Fuel for Thought: Is it time to take politics out of the US EPA’s Renewable Fuel Standard?

If there is a consensus among US transportation fuel producers about the EPA’s long-overdue renewable volume commitment for 2020, 2021 and 2022 under the Renewable Fuel Standard, that means no one is completely satisfied.

Some political divisions remain. Oil refineries continue to compete with the corn and ethanol industry for gasoline market share, but the growing demand for renewable diesel and biodiesel has shifted the dynamics to those fuels, giving this pressure, which includes several major oil refineries, a stronger presence.

“It’s a mixed bag for us,” said Derek Morgan, senior vice president of federal and regulatory affairs for the US fuel and petroleum trade group that represents refineries.

The Environmental Protection Agency (EPA) has revised the 2020 total volume commitment to 17.13 billion gallons from 20.09 billion gallons to reflect actual pandemic demand. The proposed initial 2021 RVO of 18.52 billion gallons will be completed based on actual demand.

The EPA raised RVO to 20.77 billion gallons in 2022, including 15 billion gallons of ethanol, which some refiners feel would be difficult to counteract by blending, given that it would bypass the 10% blend wall to mix with gasoline to create E10, which It is sold at most service stations across the country.

But the ethanol industry does not agree.

The EIA projects gasoline consumption in 2022 at 138.1 billion gallons, so the RFS requirement of 15 billion gallons can be easily met with most E10, along with modest volumes of E85 and E15, modest amounts of conventional non-ethanol biofuels, and portable RIN. [Renewable Identification Number] Jeff Cooper, president of the Renewable Fuels Consortium, a major industry group for ethanol producers, said:

Cooper said legislative history shows Congress intended the RFS to push ethanol use beyond the “so-called E10 blend wall,” and is looking to appeal the district court’s recent reversal that allows year-round E15 sales.

Further reading: Commodities 2022: Logistical challenges weigh on US ethanol

Biofuel producers such as Renewable Energy Group also expressed disappointment with the lower volumes proposed for EPA for 2020 and 2021, but felt that the increase in 2022 for advanced biofuel volumes was promising.

“Our primary focus has been 2022, which is positive,” said Neville Fernandez, REG Vice President, in an interview, noting that the proposed growth in the biomass-based diesel and advanced biofuels categories are driving in the right direction.

With this climate crisis, we need to reduce the carbon intensity of diesel as much as possible, ASAP, by replacing petroleum with biofuels including biodiesel, renewable diesel and a combination of these two low-carbon, clean-burning renewable fuels.
– Neville Fernandez, REG

Small refinery exemptions

The EPA’s initial volume requirement for 2022 biomass-based diesel is 2.76 billion gallons, up from 2.43 billion gallons in 2020 and 2021.

Advanced biofuel volumes for 2022 were 5.77 billion gallons, up from 5.2 billion gallons and 4.63 billion gallons in 2021 and 2020, respectively.

“However, we believe that biomass-based diesel and total advanced numbers could be higher, based on projected production of renewable diesel and biodiesel and demand in the United States,” Fernandez said, noting that there are several renewable diesel projects expected. Online in 2022.

But an important element of the EPA’s mandate was its proposal to dispose of more than 60 outstanding small refinery exemptions. The SREs, which are incorporated into the RFS, are a lifeline for refineries with a capacity of less than 75,000 barrels per day, and are granted an exemption in the event of disproportionate economic hardship to the facility.

This contentious issue was partially settled in April when the US Supreme Court on appeal overturned the Federal Court of Appeals for the Tenth Circuit’s decision to reject the requirement that refiners enjoy continuing exemptions from 2011. However, other aspects of the lower court’s ruling were not reviewed by the Supreme Court.

The Environmental Protection Agency claims that these aspects have not been inverted. This includes the cost recovery of RFS compliance. In its December 7 statement, the EPA claimed that parties are obligated to recoup compliance costs when selling fuel products, so there are no disproportionate economic hardship.

However, the refineries feel that the entire Tenth Circuit Court of Appeals has overruled, thus overturning alternative rulings. They noted that the SRE was written into the RFS when the law was drafted.

“That was the intention of Congress,” CVR Lamp said. “They put it on on purpose. The EPA is just trying to ignore it as if it’s not the law, but the intent of the law they can’t ignore.”

But by excluding small refineries from complying with RVOs, it reduces the size of the RINs market, which is detrimental to the increased volume of renewable fuels, an especially important factor in addressing greenhouse gas emissions, said REG’s Fernandez.

“Exempting refineries from fulfilling their obligations under the RFS results in less use of renewable fuels, which is of course inconsistent with the RFS goal of reducing greenhouse gas emissions and combating global warming,” he said.

“And with this climate crisis, we need to reduce the carbon intensity of diesel as much as possible, as quickly as possible, by replacing petroleum with biofuels including biodiesel, renewable diesel and a combination of these two types that are low-carbon and clean — burning renewable fuels.”

Fernandez referred to the large number of exemptions made by the Trump administration, about 1.82 billion renminbi in 2017 and 1.43 billion riyals in 2018, which were exempted by 35 and 31 renewable energy standards granted, respectively, reducing the market for ethanol and diesel. Vital and regenerative. diesel.

RINs, RVO تكاليف costs

political uncertainty

Uncertainty about how the EPA allocates volumes and SREs creates problems for both biofuel and hydrocarbon-based fuel producers, according to CVR Lamp.

“It is impossible to predict what they will do from administration to administration or from year to year with an administration,” he said. “And [with] If they mismanage it we get high RIN prices, which are commensurate with the price of gasoline, which they claim they want to lower.”

Lamam said the law is “fundamentally flawed” because it is a volume mandate rather than a percentage mandate, which could be amended to demand changes.

“They had the opportunity to fix this and they blew it up,” he said.

But REG’s Fernandez believes the program can be modified to make it more responsive to market conditions.

“I think it is a viable program that meets the requirements and has the potential to support the production and consumption of low-carbon biofuels in the United States in order to significantly reduce greenhouse gases,” Fernandez said.

“It’s up to the EPA to decide if they want to increase the mass of biomass-based diesel and advanced biofuels, and since there is more biomass-based diesel slated to come online, according to refiners’ plans, that’s what we’re going to ask about in Our testimony,” referring to the RVO suspension period that will be open until February 4.

CVR Energy is one of the refineries with a renewable diesel project in progress, converting a hydrocracking unit at its Wynnewood, Oklahoma, refinery, to produce renewable diesel to reduce RFS exposure.

Mosbah said CVR would “comply with the law” but “will sue on the part of the small refinery being ceded from it until the cows go home.”

Explore this topic: Commodities 2022

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