Hocus Pocus: RVO Litigation, 2023 Set, and Other Rumors

October 12, 2022

It’s that time of year when the leaves are falling, the air is getting chillier, and rumors about the Renewable Fuel Standard (RFS) are mounting their broomsticks and flying through the air. With the deadline of the 2023 (and possibly beyond) RFS Set and recent legal proceedings associated with the release of 2021 and 2022 final Renewable Volume Obligations (RVOs), rumors are flying faster than Starbuck’s released its famed pumpkin spice latte. While there is a lot going on in the industry, I’ll be funny…so you’ll at least giggle while you read this…

Let’s talk about the litigation and legal proceedings surrounding final RVOs before we get to Set rumors. I know we all thought we were done with this and then BOO! They’re back…from the dead…like zombies! #halloweenjokes. Shortly after the RVOs were released, the environmental group, Center for Biological Diversity, filed suit against EPA. In its suit, the group alleges that EPA failed to take into account the impact on endangered species from land conversion and the potential increased uses of pesticides and fertilizer would have when setting higher volume targets for the RFS.

Then, like Hocus Pocus 2 after its 30-year hiatus, industry participants have burst into the case, with the hope of flying it forward or just out of court entirely. Growth Energy, Renewable Fuels Association, and Clean Fuels Alliance America have all filed motions to intervene on behalf of EPA. This basically means that they wish to be joined with EPA as parties to the case, going against the Center for Biological Diversity. Part of the reason these groups have chosen to do this is because they have an interest in seeing the final RVOs progress forward, particularly in the wake of litigation from oil and refining companies and the protracted setting of the final RVOs.

Flying right along, many oil and refining companies (i.e., Sinclair Wyoming Refining, Wynnewood Refining, American Fuel & Petrochemical Manufacturing, etc.) have also filed suit against EPA alleging a variety of claims, many of which can be boiled down to EPA setting the RVOs too high and denying many small refinery exemptions (SREs). However, these suits are on-going, and many are still in their beginning stages. Further, EPA has consistently denied SREs but has also issued alternative compliance schedules so that many of these refineries could comply with obligations from previous years without the need to buy and retire RINs. This means that many lawsuits alleging that EPA wrongly denied SREs have greater potential of getting dismissed. It figures that EPA finally releases the RVOs, two whole years after the deadline, and now everybody is kung-foo fighting. But plot twist, nothing about this will be fast as lightning…no, really, court cases are not speedy, especially in D.C.

Speaking of obligated parties, EPA is busy getting to the release of the proposed 2023 (and possibly beyond) RVOs (a.k.a. Set). Rumor has it, EPA is preparing to release three years of RVOs by the November 16 deadline. Many industry participants are hoping this is true, because, as past experience has shown, the more certainty for the future EPA can bring, the less industry participants will start looking for crystal balls…and the more they can make accurate business decisions. EPA is mandated by the D.C. Circuit Court to propose, at minimum, the 2023 RVOs by the November 16 and finalize those volumes by June 1, 2023. This means that, potentially, by next June, RFS participants could have three years of certainty.

Another rumor that has been flying through the air is that EPA is going to allow certain types of electricity used to power electric vehicles to be eligible to generate RINs. If EPA chooses to incorporate electricity into the RFS, it will be the biggest change to the program since the inception of RFS2, over a decade ago. However, EPA has long been toying with the creation and development of “e-RIN” pathways (RINs generated as a result of electricity). While it may be a big change, it would not be all that “shocking” to see new electric pathways incorporated within the 2023 Set.

After spilling all that tea, as the kids say, where does this leave the RFS and the future? Um, well, that’s a great question. While I am keenly aware this is Halloween month, I feel obliged to inform you that I have not an enchantment nor crystal ball to divine a clear answer. I think the takeaway here has got to be that the final RVOs maybe changing as a result of several lawsuits, and that EPA is going to propose 2023 RVOs (and possibly more) for the Set in November. It is also possible that e-RIN pathways start to be included in the RFS (which isn’t “shocking”…sorry, couldn’t help it).

In the meantime, make some potions, cast some spells, or pray to a deity of your choosing that November holds more answers than it brings questions.