First RFS rule from Trump EPA a big disappointment for biodiesel

By Ron Kotrba | November 30, 2017

The U.S. EPA released its final rule for renewable volume obligations (RVO) under the Renewable Fuel Standard Nov. 30, and the Trump administration’s first RFS final rule is a big disappointment for biodiesel producers. The biomass-based diesel volumes for 2019 set by the Trump-led agency run by Scott Pruitt are what EPA proposed this summer, stalling the biodiesel category at 2.1 billion gallons—the first setback since the Obama-era EPA had proposed stalling biodiesel volumes at 1.28 billion gallons in 2014, which was rescinded and replaced after significant delay with a modest 100 million gallons of growth year-over-year for the past few years.

The 2018 biomass-based diesel RVO, previously finalized by the Obama administration, was set at 2.1 billion gallons—a figure that was in jeopardy after EPA issued its Notice of Data Availability in late September, which sought ways to lower the already-established 2018 biomass-based diesel volume requirement based on a lapsed biodiesel tax credit and duties imposed on biodiesel imported from Indonesia and Argentina. The NODA proposal was quelled after significant pressure was placed on President Trump and the EPA by influential senators along with biodiesel and agricultural lobbies. This year’s biomass-based diesel mandate was 2 billion gallons, and last year’s was 1.9 billion.

The agency also issued its advanced biofuel RVO for 2018 at 4.29 billion ethanol-equivalent gallons, which is just a hair over the 4.28 billion gallons set for 2017 and slightly higher than the 2018 proposal of 4.24 billion gallons put out this summer. One gallon of biodiesel is equivalent to 1.5 gallons of ethanol in the RFS program. The 2016 advanced biofuel RVO was 3.61 billion gallons.

“EPA got this year’s rule out on time—kudos to them for that,” Gene Gebolys, president and CEO of World Energy, told Biodiesel Magazine. “President Trump has repeatedly promised that he would defend the RFS. Apparently EPA didn’t get the memo. These numbers show the EPA’s resolve to weaken, rather than defend, the RFS. Flatlining advanced biofuels and biodiesel is not what Congress intended. If this administrator is serious about administering to congressional intent rather than oil industry intent, he needs to get serious about learning about our industry.”  

“The administration heard us when we said the advanced biofuel RVO should grow in 2018, not be cut as EPA originally proposed,” said Randy Howard, Renewable Energy Group Inc.’s interim president and CEO. “While we would have liked to see a larger increase, we consider this a crucial win—signaling a policy of continued RVO growth under the Trump administration.” Howard added that it certainly would have been better if EPA allowed for even a modest increase in the biomass-based diesel RVO. “We feel the administration missed an opportunity in not continuing a sensible and consistent growth trajectory for biomass-based diesel,” he said. “We firmly believe the U.S. industry is fully capable of delivering increasing volumes of biomass-based diesel to meet a growing RVO as Congress intended when it created the RFS. We will continue to work with EPA in 2018 to develop workable plans for additional growth in 2019.” 

The National Biodiesel Board had pushed for biomass-based diesel volumes of 2.5 billion gallons for 2019—down from its original ask volumes of 2.75 billion—and for 4.75 billion gallons of advanced biofuels next year.

“EPA Administrator Pruitt has disappointed the biodiesel industry for failing to respond to our repeated calls for growth,” said Doug Whitehead, chief operating officer for the NBB. “These flat volumes will harm Americans across several job-creating sectorsbe they farmers, grease collectors, crushers, biodiesel producers or truckers—as well as consumers. Nevertheless, we can’t thank our members and our biodiesel champions at the state and federal levels enough for their tireless advocacy and education efforts. We’ll continue to work with the administration to right this wrong for future volumes.”

Grant Kimberley, executive director of the Iowa Biodiesel Board, said, “These flat volumes send a weak signal to the market at a time when our plants could significantly increase production and expand capacity. Many plants in Iowa and beyond stand ready to make new investments in boots on the ground and brick-and-mortar projects, which would create jobs and spur growth in agriculture and rural America.” Kimberley added that the RFS decision brings a “heightened urgency” to extending the federal biodiesel tax credit, “which will augment U.S. demand and could reenergize economic growth,” he said. “It’s up to Congress to advance this good policy.”

“It’s fair to say that we’re very frustrated yet again by the lack of growth in these volumes by EPA,” said American Soybean Association President Ron Moore. “We can do more, and we’ve shown that year after year. The flat nature of the biomass-based diesel and advanced biodiesel volumes continues to be a missed opportunity to capitalize on a valuable market for soybean oil.”

The Iowa Renewable Fuels Association notes that the advanced biofuels level of 4.29 billion gallons effectively cuts biodiesel demand in 2018 by 67 million gallons. The organization also said the cellulosic biofuel volume for 2018 was cut by more than 7 percent from 2017, although less than the 25 percent cut that was originally proposed in the summer. The cellulosic biofuel RVO for 2018 is set at 0.288 billion gallons, down from 0.311 billion this year.

“Many people are saying the RFS numbers released today, while disappointing, were expected,” stated IRFA Executive Director Monte Shaw. “I disagree. Based on the 2018 biodiesel level finalized a year ago, biodiesel producers had every right to expect a 100 million gallon increase for 2018. But the EPA failed to raise the advanced biofuels level by an equal amount, resulting in only a 33 million gallon potential increase for biodiesel in 2018a cut of 67 million gallons from what was signaled a year ago.”

EPA is keeping conventional biofuels—corn ethanol—at 15 billion gallons, the statutory maximum under the RFS.

“Virtually every ethanol plant in Iowa produces distillers corn oil that is used to produce biodiesel,” added Shaw. “Ethanol plants had every right to expect a growing market for biodiesel, but today’s rule cuts the expectation for 2018 and signals no growth for 2019. And with roughly a dozen Iowa ethanol plants poised to produce cellulosic ethanol from corn kernel fiber, they had every right to expect an increase in the cellulosic level, not a 7 percent cut.”

Naturally, the president and CEO of oil lobby group American Fuel & Petrochemical Manufacturers Chet Thompson said, “Unfortunately, it appears that EPA did exactly what Sen. Grassley demanded, bowing the knee to King Corn. We think this action is bad for U.S. manufacturing and American consumers and encourage Congress to finally fix the RFS.”

U.S. biofuel groups intend to double down on efforts to convince Trump and the EPA that increasing biodiesel and advanced biofuel volumes in future years is vital for the agricultural complex and domestic job market.

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