The Biobased and Renewable Products Advocacy Group (BRAG) helps members develop and bring to market their innovative biobased and renewable chemical products through insightful policy and regulatory advocacy. BRAG is managed by B&C® Consortia Management, L.L.C., an affiliate of Bergeson & Campbell, P.C.

By Lynn L. Bergeson

On July 20, 2018, the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) ruled that EPA must reconsider its denial of Ergon-West Virginia, Inc.’s (Ergon) application for a small refinery waiver under the RFS.  The Fourth Circuit stated that EPA relied on an “error-riddled” analysis when it denied the exemption.  Ergon is a small refinery based in West Virginia (with a daily production of 23,500 barrels) that produces primarily diesel which is not easily blended and sold in the local market.  The number of small refinery hardship waivers has jumped in recent years, with 48 waivers granted in 2016 and 2017, prompting outcry from the biofuel industry that the increased waivers undercut the RFS program.


 

On January 17, 2017, the U.S. Environmental Protection Agency (EPA) wrote to the American Petrochemical and Fuel Manufacturers (AFPM) denying its petition for partial supplemental waiver of the 2016 cellulosic biofuel standard under the Renewable Fuel Standard (RFS).  The letter was sent in response to AFPM’s December 28, 2016, petition for a supplemental waiver on the basis of an inadequate domestic supply of cellulosic biofuel, as reported in the Biobased and Renewable Products Advocacy Group’s (BRAG ® ) blog post Petition for Waiver of 2016 Cellulosic Biofuel Volumetric Requirements.  In its response, EPA stated that the actual number of cellulosic biofuel Renewable Identification Numbers (RIN) or waiver credits that will need to be retired for compliance will not be known until the compliance deadline, since the compliance obligation is calculated on a percentage basis.  EPA anticipates that an additional 19 million 2016 cellulosic biofuel RINs will be generated in 2017, resulting in 197 million 2016 cellulosic RINs overall.  When combined with the 39 million carryover RINs from cellulosic biofuel produced in 2015, EPA estimates the total number of cellulosic biofuels RINs to be 236 million, which is greater than the 227 million RINs expected to be necessary for compliance.


 

On December 28, 2016, the American Fuel & Petrochemical Manufacturers (AFPM) submitted a petition requesting that EPA waive the cellulosic biofuel volumetric requirements for the 2016 compliance year citing an inadequate domestic supply of the fuel.  Based on the amount of cellulosic fuel produced through November, AFPM estimated that between 173.8 and 190 million gallons will be produced in 2016, which is approximately 40 to 60 million gallons below the 230 million gallon target set by EPA in December 2015.  With a cellulosic waiver credit price of $1.33 for 2016, obligated parties would be required pay approximately $50 to $75 million to meet the cellulosic biofuel mandate.  The petition requests that a partial supplemental cellulosic biofuel waiver equal to the shortfall be granted to prevent am unjust penalty on obligated parties.  Since RFS compliance must be confirmed by March 30, 2017, the petition also urges EPA to defer the 2016 cellulosic biofuel waiver credit requirement until EPA can formally act on the petition.


 

On March 25, 2015, EPA announced the direct final rule, Regulation of Fuels and Fuel Additives: Cellulosic Waiver Credit Price and Minor Amendments to Renewable Fuel Standard Regulations, that would result in cellulosic waiver credit prices being posted on the EPA website rather than as a result of the rulemaking process. This would allow the credit prices to be announced as soon as the needed data for the wholesale price of gasoline is available, which would provide more certainty to the market. The credit prices are supposed to be updated annually according to the Clean Air Act (CAA) but delays in RFS have also delayed updating the credit prices. EPA announced that the price of the waivers will be $0.49 per credit for the 2014 compliance period and $0.64 per credit for the 2015 compliance period. This direct final rule also corrects an error created by an earlier rule where EPA moved standards for process heat produced from biogas and accidentally overwrote standards for giant reed and napier grass. This final rule will take effect 30 days after it is published in the Federal Register unless it receives any adverse comments.