EPA's RFS Proposal Bullish on Biofuels

Editor's note: This story was updated at 11:18 a.m. (CST)

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LINCOLN, Neb. (DTN) -- EPA proposes growing the total volume of biofuels blended with petroleum products by more than 2 billion gallons between 2023 and 2025, according to a multi-year Renewable Fuel Standard volumes proposal released on Thursday.

For the first time in the history of the RFS, the agency proposes establishing RFS credits for electric vehicles.

EPA's proposal includes a slight bump up in corn-based ethanol production and biodiesel by 2025.

The proposal is required under a consent agreement with Growth Energy, to be finalized by June 14, 2023. This is the agency's first attempt at setting RFS volumes beyond the 2022 statutory deadline for the law.

EPA would set overall renewable fuels volumes at 20.63 billion gallons in 2022, but that bumped to 20.88 billion gallons with a 250-million-gallon supplemental added in for the agency illegally waiving gallons in 2016.

The overall volume for 2023 would be set at 20.82 billion gallons, 21.87 billion gallons in 2024, and 22.68 billion gallons in 2025.

The overall growth in biofuels volumes would come primarily from a surge in renewable natural gas production, according to the proposal.

The EPA would set corn-ethanol blending at 15 billion gallons for 2023 and proposes adding a 250-million-gallon supplemental for 15.25 billion gallons. In addition, EPA would require 15.25 billion gallons to be blended in 2024 and 2025. The ethanol industry was particularly concerned the agency would dial back on corn-ethanol volumes in favor of more advanced biofuels such as biomass-based diesel.

The supplemental addition in 2023 would be part of restoring 500 million gallons illegally waved by the agency in 2016.

Overall, the EPA would set advanced biofuels volumes at 5.82 billion gallons in 2023, 6.62 billion gallons in 2024, and 7.43 billion gallons in 2025.

When it comes to biomass-based diesel, EPA proposes an increase from 2.76 billion gallons in 2022 to 2.82 billion gallons in 2023, 2.89 billion gallons in 2024 and 2.95 billion gallons by 2025, according to the proposal.

In addition, for the first time the EPA has offered a proposal that would allow car makers the ability to generate credits known as E-Renewable Identification Numbers, or E-RINs, by using biofuels to charge electric vehicles. The agency estimates an additional 1.4 billion new credits would be generated by 2025, according to Reuters. That would include generating electricity to power electric vehicles through biogas.

The EPA has scheduled a virtual public hearing for Jan. 10, 2023, on the proposal, with the possibility of an additional hearing on Jan. 11 if necessary, according to the agency.

"The Renewable Fuel Standard program is critical to helping incorporate more homegrown biofuels into the market," EPA Administrator Michael Regan said in a news release.

"This proposal supports low-carbon renewable fuels and seeks public input on ways to strengthen the program. With this proposal, EPA seeks to provide consumers with more options while diversifying our nation's energy mix. EPA is also focused on strengthening the economics of our critical energy infrastructure, needed to maintain and boost our energy security."

According to an EPA economic analysis, the proposed rule would increase U.S. energy security by reducing U.S. oil imports by 160,000 to 180,000 barrels of oil per year from 2023 to 2025.

"The anticipated value of the energy security benefits over the time frame of the proposed rule ranges from $200 million to $223 million per year," EPA said.

INDUSTRY REACTION

Clean Fuels Alliance America Vice President of Federal Affairs Kurt Kovarik said the EPA's proposal falls short in a couple of key areas when it comes to biomass-based diesel and sustainable aviation fuel.

"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 sustainable aviation fuel," he said in a statement.

"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."

Iowa Renewable Fuels Association Executive Director Monte Shaw said in a news release the RFS proposal is a mixed bag for the industry.

"As the finalized rule will set the foundation for this new era, it is more important than ever for EPA to get it right," he said.

"They must lean into expanding the use of low-carbon biofuels as Congress intended. The RFS should be, and always was intended to be, a market-moving mechanism. From that viewpoint, today's draft rule sets a solid foundation for conventional biofuels like ethanol. However, IRFA believes the final rule must better account for the rapid increase in advanced biofuels like biodiesel and renewable diesel."

The Renewable Fuels Association said in a statement the proposal paves the way for growth in the ethanol industry.

"EPA's proposed rule solidifies a role for the Renewable Fuel Standard in future efforts to reduce carbon emissions and enhance our nation's energy security," RFA President and CEO Geoff Cooper said in a news release.

"Once finalized, this rule will significantly accelerate growth and investment in the low-carbon renewable fuels that will help decarbonize our nation's transportation sector, extend domestic fuel supplies, and bolster the rural economy. By including three years' worth of RFS volumes, EPA's proposed rule will finally provide certainty and stability for the entire supply chain."

Growth Energy CEO Emily Skor said the EPA proposal keep biofuels on track to be part of carbon reductions from transportation fuels.

"We're grateful to President (Joe) Biden and EPA Administrator (Michael) Regan for keeping clean energy on an upward trajectory that will move America closer to a net-zero future," she said. "As we saw again this summer, biofuels remain the single best tool available to shield motorists from volatile global oil prices and rapidly decarbonize the transportation sector."

Skor said a final rule needs to ensure the "integrity of the RFS" when it comes to new renewable fuels sources like those to be tracked by E-RINs.

"At the same time, the agency must clear the backlog of pathway approvals for advanced and cellulosic biofuels," she said, "including cellulosic biofuels from kernel fiber and advanced biofuels from corn oil produced at ethanol wet mills, and better leverage this opportunity to account for all of the innovation taking place in the renewable transportation industry."

American Coalition for Ethanol CEO Brian Jennings said in a statement the RFS proposal was a "critical opportunity" for the EPA to leverage the greenhouse gas emissions reduction benefits of ethanol.

"We're pleased the agency is taking steps in the right direction by setting conventional biofuel blending at 15 billion gallons or more for 2023 through 2025 on paper, in addition to including the 250 million gallons of supplemental volume to carry out the 2017 D.C. Circuit Court order," Jennings said.

"Multi-year targets help provide clarity the market needs to lean into climate benefiting transportation fuels such as ethanol."

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

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