EPA supplemental proposal is not the same ‘deal’ struck by Trump

The release of the supplemental rulemaking follows a press briefing held by EPA on Oct. 4 announcing a deal related to the biofuel relief package promised by President Trump in late August to quell outrage from the ag and biofuel industries following the EPA’s Aug. 9 approval of 31 SREs. Those SREs alone exempted 13.2 billion gallons of gasoline and diesel from having to meet 2018 RFS RVOs, accounting for 1.43 billion renewable identification numbers (RINs), or approximately 7.5 percent of the 2018 blending requirements finalized by the agency nearly two years ago. 

The rulemaking released Oct. 15 supplements the EPA’s pending proposed rule to set 2020 RVOs and the 2021 RVO for biomass-based diesel. That rulemaking was originally issued in July. A public comment period closed Aug. 30. The new supplemental notice of proposed rulemaking does not change the proposed RVOs for 2020 and 2021. It does, however, seek comment on adjustments to the way that annual RVOs are calculated. Specifically, the EPA said it is seeking comment on projecting the volume of gasoline and diesel that will be exempt in 2020 due to SREs based on a three-year average of the relief recommended by the DOE, including where DOE had recommended partial exemptions. The agency said it intends to grant partial SREs in appropriate circumstances when adjudicating 2020 exemption petitions, an approach to SREs the agency has not taken in recent years.

According to the EPA, it is proposing to use this value to adjust the way it calculates RVOs. “The proposed adjustments would help ensure that the agency blends the final volumes of renewable fuel into the nation’s fuel supply and that, in practice, the required volumes are not effectively reduced by future hardship exemptions for small refineries,” the agency said in a notice posted to its website. “Consistent with the statute, the supplemental notice seeks to balance the goals of the RFS of maximizing the use of renewables while following the law and sound process to provide relief to small refineries that demonstrate the need.”

Within the supplemental rule, the EPA notes that from 2016-’18, the relief recommended by the DOE would have resulted in a reduction to the RVO of approximately 770 RINs per year. “The amended definitions proposed in this rule would effectively increase the percentage standards that apply to non-exempt obligated parties to offset future [SREs] and help ensure that the required volumes are met,” the EPA said in the supplemental rulemaking.

Data released by the EPA as part of the rulemaking seems to indicate that if the EPA would have followed DOE’s recommendations in past years—including its recommendations to grant partial exemptions—the volumes waived through SREs approved over the past three years would have been much lower than actually realized. The data shows the EPA followed DOE recommendations for compliance year 2015, providing a total exemption of 290 RINs. There was, however, a significant mismatch between DOE recommendations and EPA approvals for compliance years 2016-’18.

For compliance year 2016, the EPA said the DOE recommended SREs equating to 440 million RINs. In actuality, the EPA approved SREs accounting for approximately 790 million RINs. Similarly, the DOE’s compliance year 2017 recommendation reached 1.02 billion RINs, far lower than the estimated 1.82 billion RINs finalized by the EPA. For compliance year 2018, for which several SRE applications are still pending, the DOE has, to date, recommended EPA approve SREs accounting for 840 million RINs, far lower than the 1.43 billion RINs worth of SREs already approved by the agency.

The EPA has announced plans to hold a hearing Oct. 30 in Ypsilanti, Michigan, regarding the supplemental notice of proposed rulemaking, followed by a 30-day public comment period. The agency said it will finalize this action later this year. A full copy of the supplemental notice of proposed rulemaking can be downloaded from the EPA website. 

Representatives of the biodiesel industry have slammed the supplemental rulemaking, stressing that its falls short of the relief package previously promised by Trump.

The National Biodiesel Board said it is skeptical the EPA’s proposed supplemental rule will ensure that 2020 and future biomass-based diesel volume obligations are fully met. “The supplemental notice contains a never-before-discussed proposal to estimate small refinery exemptions for 2020, with no assurance that the estimate will come close to actual future exemptions,” the organization stated. “The biodiesel industry does not believe the proposal meets President Donald Trump's Oct. 4 promise to American farmers and biodiesel producers.”

Kurt Kovarik, NBB’s vice president of federal affairs, said, “The notice that EPA issued today is significantly different from the agreement that biofuel industry champions negotiated with President Trump just two weeks ago, which was to estimate future exempted RFS volumes based on the average of actual volumes exempted over the past three years. EPA is proposing a brand-new method for making the estimate—one that was never previously proposed or discussed and significantly undercounts past exemptions. Once again, EPA is sending a signal to the biofuel industry that the volumes it sets in annual rules can't be trusted. The proposed estimates lack transparency and undercut the president’s commitment to ensure that biomass-based diesel volumes are fully met. The biodiesel industry will work diligently with all appropriate federal agencies to ensure that the final rule scrupulously fulfills President Trump’s promise to soybean farmers and biodiesel producers.”

The Iowa Biodiesel Board expressed apprehension over the plan, saying it appears to run contrary to a previously agreed-upon deal with President Trump. “The solution President Trump previously promised us would have estimated future exempted RFS volumes based on the average of actual volumes exempted over the past three years,” said Grant Kimberley, IBB executive director. “That is the remedy we need to steady the renewable fuels market, help plants reopen their doors, and infuse rural economies still in crisis. This new plan from EPA appears to be a dramatic departure from the agreement struck with the president, and we expect markets to react accordingly. This is likely to inflict further damage on the already struggling biodiesel industry and farm economy. We will join our Iowa political champions, the National Biodiesel Board and other groups in scrutinizing this new proposal, and in ensuring the final rule fulfills the deal President Trump agreed to earlier this very month.” 

“Iowa Renewable Fuels Association members continue to stand by President Trump’s strong biofuels deal announced on Oct. 4, which was worked out with our elected champions,” said Monte Shaw, executive director of the IRFA. “Unfortunately, only 11 days after President Trump’s landmark announcement, the EPA proposal reneges on the core principal of the deal. Instead of standing by President Trump’s transparent and accountable deal, EPA is proposing to use heretofore secret DOE recommendations that EPA doesn’t have to follow. That means there is no guarantee that RFS exemptions will be accounted for in the RFS. Instead, the proposal today essentially asks Iowa farmers and biofuels producers to trust that EPA will do the right thing on SREs in 2021 when they have spent the past two years weaponizing SREs to unfairly undermine the RFS. It is unreasonable and counterproductive to expect Iowans to put their faith in EPA to fix the SRE problem when they were the ones who created the crisis in the first place. As this proposal goes against the core of President Trump’s deal that we continue to support, we will work with our elected champions and the president to get the deal he proposed, and we all celebrated, back on track.”  

The Advanced Biofuels Association criticized the proposal and questioned the legality of the action. “Today, the administration took back two-thirds of what it promised just a week ago, and the irony is rich,” said Michael McAdams, president of the ABFA. “In this rule, EPA has based SRE reallocation on DOE recommendations when the agency ignored those recommendations in its Aug. 9 decision to grant 31 exemptions for compliance year 2018. Furthermore, EPA has proposed to reallocate only 580 to 770 million gallons when 1.4 billion were ultimately displaced by those SREs. We doubt the legality of this action, and the administration’s good faith in proposing this ‘deal.’ ABFA will argue its case later this month before the D.C. Appellate Court challenging the SREs granted over the past several compliance years. We look forward to the court’s judgment on the administration’s efforts to undercut the congressional intent of the RFS program.”            

The corn ethanol industry is not happy with the proposal either. The Renewable Fuels Association said it was a step backward, while Growth Energy called it a betrayal.