With volumes below existing biobased diesel production, biofuel groups bash EPA’s RFS ‘set’ proposal

The U.S. EPA issued its “set” proposal for the Renewable Fuel Standard, the first proposed rule after statutory volumes established by Congress in the Energy Independence and Security Act of 2007 ended in 2022, giving the agency more latitude in administering the program and setting future renewable volume obligations (RVO).

The proposal provides RVOs for three years: 2023, 2024 and 2025.

The RVO proposals for biomass-based diesel are underwhelming at best, moving from 2.76 billion gallons this year to 2.82 billion gallons next year, 2.89 billion gallons in 2024 and 2.95 billion gallons in 2025.

For advanced biofuels, the agency proposes moving from 5.63 billion ethanol-equivalent (EE) gallons (3.75 billion biodiesel-equivalent, or BE, gallons) in 2022 to 5.82 billion EE (3.88 billion BE) gallons in 2023, 6.62 billion EE (4.41 billion BE) gallons in 2024 and 7.43 billion EE (4.95 billion BE) gallons in 2025.

Clean Fuels Alliance America criticized the proposal for undercutting investments in biodiesel and renewable diesel capacity, saying it “woefully underestimates biomass-based diesel.”

“The minor increases for biomass-based diesel volumes in 2023, 2024 and 2025 are below the industry’s existing production and ignore the clean fuels industry’s significant investments in new capacity,” the organization stated. “The volumes provide no additional space for sustainable aviation fuel (SAF) and short-circuit the nation’s goals to cut carbon emissions.”

EPA’s data from the RFS program show that the U.S. market reached 3.1 billion gallons of biomass-based diesel in 2021 and already 2.9 billion gallons through October 2022, with two months still to go.

According to the Energy Information Administration’s data, the U.S. has more than 4.2 billion gallons of combined biodiesel and renewable diesel* operating production capacity as of September 2022. Biodiesel and renewable diesel capacity is already 750 million gallons higher in 2022 compared 2021, according to EIA.

The EIA’s Short Term Energy Outlook, which informs EPA’s decisions on annual RFS volumes, currently projects a 500-million-gallon increase in biodiesel and renewable diesel consumption for 2023. The STEO also projects availability of 3.9 billion gallons of biodiesel and renewable diesel next year.

EIA has also projected 2.4. billion gallons of added renewable diesel capacity coming online by 2024 and calculated another 1.8 billion gallons in announced planned capacity.

“EPA’s overdue set proposal significantly undercounts existing biomass-based diesel production and fails to provide growth for investments the industry has already made in additional capacity, including for SAF,” said Kurk Kovarik, vice president of federal affairs for Clean Fuels. “The volumes EPA is proposing for 2023, 2024 and 2025 ignore the more than 3 billion gallons currently in the market and fail to take into account the planned growth of the clean-fuels sector. The biodiesel and renewable diesel industry has already made considerable investments in production capacity and distribution infrastructure that will come online by 2025. The soybean and canola industries have invested more than $4 billion to bring additional feedstock capacity online over the next several years. EPA’s proposed biomass-based diesel volumes undercut those investments.”

The American Soybean Association characterized the proposed rule as “deeply disappointing,” saying it “threatens the integrity of the RFS by significantly dialing back annual increases in volume obligations.”

Brad Doyle, ASA president, said, “Billions of dollars have gone into building and growing the infrastructure needed to support this industry. … Instead of continuing to support available, low-emission plant-based fuel sources, EPA has changed course and seemingly is ignoring the major investments in and consumer demand for biomass-based diesel and other biofuels that exists right now.”

The Iowa Soybean Association and Iowa Biodiesel Board called the proposed advanced biofuel and biobased diesel RVOs “lackluster.”

“The volumes are not consistent with the industry’s projected growth, nor with the Biden administration’s goals to quickly decrease carbon emissions,” the groups said.

Dave Walton, a director on both ISA and IBB boards, said, “The 60 million gallons of RFS volume growth proposed by EPA for 2023, for example, is a far cry from what other agencies are projecting to come online. The EIA predicts 500 million gallons of added biodiesel and renewable diesel in 2023. EPA should take that into account. Frankly this small increase in growth would send negative signals to the market. Significant investments have been made in feedstock infrastructure, like soybean-crushing plants, and the administration would undercut that. Iowa’s 11 biodiesel plants, which have a proven history of generating economic growth and jobs while reducing the nation’s carbon footprint, also stand to lose under this proposal. That means our state’s rural economy and Iowa soybean farmers, who rely on strong commodity demand to support their livelihoods, also come up short if this proposal is finalized.”

The Iowa Renewable Fuels Association called out EPA’s proposal for not keeping up with the rapid growth in renewable diesel production, let alone acting as a market-moving mechanism.

ASA took this idea a step further. The organization added that “these very insignificant volume increases for 2023-’25 realistically could not only stifle growth but also jeopardize the existing biofuels industry.”

IRFA pointed out another important consideration. “Not only does this not sufficiently incent increased biodiesel use, but the new renewable diesel consumption driven by state policies such as California will generation RFS credits (known as RINs) that could flow down into the conventional pool and displace ethanol blending,” the organization stated.

Michael McAdams, president of the Advanced Biofuels Association, called the proposal a “missed opportunity.”

When setting biofuel volumes for years after 2022, EPA must consider a variety of factors specified in the statute, including costs, air quality, climate change, implementation of the program to date, energy security, infrastructure issues, commodity prices, and water quality and supply.

The agency is seeking comment on the proposed volumes and “how to appropriately balance these factors so that the program works for renewable fuel growers and producers, refiners and the union workers who operate these facilities, and fuel consumers,” EPA stated. “Because this rule is an opportunity to take a fresh look at many aspects of the program, EPA is also seeking comment on how this rule can intersect with continued viability of domestic oil refining assets, including merchant refineries, how best to support novel fuels like SAF and clean hydrogen, and how to account for the new and updated incentives in the Inflation Reduction Act.”

EPA is also proposing new regulations governing the generation of qualifying renewable electricity made from renewable biomass that is used for transportation fuel in electric vehicles. The agency is seeking comment on this new component of the RFS program that would tie electricity generation from renewable biomass into the program for the first time.

For all the negative comments about the proposal, Clean Fuels did note its appreciation for the final rule creating a pathway to produce renewable diesel, jet fuel, heating oil, naphtha, and liquefied petroleum gas (LPG) from canola oil, which will generate even more biobased diesel and advanced biofuel gallons for the program. The approval enables a more diverse feedstock supply for the clean fuels industry.

“But the potential growth is not accounted for in the proposed volumes,” the group said.

The organization also supports EPA’s proposed alternative compliance method to document points of origin for used cooking oil supplies under separated food-waste plans.

“This method will allow small producers to continue using a low-carbon feedstock and rely on documentation from used cooking oil aggregators,” Clean Fuels stated.

The full proposal can be accessed here.

Comments on the proposal must be submitted to EPA on or before Feb. 10.

*Renewable diesel and “other biofuels,” which includes renewable heating oil, renewable jet fuel, renewable naphtha, renewable gasoline, and other biofuels and biointermediates.