EPA's RFS Volumes Include Ethanol Cuts

LINCOLN, Neb. (DTN) -- EPA finalized a package of Renewable Fuel Standard volumes on Friday that makes retroactive cuts to corn ethanol for 2020 and sets corn ethanol at below 15 billion gallons also for 2021.

The Biden administration, however, restored corn ethanol to 15 billion gallons for 2022, with total biofuel gallons set at 20.63 billion gallons. The 2022 number was set slightly lower than the proposed 20.77 billion gallons in December 2021.

EPA Administrator Michael Regan pointed to the 2022 numbers, saying the RFS volumes would reduce reliance on foreign oil and provide consumers a choice at fuel pumps.

"Today's actions will help to reduce our reliance on oil and put the RFS program back on track after years of challenges and mismanagement," Regan said. "We remain committed to working with all RFS stakeholders to build on today's actions and deliver certainty and stability in the RFS program."

DTN Lead Analyst Todd Hultman said the EPA action likely will have no market effect.

"Today's final numbers from EPA are likely to have no market impact on actual ethanol production, as production in calendar year 2022 is currently on track for 15.5 billion gallons, comfortably higher than EPA's final RVO of 15 billion gallons for 2022," he said.

Despite pleas from the ethanol industry, EPA reset lower corn-ethanol volumes at 12.5 billion gallons for the COVID-19 shutdown year of 2020. The agency retroactively cut nearly 3 billion gallons from 2020's total biofuel gallons, finalized at 17.13 billion gallons.

In the final 2021 numbers, however, EPA raised the corn-ethanol share from 13.32 billion gallons in the December proposal to a final 13.79 billion gallons.

The agency also retroactively cut 2020 volumes for advanced biofuels such as biomass-based diesel from 5.09 billion gallons to 4.63 billion.

In addition, EPA finalized the advanced biofuels volume at 5.05 billion gallons for 2021, a drop from 5.2 billion gallons in the December proposal. The agency set the 2022 advanced number at 5.63 billion gallons, also a small cut from 5.77 billion proposed last December.

EPA also added a 250-million-gallon "supplemental obligation" to the volumes proposed for 2022. The agency said it intends to add another 250 million gallons in 2023 to address the remand of the 2014 to 2016 annual rule by the U.S. Court of Appeals for the District of Columbia Circuit.

In addition, EPA officially denied all pending small-refinery exemptions to the RFS and announced a proposed rulemaking to change the exemptions process.

As part of the RFS announcement, EPA finalized a regulatory framework to allow so-called biointermediates to qualify in the program.

Biointermediates are feedstocks that have been partially converted at one facility but are then processed into an RFS-qualified biofuel at a separate facility. The agency said allowing their use "may reduce biofuel-production costs and expand opportunities for more cost-effective biomass-based diesel, advanced, and cellulosic biofuels."

REACTION TO RFS VOLUMES

The Renewable Fuels Association said the EPA action will "bring order and certainty back to the Renewable Fuel Standard and provide a solid foundation for future growth in the production and use of low-carbon renewable fuels."

"At long last, the RFS is being put back on track," RFA President and CEO Geoff Cooper said in a statement.

"Today's actions by EPA and the Biden administration restore integrity and stability to the RFS program after several years of wanton mismanagement and abuse by the previous administration. The combination of a strong RVO for 2022, restoration of illegally waived volume from 2016, and a new direction for the SRE program puts the RFS program on solid footing for the future."

Growth Energy CEO Emily Skor said the final proposal "sets a baseline for strong future biofuel blending levels" in the RFS.

"These last six months have been a rude awakening for those who have grown complacent about U.S. energy supplies," Skor said in a statement.

"EPA's 2022 renewable fuel blending requirements will deliver savings at the pump for working families, slash carbon emissions, and strengthen U.S. energy security by bringing more American renewable fuel into our fuel supply."

Although the Biden administration has made retroactive cuts to 2020 volumes, she said the 2022 volumes are a "strong signal of EPA's commitment to getting the RFS back on track."

American Coalition for Ethanol CEO Brian Jennings said his group "strongly" objects to the retroactive cuts to 2020 volumes but was encouraged to see the EPA put the RFS program on a growth trajectory.

"When taken as a whole, today's actions begin to get the RFS back on track and fulfill Administrator Regan's commitment to follow the law and science when it comes to this program," he said.

Iowa Corn Growers Association President Lance Lillibridge, a farmer from Benton County, said the EPA action comes at a tough time for consumers at the pump.

"We are all feeling the pressure at the pump with higher fuel prices," Lillibridge said in a statement, "so this decision by EPA is a step in the right direction to give farmers more access to markets while also providing more renewable fuel for our vehicles."

Monte Shaw, Iowa Renewable Fuels Association executive director, said he was pleased with EPA's adjustments since the December proposal but remains concerned about the agency's willingness to retroactively change RFS volumes.

"IRFA appreciates the Biden EPA getting the RFS back on track in 2022 and increasing the 2021 blending target compared to the proposal," he said in a statement.

"But we also cannot ignore that today's final rule creates uncertainty. Any of these numbers that look good today could be revised downward in the future."

The Advanced Biofuels Association expressed disappointment in the EPA's action on advanced biofuels.

"With this RVO ruling, the Biden administration has missed an important opportunity to prioritize advanced low-carbon fuels that will help America achieve its climate ambitions and support American energy independence," the group said in a statement.

"Fortunately, the administration will have a chance to strengthen the development of America's low-carbon fuel industry and broaden our national supply of renewable fuel sources by setting a more progressive path under the forthcoming 'set' process."

Kurt Kovarik, vice president of federal affairs for Clean Fuels Alliance America, said the EPA action was important.

"Clean Fuels and its members appreciate EPA Administrator Regan's recognition that homegrown, clean fuels offer a better solution to high fuel prices stemming from high oil prices and supply shortages," he said in a statement.

USDA BIOFUELS AID

Also on Friday, USDA announced more details about the $700 million in COVID-19 aid provided to biofuel producers.

The agency said in a news release it was "making payments" to 195 biofuel production facilities to "support the maintenance and viability of a significant market" for agricultural producers of corn, soybean or biomass that supply biofuel production.

"These biofuel producers experienced unexpected market losses on a combined 3.7 billion gallons as a result of COVID-19," USDA said on Friday.

The agency provided a few examples of how the funds helped biofuels companies.

For example, USDA said Southwest Renewable Energy LLC in Iowa was paid $3 million for losing about 14.3 million gallons of ethanol production during the COVID shutdown.

In Texas, White Energy Holding Company was paid $21 million for a production loss of 98 million gallons at two ethanol plants.

Adkins Energy in Illinois received a $774,000 payment for losing about 3.5 million gallons of biomass-based diesel production as a result of the shutdown.

Read more on DTN:

"EPA Proposes Corn-Ethanol Cuts to RFS," https://www.dtnpf.com/…

"Report: Biden Considers More RFS Cuts," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @DTNeeley

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