US EPA sends RFS rule to White House for review as June 14 deadline nears

The US Environmental Protection Agency appears on track to meet a June 14 deadline to finalize new biofuel blending requirements but has provided little insight as to whether its final rule will address gripes laid out by the oil and biofuel sectors.

A draft final rule for the EPA's Renewable Fuel Standard program that would steadily raise the amount of renewable fuel that US refiners must annually mix with gasoline and diesel over the next three years was sent May 15 to the White House Office of Management and Budget for interagency review.

Moving the draft regulation to OMB is a key step before the EPA can issue the final annual renewable volume obligations for 2023, 2024 and 2025. Under a consent agreement reached with ethanol group Growth Energy to settle litigation over delays in promulgating annual mandates for the RFS program, the EPA must sign a final rule on the new blending requirements by June 14.

However, how this final draft may differ from the agency's Dec. 1 proposal is yet unknown as the rulemaking's public comment period revealed a number of concerns held by stakeholders.

Some biofuel advocates thought the agency's proposal could have been more aggressive in setting certain renewable volume obligations (RVOs), while oil refiners contended that the proposed volumes failed to take into account actual consumer demand and infrastructure realities. And both oil and biofuel interests expressed concern with the EPA's plan to include a pathway for electric vehicle manufacturers to generate Renewable Identification Numbers (RINs).

EPA Administrator Michael Regan acknowledged at a congressional hearing May 10 that a number of those concerns were "valid," and that the agency was taking them seriously.

Biodiesel volumes

The EPA's proposal would require refiners to blend 20.82 billion gallons of renewable fuel in 2023, up from the 20.63 billion gallons required under the 2022 RVO. It then boosts the total renewable fuel obligation to 21.87 billion gallons in 2024 and to 22.68 billion gallons in 2025.

But Clean Fuels Alliance America and lawmakers from farming states have said that the proposed RVOs for biomass-based diesel undercut biodiesel and renewable diesel capacity, given new investments in production capacity and distribution infrastructure.

The EPA proposed a biomass-based diesel mandate of 2.82 billion gallons for 2023, up from 2.76 billion gallons, and increased that to 2.89 billion gallons for 2024 and 2.95 billion gallons for 2025.

Yet, Clean Fuels asserted there is currently more than 3 billion gallons of biomass-based diesel already in the market, and the Energy Information Administration forecasts biodiesel and renewable diesel consumption to grow by 500 million gallons in 2023, expects 2.4 billion gallons of added renewable diesel capacity to come online by 2024 and sees another 1.8 billion gallons in announced planned capacity.

Regan May 10 defended the EPA, noting that it has set the highest RVOs ever. As work continues on the RFS "set" rule, Regan sought to make clear: "I have engaged mightily with the biodiesel industry since we proposed that rule, and we haven't finalized those numbers yet."

The RFS "set" rule refers to the need for the agency, in coordination with the departments of Energy and Agriculture, to determine RVOs for 2023 and beyond, years for which Congress no longer specifies RFS volume targets.

While there are no longer congressional targets to guide the EPA's rulemaking, the agency is statutorily required to consider certain environmental, economic and energy security factors. And by law, RVOs for 2023 and beyond must also maintain the volume of advanced renewable fuel at a level at or above, in percentage terms, the volume finalized for advanced biofuels in 2022.

eRINs

Another sticking point for stakeholders has been the possible expansion of the RFS to EV manufacturers and the introduction of so-called eRINs.

RINs are tradable credits the EPA issues to track production and use of alternative transportation fuels. For corn-based ethanol, one gallon of ethanol yields one RIN. The agency's proposal envisions eRINs that would be generated for electricity made from renewable biomass that is used for transportation fuel.

These eRINs would fall under the RFS' cellulosic biofuel category, for which the EPA proposed an RVO of 720 million gallons in 2023, up from 630 million gallons in 2022. The proposal would have the eRINs provisions take effect Jan. 1, 2024, with maximum production targets of 600 million eRINs for electricity derived from biogas in 2024 and 1.2 billion eRINs in 2025. The EPA thus boosts the mandate for cellulosic biofuel to 1.42 billion gallons in 2024 and to 2.13 billion gallons in 2025.

Oil and biofuel groups as well as Republican lawmakers have criticized how the eRINs framework would work and challenged the EPA's authority to make such changes to the RIN generation structure.

Regan said the agency was taking a hard look at those comments and doing further study of that aspect of the proposal. "And that will dictate how we move forward and whether or not we finalize the eRINs portion of this program," he told lawmakers.