On May 29, the United States Environmental Protection Agency (EPA) proposed long-delayed Renewable Fuel Standard (RFS) volume requirements for 2014, 2015, and 2016. Despite significant efforts to promote the use of renewable fuels, real-world limitations, such as the slower than expected development of the cellulosic biofuel industry, less growth in gasoline use than was expected when Congress enacted these provisions in 2007, and constraints in supplying certain biofuels to consumers, have made Congress’ original RFS goals for 2014, 2015, and 2016 effectively beyond reach.  Congress established the RFS program in 2005 (42 U.S.C. § 15801) and expanded the program in 2007 (EISA, P.L. 110-140), when it set specific volume production goals.  The program, according to EPA, is designed to promote energy security by increasing the percentage of domestic renewable fuels used in transportation. The RFS program has played a key role in the emergence of the biofuels industry but has been insufficient to overcome challenges such as the declining demand for gasoline, insufficient infrastructure capacity to transport the fuels, high cost associated with producing some renewable fuels, and limitations on how much renewable fuel can be blended with conventional fuels. As production of renewable fuels lagged, EPA failed to use its discretion to waive the Congressionally-authorized goals.

Pursuant to a consent decree entered in March 2015 between EPA and the American Petroleum Institute (API) and the American Fuel and Petrochemical Manufacturers (AFPM), EPA must issue the final rule by Nov. 30, 2015. In the proposal, the 2014 volume requirements for conventional ethanol and advanced biofuels is set to reflect the volumes actually used in 2014.  For 2015 and 2016, EPA proposes higher volumes than the levels EPA proposed in a rulemaking withdrawn last year, but are well below the levels that Congress wrote into law.

The RFS2 program works by imposing an annual obligation on refiners and importers of fossil transportation fuels to include an increasing percentage of renewable fuel in the overall production. This obligation, known as the RVO, is the cornerstone of RFS.  Refiners and importers must annually certify that they met their RVOs by either physically blending the required amount of renewable fuel or by purchasing and retiring “renewable information numbers” (RINs), which are renewable fuel credits that are bundled with renewable fuels meeting certain greenhouse gas emissions reductions and other requirements.

EPA proposed a Renewable Volume Obligation (RVO) for 2015 of 16.3 billion gallons of renewable fuels: 13.4 billion gallons of conventional ethanol and 2.9 billion ethanol-equivalent gallons of advanced biofuels.  For 2016, EPA proposed an RVO of 17.4 billion gallons of renewable fuels:  14 billion gallons is to be corn-based ethanol and 3.4 billion ethanol-equivalent gallons is to be advanced biofuel.  According to EPA, the proposed levels are ambitious but within reach of a responsive marketplace.

Stakeholders have expressed frustration over EPA delays in releasing the RVOs because EPA’s failure to set an RVO introduced additional uncertainty into the renewable fuels market. EPA’s proposal can be viewed here. Comments on the proposal must be received on or before July 27, 2015.  Please contact any member of the Schiff Hardin Environmental Group with questions about EPA’s RFS RVO proposal.