EPA Proposes Renewable Volume Obligations for 2018

Today, the Environmental Protection Agency (EPA) proposed renewable volume obligations (RVOs) for 2018 under the Renewable Fuel Standard (RFS). EPA also proposed RVOs for Biomass-based diesel (BBD) for 2019. EPA is again proposing to use its waiver authority to lower the volumes below their statutory levels and is setting forth volume requirements for cellulosic biofuel, advanced biofuel, and total renewable fuel that are lower than the 2017 requirements. 

EPA's proposed RVOs and percentage standards are as follows, with 2015, 2016, and 2017 final volumes and percentage standards listed for reference (the previously finalized volumes/percentages are shaded, with newly proposed volumes/percentages are not shaded):   

Volumes Used to Determine the Proposed Percentage Standards
	2015	2016	2017	2018	2019
Cellulosic biofuel	123 mill gal	230 mill gal	311 mill gal	238 mill gal	n/a
Biomass-based diesel	1.73 bill gal	1.90 bill gal	2.0 bill gal	2.1 bill gal	2.1 bill gal
Advanced biofuel	2.88 bill gal	3.61 bill gal	4.28 bill gal	4.24 bill gal	n/a
Total renewable fuels	16.93 bill gal	18.11 bill gal	19.28 bill gal	19.24 bill gal	n/a

All volumes are ethanol-equivalent, except for biomass-based diesel which is actual.

Proposed Percentage Standards
	2015	2016	2017	2018
Cellulosic biofuel	0.069%	0.128%	0.173%	0.131%
Biomass-based diesel	1.49%	1.59%	1.67%	1.74%
Advanced biofuel	1.62%	2.01%	2.38%	2.34%
Total renewable fuels	9.52%	10.10%	10.70%	10.62%

The Clean Air Act (CAA) called for 7.0 billion gallons of cellulosic biofuels in 2018, and the proposal would lower the cap for cellulosic biofuel to 238 million gallons, well below the statutory requirement. Biomass-based diesel remains steady at 2.1 billion gallons while advanced biofuels dropped to 4.24 billion gallons, a decrease from last year's numbers. Finally, the proposal would cap non-advanced biofuels (typically corn ethanol) at 15 billion gallons in 2018, the level required by statute. As the EPA noted in its proposal, "Real-world challenges, such as the slower-than-expected development of the cellulosic biofuel industry, have slowed progress towards meeting Congressional goals for renewable fuels, even as progress has been made in some areas. Those challenges have made the volume targets established by Congress for 2018 beyond reach for all fuel categories other than BBD."

In addition to the proposed RVOs, EPA has also requested comment on whether and how the current Renewable Identification Number (RIN) trading structure "provides an opportunity for market manipulation," and seeks comment and input on "potential changes to the RIN trading system that might help address these concerns." The Agency also initiated an internal Agency "technical analysis to inform a reset rule"—although EPA is not soliciting comments on the reset rulemaking process. Under the CAA, EPA is required to "reset" the statutory volume targets if EPA waives at least 50 percent of a mandated target or if for two consecutive years EPA waives at least 20 percent of a mandated target.

 Of great importance for SIGMA members, the proposed rule does notappear to revise or otherwise initiate a rulemaking to adjust the RFS regulations in a manner that would make downstream entities – rather than refiners and importers – "obligated parties." In fact, EPA specifically notes that it is "not re-opening for public comment in this rulemaking the current definition of 'obligated party.'" In recent months, SIGMA counsel met with EPA as well as various White House officials to object to changing the point of obligation under the RFS program and is pleased that the proposal does not seek to make such a change.

Some refiners have petitioned the EPA in recent years to switch the point of obligation from refiners and importers to the "position holder," the entity that holds title to product before it is dispensed from the terminal. As SIGMA has stated in previous comment letters to EPA, non-manufacturers have no control over the composition of the petroleum products with which renewable fuels must be blended in order to be sold as motor fuels. In stark contrast, manufacturers and importers of motor fuels have control over not only the composition of the products they sell, but also the terms upon which they sell them. These facts indicate that it is the manufacturers and importers of motor fuels which are in the best position to achieve the requirements of the RFS and thus should remain "obligated parties" under the Program.

 SIGMA is continuing to analyze the proposed rule and will share further details in this Friday's Weekly Report.

EPA Rule Summary on the Proposed Standards

EPA Notice of Proposed Rulemaking