Slight Volume Increases For Biobased Diesel In 2023-2025 Final RFS Rule Not Enough, Stakeholders Say

The U.S. EPA released June 21 what is arguably the most consequential administration of U.S. federal biofuel policy in modern history, the agency’s final “set” rule establishing renewable volume obligations (RVOs) for 2023-’25 under the federal Renewable Fuel Standard—the first such final rule after statutory volumes established by Congress in the Energy Independence and Security Act of 2007 ended in 2022.

Under the final rule, EPA has set RVOs for biomass-based diesel at 2.82 billion gallons for 2023, the same as proposed in December and up just over 2 percent from 2.76 billion gallons in 2022; 3.04 billion gallons for 2024, up just 5 percent from the 2.89 billion gallons in the proposal; and 3.35 billion gallons in 2025, up nearly 14 percent from 2.95 billion gallons proposed.

For advanced biofuels, which are provided in ethanol-equivalent gallons instead of biodiesel- or renewable diesel-equivalent gallons, the agency has established RVOs at 5.94 billion gallons for 2023, up 2 percent from 5.82 billion in the proposal; 6.54 billion gallons in 2024, down 1 percent from 6.62 billion gallons proposed in December; and 7.33 billion gallons for 2025, down just over 1 percent from 7.43 billion gallons in the proposal.

Regarding the cellulosic biofuel subcategory of advanced biofuels, the agency’s December proposal had rapidly increasing volumes to accommodate its eRIN scheme allowing electric-vehicle (EV) manufacturers to generate RINs, which was eliminated from the final rule after significant pressure from a variety of stakeholders.

In the final rule, cellulosic RVOs are set at 840 million gallons in 2023, up from 720 million gallons proposed; 1.09 billion gallons in 2024, down from 1.42 billion in the proposal; and 1.38 billion gallons for 2025, down 35 percent from 2.13 billion proposed.

In biodiesel-equivalent gallons, the noncellulosic advanced biofuel final RVOs equal 3.4 billion gallons in 2023, 3.63 billion gallons in 2024 and nearly 3.97 billion gallons in 2025.

The final biomass-based diesel RVOs for 2023-’25 are indeed higher than what EPA first proposed in December, but not by enough, industry representatives say.

“The ruling disagrees with studies conducted by numerous organizations about America’s surging advanced biofuel production capacity, including the Energy Information Agency, and underestimates the existing and planned capacities of advanced biofuels by hundreds of millions of gallons per year,” said Michael McAdams, president of the Advanced Biofuels Association. “By choosing not to reflect the available and growing supply of advanced biofuels in this three-year rule, the EPA is overlooking a chance to reduce 7 trillion pounds of CO2 from our atmosphere. This rule reneges on the Biden administration’s proclaimed vision for carbon reduction.”

The final rule could discourage continued investment in sustainable fuels, according to McAdams.

“It is disappointing that the Biden administration’s EPA chose not to recognize the projected growth of the biomass-based diesel pool in this rule, despite the groundbreaking carbon reductions being delivered by renewable diesel plants coming online today,” he said. “More than 20 renewable diesel facilities have been proposed or are currently under construction.”

McAdams noted that his organization provided the agency with studies conducted by third-party analysts that found there are sufficient feedstocks available, accounting for food, to support a more significant increase in renewable volumes.

“Although our request for a 500-million-gallon yearly increase in the biomass-based diesel pool was not met, our industry is appreciative that the rule ramps up to 460 million gallons in the D4 pool by 2025,” he said. “This boost serves as a commendable acknowledgement of the progress made by those of us involved in the delivery of renewable diesel, biodiesel and sustainable aviation fuel (SAF).”

He added that the Advanced Biofuels Association will continue to work with EPA, DOE, USDA and other key stakeholder groups to deliver the hundreds of millions of gallons of advanced biofuels that will not be mandatory under RFS.

Clean Fuels Alliance America noted that EPA failed to change biomass-based diesel volumes for 2023 despite the rapid increase in U.S. production of biodiesel, renewable diesel and SAF during the first months of the year.

“EPA is undercutting the certainty that our industry hoped for from a three-year RFS rule,” said Kurt Kovarik, vice president of federal affairs with Clean Fuels. “U.S. clean-fuel producers, oilseed processors, fuel distributors and marketers have all made significant investments to grow the industry rapidly over the next several years. The industry responded to signals from the Biden administration and Congress aiming to rapidly decarbonize U.S. fuel markets—particularly aviation, marine and heavy-duty transport—and make clean fuels available to more consumers. The volumes EPA finalized today are not high enough to support those goals.”

Kovarik added that “it is a shame” EPA failed to fully consider the data provided by other federal agencies and industry experts demonstrating the upward trajectory of the industry.

“Worst of all,” Kovarik said, “EPA ignores the hundreds of millions of gallons of biodiesel, renewable diesel and SAF generated in the first half of 2023. In past years when EPA set RFS volumes after the statutory deadline and after the compliance year is nearly half over, the agency properly accounted for available gallons and RINs.”

Clean Fuels revealed how EPA’s own public data for RFS shows that qualifying biomass-based diesel production increased by more than 30 percent—or 400 million gallons—in the first five months of 2023, compared to the same period in 2022.

The total biomass-based diesel volumes for 2025 represent just over a 20 percent growth compared to the 2022 RVOs previously set by EPA.

“However, these totals match current production levels and do not actually account for growth in the industry,” stated the American Soybean Association. “The EIA predicts an increase in biomass-based diesel production of over 800 million gallons in 2023 alone.”

But in the final rule released June 21, EPA increases RFS volumes for these fuels by only 590 million gallons over the three-year period: 60 million gallons in 2023, 220 million gallons in 2024, and 310 million gallons in 2025.

The announcement is an obvious letdown for soy growers, said ASA President Daryl Cates.

The expanded crush capacity companies have announced for the next three years would increase soybean oil supplies by about 5.5 billion pounds, which translates into about 700 million gallons of renewable diesel—far above EPA’s three-year RVO growth of only about 590 million gallons, ASA pointed out.

“Adding growth from other feedstocks to the announced crush expansion creates a feedstock-abundant situation,” the organization stated.

Cates added, “EPA’s final rule undercuts these investments, and the market may not be able to absorb the expected future production. It’s also a huge, missed opportunity for a low-carbon fuel to reduce greenhouse gas emissions and scale back the country’s reliance on imported oil.”

The agency also kept the conventional corn ethanol mandate at 15 billion gallons for all three years, down 250 million gallons for years 2024 and 2025 compared to the proposal.

To access the final rule, click here.

Originally shared by Biobased Diesel Daily, June 21, 2023.

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