Biden Administration Releases Long-Awaited Proposal on RFS

Recently the EPA released a proposed rule establishing Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS), while also denying more than 60 small refinery exemption (SRE) petitions and proposing other changes to the program. The proposed rule, historically released over the summer and finalized at the end of November, addresses RVOs for 2020, 2021 and 2022 volumes of the various biofuel categories and for which obligated parties are responsible. The proposal initiates a public comment and hearing process that is expected to produce a final rule in 2022. 

In its proposal, the EPA: 

• Retroactively reduces the 2020 RVO to 17.13 billion gallons (down from 20.09), of which 12.5 billion may come from traditional corn ethanol
• Establishes 2021 RVO at 18.52 billion gallons, of which 13.3 billion gallons may come from traditional corn ethanol
• Establishes the 2022 RVO at 20.77 billion gallons, of which 15 billion may come from traditional corn ethanol

As well as setting these top-level numbers, EPA also established the 2022 RVO for biomass-based diesel at 2.76 billion gallons while updating several additional regulatory and compliance mechanisms within the program. In addition to EPA’s announcement, USDA simultaneously announced $800 million in financial support to the industry, including $700 million for economic hardships caused by the pandemic and another $100 million in biofuel infrastructure investments, designed to increase the sales of higher blends of biofuels.

The EPA also released its Proposed RFS Small Refinery Exemption Decision, intended to reconsider previous SREs that had been approved based on the Tenth Circuit Court of Appeals’ decision on the matter. In its proposal, the EPA recommends denying SRE applications submitted during the 2016–2021 compliance years and updating its consideration of future applications — including what constitutes disproportionate hardship as well as eligibility requirements for applicants. EPA is seeking public comments on these specific proposals by February 7, 2022.

The RFS and its rulemakings have become increasingly controversial as tensions have increased between the oil and gas, and the agricultural and biofuel industries. The RFS, which establishes a mandatory market for biofuels, is the most consequential policy to that industry, while its compliance falls largely to the traditional refining community. Complicating the issue for the president are the increasing prices at the gas pump for consumers as well as his own push for greater electrification of the country’s transportation fleet — which will further reduce overall consumption of gasoline and diesel.

As part of its rulemaking process, the EPA will be holding a virtual public hearing January 4–5, 2022. To participate, interested parties must register by December 20. In addition, EPA will be soliciting public comments on its RVO proposals through February 4, 2022. 

For More Information

For additional information on the proposed rule or the RFS generally, contact Brandon Kirkham, Josh Andrews or your usual Faegre Drinker consultant.