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Cuts Coming to U.S. Biofuel Obligations?

EPA holds steady on corn-based ethanol, examines RIN-market manipulation

WASHINGTON -- The Environmental Protection Agency (EPA) released its proposed blending volumes for biofuels under President Trump and Administrator Scott Pruitt for the first time this week. While corn-based ethanol and biodiesel volumes would hold steady, other biofuels would see cuts under the proposal.

The proposed renewable-volume obligations (RVO) for 2018 would keep conventional biofuel volumes (mainly corn-based ethanol) at the 15 billion-gallon mark mandated by the Renewable Fuel Standard (RFS), and biomass-based diesel volumes would stay at 2.1 billion gallons. However, advanced biofuels would see a small decline from 4.28 billion gallons to 4.24 billion gallons. And the RVO for cellulosic biofuels—fuels made from material such as switchgrass and corn stalks—would drop to 238 million gallons, down nearly 24% from 2017.

“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,” the EPA stated in its proposal, adding it “nevertheless will ensure these renewable fuels will continue to play a critical role as a complement to our petroleum-based fuels.”

The proposed RVOs would bring total renewable fuel blending in 2018 to 19.24 billion gallons, down from 19.28 billion gallons in 2017.

Emily Skor, CEO of ethanol-industry group Growth Energy, Washington, D.C., described the proposed RVOs as “the first real test of the current administration’s pledged support for renewable fuels.”

“While we are pleased with the EPA and administration’s commitment to a 15 billion-gallon target for conventional biofuels, we would like to see final levels for cellulosic and advanced biofuels continue to give producers and stakeholders certainty in their investment in second-generation technology,” she said. 

Bob Dinneen, president and CEO of the Renewable Fuels Association (RFA), Washington, D.C., also praised the plan to keep conventional biofuel blending at 15 billion gallons, but likewise expressed concern about the cuts to cellulosic blending targets.

“It is important that the RFS continue to drive investment in new advanced and cellulosic biofuel technologies,” said Dinneen. “We are concerned that by reducing the cellulosic RVO, this proposal may weaken the signal to the marketplace and we want to better understand EPA’s methodology.”

RIN review

Meanwhile, the EPA is also planning to examine the market for Renewable Identification Numbers (RIN), which obligated parties such as refiners use to show compliance with RFS blending targets. In particular, it would look into “whether and how the current trading structure provides an opportunity for market manipulation,” and it would accept comments on possible changes to address the issues.

In 2016, some refiners and their advocates complained to the EPA about escalating RIN prices and the potential that speculators and other parties were gaming the system. After the 2016 presidential election, some reports suggested Trump might weigh a shift in the point of obligation downstream from refiners to retailers.

However, the EPA stressed it was only accepting comments on RIN trading and the proposed RVOs. “In particular, EPA is not re-opening for public comment in this rulemaking the current definition of 'obligated party,'" it stated. 

The EPA has a Nov. 30 deadline to release the final RVOs for 2018.

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