Biofuels sector rankled although EPA proposes highest ethanol mandate ever
The Biden administration said it would set the ethanol mandate at its highest level ever in 2022 and reject 65 requests from small refineries for exemptions from the Renewable Fuel Standard (RFS).
Both were welcome steps for biofuel backers, but they rebelled at companion proposals to retroactively set the RFS for 2020 and this year below the maximum possible — “a betrayal” of rural America, said a Nebraska senator.
“This package of actions will enable use to get the RFS program back into growth mode” following the disruptions of the pandemic, said EPA administrator Michael Regan on Tuesday. “EPA remains committed to the growth of biofuels in America as a critical strategy to secure a clean, zero-carbon energy future.”
The EPA is supposed to finalize the RFS for each year by November 30 of the preceding year. The pandemic complicated the task of setting the RFS for this year. The Trump administration left office without proposing it.
In a long-awaited announcement, the EPA proposed an RFS of 20.77 billion gallons for 2022. The target for corn ethanol would be the highest ever — a combined 15.25 billion gallons; 15 billion gallons under the standard terms of the RFS and a “supplemental standard” of 250 million gallons. The 250 million gallons would be the first of two steps toward satisfying a 2017 appeals court ruling to increase ethanol use.
Also on Tuesday, the Agriculture Department said it would make up to $700 million in pandemic relief payments to biofuel producers for 2020 losses and award $100 million in grants to offset the cost of “blender” pumps and other equipment to increase sales of blends containing a higher proportion of biofuels than the traditional 10%.
The RFS guarantees biofuels a share of the fuel market for cars and pickup trucks. Typically, refineries satisfy the RFS by blending ethanol or other biofuels into gasoline. If they cannot blend enough ethanol, they can buy credits known as RINs to make up the difference. Hardship waivers are available to small-volume refineries if compliance costs would be excessive.
Pro-ethanol trade groups applauded the 2022 target while arguing that the EPA should set the ethanol mandate for 2020 and this year at 15 billion gallons, the level set in a 2007 law. Instead, the EPA proposed an ethanol mandate of 13.2 billion gallons for this year and 12.5 billion gallons for 2020, based on actual use. Lowering the mandate would result in “lost gallons” of ethanol sales, said industry groups and the National Corn Growers Association. They have used a similar argument against EPA’s allowance of hardship waivers to small refineries.
Gasoline consumption plunged by 19%, to around 123 billion gallons, in 2020. Consumption is forecast at 135 billion gallons this year. It was 146 billion gallons in 2019, before the pandemic. Ethanol production dropped by 12% in 2020, mirroring the abrupt decline in travel caused by stay-at-home orders and the economic recession that accompanied the pandemic.
“At face value, EPA’s plan for 2020 gallons serves as a giveaway to petroleum companies at the expense of rural families and future investment in low-carbon energy,” said the trade group Growth Energy. The Renewable Fuels Association said it was “completely unprecedented” for the EPA to re-open an RFS, as it would for 2020, originally set at 15 billion gallons.
“We recognize the previous administration left the RFS program in total disarray when it left Washington,” said RFA president Geoff Cooper. The EPA package was a step toward putting the RFS back on track but does not go far enough, he said.
The American Fuel and Petrochemical Manufacturers said the EPA package “would needlessly increase record-breaking RFS compliance costs, which, in turn, will raise the cost of producing gasoline and diesel for U.S. consumers.”
The EPA said its plan to reject the 65 applications for RFS waivers was based on a 2020 decision by the U.S. appeals court in Denver that greatly restricted eligibility for the exemptions. The Supreme Court overturned that decision last summer and indicated more latitude should be given in deciding if a waiver was appropriate. The EPA said it would seek comment on the proposal from the public and interested parties.