US refiners will need to provide ever higher volumes of renewable fuels or pay for ever greater amounts of renewable fuel credits to meet the latest proposed fuel blending standards of the Environmental Protection Agency (EPA).
Under the Renewable Fuel Standard (RFS), the total volume of renewable blendstocks added to fuels in 2022 would set a new record at 20.77 billion gal, and EPA is proposing a “supplemental obligation” of 250 million gal be added to that total.
The supplement is a response to a 2017 decision by the US Court of Appeals for the District of Columbia Circuit that narrowed the criteria for calculating “inadequate domestic supply” when EPA issues waivers. EPA said it would add another 250 million gal to its 2023 plans.
In its Dec. 7 announcement of the new volume requirements, the agency said it was proposing to retroactively revise its 2020 total level to 17.13 billion gal to take into account the challenges faced by the market and the RFS program during that first year of the COVID-19 pandemic. The 2021 total would be 18.52 billion gal under the announced plan.
The agency said it also is proposing to deny 65 hardship exemptions requested by small refiners, based on a 2020 ruling by the US Court of Appeals for the Tenth Circuit, even though the Supreme Court overruled the circuit court in 2021 (OGJ Online, June 25, 2021). It said it will be taking comments on that proposal.
Because the proposal on small refiners “is highly consequential to impacted parties, reflects an updated interpretation of the [Clean Air Act], and is a change from previous EPA practice, we are implementing a public notice-and-comment process and seeking input from stakeholders, the public, and from individual petitioning refineries,” EPA said.
Cost impacts feared
“This package of actions will enable us to get the RFS program back in growth mode by setting ambitious levels for 2022,” said EPA Administrator Michael Regan in a statement accompanying the new RFS targets.
To refiners, however, the growth does not consider market realities.
“So much for the Biden administration being concerned about energy costs,” said Chet Thompson, president of the American Fuel & Petrochemical Manufacturers, in a statement responding to the EPA action.
The plan will raise the cost of producing gasoline and diesel for consumers, Thompson said. “EPA’s proposal will make matters worse, depleting the RIN bank by ignoring fuel market realities,” he said, referring to the often costly credit system using renewable identification numbers (RINs).
“Potentially making matters even worse is EPA’s plan to disregard the Supreme Court and eliminate Congress’ small refinery relief program,” Thompson said.
The renewable fuel program is fiercely defended by the agricultural lobby and members of Congress from corn-growing states. EPA’s Regan portrayed it in his announcement as a part of the climate change fight, “a critical strategy to secure a clean, zero-carbon energy future.”
