EPA finalizes 2017 RFS RVOs, biofuels industry applauds rule

By Erin Voegele | November 23, 2016

On Nov. 23, the U.S. EPA released its final rule to set 2017 renewable volume obligations (RVOs) under the renewable fuel standard (RFS), along with 2018 RVOs for biomass-based diesel. The RVO for conventional fuel has been increased to meet the 15 billion gallon congressional target for conventional fuels. Overall renewable fuel volumes grow by 1.2 billion gallons from 2016 to 2017, a 6 percent increase. The rule finalizes RVOs proposed in May.  

The final nested volume for total renewable fuel has been set at 19.28 billion gallons, up from a proposed volume of 18.8 billion gallons. On a percentage basis, the final standard for total renewable fuel has been set at 10.7 percent of the total transportation fuel pool, up from a proposed 10.44 percent. In 2016, the renewable fuel RVO was set at 18.11 billion gallons, or 10.10 percent.

The final 2017 RVO for advanced biofuels is set at 4.28 billion gallons, up from a proposed level of 4 billion gallons. On a percentage basis, the advanced biofuel RVO is set at 2.38 percent, up from a proposed 2.22 percent. In 2016, the advanced biofuel RVO was set at 3.61 billion gallons, or 2.01 percent.

The EPA has finalized the 2017 RVO for cellulosic biofuel at 311 million gallons, down slightly from a proposed 312 million gallons. On a percentage basis, the cellulosic RVO has been maintained at the proposed 0.173 percent. The 2016 RVO for cellulosic biofuel was set at 230 million gallons, or 0.128 percent.

The 2018 RVO for biomass-based diesel has been maintained at the proposed 2.1 billion gallons. The percentage standard has also been maintained at 1.67 percent. The 2017 RVO for biomass-based diesel was set at 2 billion gallons, or 1.59 percent.

According to the EPA, the RVO for total renewable fuel is 1.2 billion gallons, or 6 percent, higher than 2016. The advanced biofuel RVO grew by approximately 700 million gallons, while the cellulosic RVO has increased by 35 percent and the advanced biofuel RVO is up 19 percent. In addition, the 2018 RVO for biomass-based diesel is set 100 million gallons higher than the 2017 standard.

The statutory 2017 RVOs specified in the Clean Air Act call for 24 billion gallons of total renewable fuel, with the nested values for advanced biofuel, biomass-based diesel and cellulosic biofuel set at 9 billion gallons, at least 1 billion gallons and 5.5 billion gallon, respectively.

“Renewable fuel volumes continue to increase across the board compared to 2016 levels,” said Janet McCabe, EPA acting assistant administrator for the Office of Air and Radiation. “These final standards will boost production, providing for ambitious yet achievable growth of biofuels in the transportation sector. By implementing the program enacted by Congress, we are expanding the nation’s renewable fuels sector while reducing our reliance on imported oil.”

Within the final rule, the EPA addresses its use of the general waiver authority to reduce RVO volume below statutory levels. The agency explains that when setting the 2014-2016 RVO, it determined there was an inadequate domestic supply of total renewable fuel, and used the general waiver authority to reduce the total renewable fuel volumes further than the reductions obtained using the cellulosic water authority. The use of the general waiver authority in this way has been strongly criticized by those in the biofuel industry.

The EPA notes that it again proposed to use the general waiver authority in a similar fashion when setting the 2017 RVO for total renewable fuel, but has since changed its mind. “Based on further evaluation of the availability of renewable fuel in the market, in the interim between the [notice of proposed rulemaking (NPRM)] and this final rule, and review of public comment, EPA has determined that it is not necessary to use the general waiver authority,” said the agency in the final rule. “That is, we have determined that use of the cellulosic waiver authority alone will be sufficient to yield a volume requirement that is consistent with available supply,”

In a supplementary document outlining the EPA’s response to public comments filed on the proposed rule, the agency elaborates on its stance on the E10 blend wall. “Our view of the E10 blendwall falls between the two opposing viewpoints expressed by refiners and ethanol proponents. We believe that there are real constraints on the ability of the market to exceed a pool-wide ethanol content of 10 percent,” said the EPA in the document. “However, these constraints do not have the same significance at all levels above 10 percent ethanol. Instead, for the state of infrastructure that can be available in 2017, the constraints represent a continuum of mild resistance to growth at the first increments above 10 percent ethanol and evolve to significant obstacles at higher levels of ethanol. This gradual nature of the impacts of the constraints is due to the fact that small increases in ethanol volumes above 10 percent are likely to be possible with changes in RIN prices, while larger increases are only possible with changes to infrastructure that cannot occur as quickly. The transition from mild resistance to significant obstacles occurs by degrees rather than all at once, and overcoming the constraints will likely require different solutions over different time periods. It is difficult to identify the precise boundary between volumes that can be achieved with mild difficulty in 2017 and those that likely cannot realistically be achieved over the next year. Ultimately the market will determine the extent to which compliance with the annual standards is achieved through the use of greater volumes of ethanol or other, non-ethanol renewable fuels.” 

“In short, the E10 blendwall is not the barrier that some stakeholders believe it to be, but neither are increases in pool-wide ethanol concentrations above 10 percent unlimited in the 2017 timeframe as other stakeholders have suggested,” the EPA continued. “Expanded use of E15 and E85 is possible under the influence of the final volume requirement for total renewable fuel that we are setting for 2017, but the volumes of E15 and/or E85 that would be needed to reach the statutory targets are not achievable in 2017. Another reason that the E10 blendwall is not the barrier that some stakeholders make it out to be is that it is focused solely on ethanol. Many of the comments on both sides of the debate focus on ethanol, but there is nothing in the statute that requires the use of ethanol, and there is no reason that the E10 blendwall by itself should limit the total volumes of renewable fuels. The E10 blendwall may create a challenge toward increasing volumes of ethanol, but growth in other biofuels is not only possible but expected within the capabilities of their markets.”

The Renewable Fuels Association has spoken out in support of the final RVOs. “We can all be thankful EPA has raised the conventional biofuel requirement to the 15 billion gallon level required by the statute,” said Bob Dinneen, president and CEO of the RFA. “The move will send a positive signal to investors, rippling throughout our economy and environment. By signaling its commitment to a growing biofuels market, the agency will stimulate new interest in cellulosic ethanol and other advanced biofuels, drive investment in infrastructure to accommodate E15 and higher ethanol blends, and make a further dent in reducing greenhouse gas emissions.”

“The final RVO rule helps put consumers in the driver’s seat when it comes to fuel choice at the pump and we thank EPA for listening to the public’s demand for lower cost, higher octane fuels, recognizing the rising demand for gasoline and abiding by the statute,” Dinneen continued. “We look forward to getting the RFS back on track, providing the consumer savings, carbon reductions and energy security benefits envisioned by Congress.”

Growth Energy has also spoken out to applaud the EPA’s final rule. “We are pleased that the EPA’s rule finally achieves the statutory volume for conventional biofuel as called for by Congress,” said Emily Skor, CEO of Growth Energy. “The renewable fuel standard is our country’s most successful energy policy. It continues to inject much needed competition and consumer choice into the vehicle fuels marketplace. It enables greater consumer adoption of cleaner biofuels that displace toxic additives and reduce harmful emissions, while creating American jobs, spurring innovation and lowering the price at the pump.”

“Today’s announcement by the administration validates the critical importance of cleaner burning, less expensive biofuels, like ethanol,” Skor continued. “The American ethanol industry is a true success story, and with increased volumes, producers can unleash their full potential to ensure that higher blends, such as E15, are available to consumers and producers can continue to innovate by developing 21st century fuels for 21st century cars. This announcement is a win for our energy security, the environment, the American consumer and American innovation. We look forward to working with EPA, as well as the incoming Trump administration, to ensure the continued successful implementation of the RFS.”

The American Coalition for Ethanol has also said its supports EPA’s final rule. “As more ethanol was blended with record-high consumption of gasoline this year, ACE urged EPA to increase the 2017 implied conventional biofuel volume to the statutory level of 15 billion gallons and we are very pleased EPA has agreed to do so,” said Brian Jennings, executive vice president of ACE. “For the last couple of years, EPA has unfortunately sided with oil companies and refiners instead of rural voters to ‘ride the brakes’ on RFS blending volumes, relying on excuses such as the make-believe E10 ‘blend wall’ and lower gasoline use to reduce renewable fuel use below statutory levels. But we are supportive of the move to increase volumes for 2017 without a ‘blend wall’ excuse.  U.S. gasoline use is expected to rise again in 2017, so increasing RFS volumes will help restore some confidence to the rural economy and reassure retailers that it makes sense to offer E15 and flex fuels like E30 and E85 to their customers.”

“Nevertheless, we remain opposed to EPA’s misapplication of the RFS general waiver authority to use ‘infrastructure constraints’ as an excuse to limit renewable fuel use below statutory levels for 2014, 2015, and 2016, which is why we are party to Americans for Clean Energy et al. vs EPA, a lawsuit pending in the U.S. Court of Appeals for D.C.  We look forward to the Court taking up our case early in 2017 and deciding in our favor,” Jennings continued.

The Biotechnology Industry Organization said the final rule appears to put the RFS back on track. “By abandoning its legally flawed reliance on general waiver authority as a basis for departing from statutory biofuels volumes requirements, EPA has sent a strong signal that it will support the biofuels industry and grow advanced and cellulosic biofuel production,” said Brent Erickson, executive vice president of BIO’s Industrial and Environmental Section. “BIO and its members welcome this change in course by EPA; today’s rule adheres to Congress’s intent in enacting the RFS statute and ends several years of instability in the RFS program. We greatly appreciate EPA’s efforts to issue a timely rule, to understand BIO’s comments and legal policy points, to listen carefully to our members’ concerns about the program’s impact on investment, and to ensure that the U.S. transportation fuels market will use all available biofuels. The RFS will continue to be successful in driving development of cleaner transportation fuels that measurably reduce carbon emissions.

“EPA’s actions finally dispel the myth of the blend wall. In a recent white paper, BIO demonstrates that oil refiners and importers easily met the RFS obligations every year since 2010—and were even able to build a bank of excess RINs—despite ethanol blending requirements that exceeded 10 percent of obligated gasoline volumes,” Erickson continued. “BIO continues to strongly disagree with EPA’s prior interpretation of its general waiver authority under the RFS statute and with EPA’s ongoing stockpiling of carryover RIN credits. The RFS statute does not allow EPA to rely on demand-side factors under the oil industry’s control as a basis for decreasing the fundamental requirement to use as much renewable fuel as the biofuel industry can produce. And the statute does not grant the agency leeway to create a permanent carryover RIN bank.”

The Advanced Biofuels Association noted the final rule sends a clear message to the market. “We congratulate EPA on getting the RVO rule out ahead of schedule. Like last year, it sends a clear signal to the market of the federal government’s intention to stand behind the RFS program,” said Michael McAdams, president of the ABFA. “We are also happy to see the confidence and support of the biomass-based diesel pool by continuing to recognize the fact it is growing steadily. And, we welcome increases in both the advanced and cellulosic pools. Those are truly the fuels of the future that deliver the most significant contribution to sustainability.”

The Advanced Biofuels Business Council called the rule strong. “Administrator McCarthy and her team deserve a lot of credit,” said Brooke Coleman, director of the ABBC. “Administrator McCarthy said they would get the RFS back on track and they did. It’s a strong rule across the board and moves the conversation forward. We have moved past the imaginary blend wall. The biofuels industry continues to innovate. The merchant refiners saying they cannot comply with the RFS are now implementing cost-effective changes at their refineries to blend more renewable fuel. President-elect Trump will no doubt hear from a shrinking group of RFS naysayers, but I think he understands that the RFS is working, supports a strong manufacturing base across the country and reduces our dependence on foreign oil. We are looking forward to working with EPA and the next Administration on further accelerating the commercial deployment of advanced biofuels.”

In addition, the Iowa Renewable Fuels Association stressed the rule gets the RFS back on track. “Today marked the last chance for the Obama Administration to get the RFS back on track,” said Monte Shaw, executive director of the IRFA. In a dramatic return to their roots, they chose to uphold the law and, in doing so, boosted fuel competition, consumer choice and rural America.  The RFS ethanol volumes announced by the EPA today mean higher income for farmers and lower prices for consumers.  They mean more jobs in rural Iowa and less dependence on foreign oil. This is the type of RFS support that the Obama Administration pledged eight years ago. There was a bit of a detour, but this final action restores the RFS as a powerful tool to crack the petroleum monopoly.”

Full copies of the final rule and the EPA’s response to comments can be downloaded from the EPA website.