December 14, 2022
“On the first day of Christmas EPA proposed to me…a 692-page rule” Doesn’t have quite the same ring to it, does it? If you’ve been paying attention to the transportation fuels industry, you know that EPA just released the “Set” rule for 2023 and beyond. This was a monstrous release, boasting 692 pages of pure regulatory and scientific language. It was a real page-turner.
The release is significant because 2023 is the first year the statute did not set mandatory targets for the transportation fuels industry. This means, under statute, EPA is now permitted to promulgate all future Renewable Volume Obligations (RVOs), among other things, without needing to comply with pre-set statutory targets. The ability for EPA to “self-regulate” is known as the 2023 “Set” rule. New Year, new EPA, am I right?
In addition to RVOs, EPA is addressing many new or outstanding rule promulgations. For example, EPA introduced the regulatory program for renewable electricity, enhanced the third-party oversight, addressed separated food waste record-keeping requirements, modified RIN ratios, and added a partridge in a pear tree, just for good measure. That being said, I am choosing to focus on is the recent release of RVOs. While the other items in this rule are important, the portion of Set address RVOs is the most relevant to this blog.
So what happened? First, EPA proposed RVO targets for three years, rather than for one year. The three-year release is being proposed to be the “new normal.” I guess Happy Holidays? EPA noted that there is no specific provision which in the Clean Air Act which prohibits this type of action…which begs the question, why haven’t they been doing this the entire time? In all seriousness, EPA’s release of multiple years would give participants more predictability that the RFS has been so desperately needing. While EPA is accepting comments from stakeholders on this item, I think it’s likely EPA will finalize releasing candidate volumes for multiple years.
Second, EPA published proposed volumes. I’ve listed the percentage standards below, because if we’re being honest, it’s difficult to put the number of gallons into context. For issued EPA RVOs, see below:
|Cellulosic Biofuel (D3)||0.41%||0.82%||1.23%|
|Biomass-Based Diesel (D4)||2.54%||2.60%||2.67%|
|Advanced Biofuel (D5)||3.33%||3.80%||4.28%|
|Total Renewable Fuel (D6)||11.92%||12.55%||13.05%|
Wait, what’s the Supplemental Standard? In June of 2022, EPA released RVOs for 2021 and 2022, which included a 500-million gallon supplemental obligation as a result of a court decision. To ease the obligation into the RFS, EPA split the number of gallons into two different 250-million gallon obligations, one in 2022 and one in 2023. This is also why the supplemental standard is listed in 2023, but not in 2024 or 2025.
Third, EPA is retaining its waiver authority with regard to future volumes. What do I mean by this? Up to 2022, EPA has been granted statutory waiver authority to adjust volume for events the transportation fuels industry had not been prepared for or considered. For example, EPA used its waiver authority to adjust 2020 volumes to account for…well…2020. When paired with the proposition that EPA is considering releasing multiple years at the same time, this retention serves as a bit of a “safety net.” For example, if we get to 2025, and an event occurs which causes a significant decrease in the production and consumption of fuels in the transportation fuels market, EPA would retain the authority to adjust those volumes at that time.
EPA’s release of this rule is supposed to be finalized in June 2023. Keep in mind, EPA is required by law to receive and consider comments from industry stakeholders on all proposed rulemakings. Comments from industry stakeholders could change what or how EPA finalizes this rule.
How likely is it that this rules is finalized on time? Given that this rule was published as a result of a settlement agreement, it’s likely that the finalization will be on time. With a small Christmas miracle, in June, we might see the “new” RFS.