The Renewable
Fuel Fuel Standard (RFS): Waiver
Authority and Modification of Volumes
Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources Policy
June 29, 2015
Congressional Research Service
7-5700
www.crs.gov
R44045
The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
Summary
Federal law requires that transportation fuels contain a minimum amount of renewable fuel. This
renewable fuel standard (RFS)— Authority and Modification of Volumes
February 10, 2016
(R44045)
Jump to Main Text of Report
Summary
The Clean Air Act requires that transportation fuels contain a minimum amount of renewable fuel. This renewable fuel standard (RFS) was established by the Energy Policy Act of 2005 (EPAct05; P.L.
109-58) and amended by the Energy Independence and Security Act of 2007 (EISA;
P.L. 110-140). The RFS P.L. 110140)—includes scheduled volume mandates that grow each year (starting with 9 billion gallons in
2008 and ascending to 36 billion gallons in 2022)
, with the U.S. Environmental Protection Agency (EPA) determining the annual volume amounts following 2022. Within the overall RFS
, there are sub-mandates
for advanced biofuels, including cellulosic biofuel, biomass-based diesel, and other advanced
biofuels. The Environmental Protection Agency (EPA) biofuels.
EPA, which is responsible for administering the
RFS, has the authority to waive the RFS requirements, in whole or in part, if certain conditions
outlined in statute
are presentprevail. More specifically, the statute identifies a general waiver and
waivers for two types of advanced biofuel: cellulosic biofuel and biomass-based diesel. The
statute requires EPA to announce each year
’'s standards by November 30 of the previous year,
except for biomass-based diesel, which
has an earlier announcement deadline. Further, the final
must be announced 14 months before the year for which the applicable volume will apply. Further, the final section of the waiver provision—which some refer to as the
“reset” section—allows for a
"reset" section—requires a modification of the applicable volumes of the RFS starting in 2016 if certain conditions are met.
The potential for full or partial RFS waivers can contribute to uncertainty for policymakers, industry, financiers, and other interested parties.
Several instances have led to EPA using, proposing to use, or being petitioned to use its waiver
authority when implementing the RFS. For example, actual production of cellulosic biofuel at the
volumes required to meet the RFS cellulosic biofuel mandate has not been achieved. For various
reasons, the cellulosic biofuel industry has, by a wide margin, been unable to produce the volume
amounts identified in statute. Thus, EPA has issued cellulosic biofuel waivers repeatedly from
2010 through 2013. For instance, under the cellulosic biofuel waiver authority, EPA reduced the
2013 mandate for cellulosic biofuels from the statutory volume of 1 billion gallons to 810,185
ethanol-equivalent gallons. EPA has not granted a general waiver, even when petitioned to do so
by a group of states in 2008 and 2012.
The potential for full or partial RFS waivers can contribute to uncertainty—for policymakers,
industry, financial supporters, and other interested parties. This is especially true when final
annual standard announcements are delayed, partly because a waiver(s) has been proposed. This
is the case for the 2014 and 2015 proposed standards, for which EPA proposes to use both the
general waiver authority and the cellulosic biofuel waiver authority to reduce the volume amounts
required for both total renewable fuel and advanced biofuel. In May 2015, EPA re-proposed the
2014 volume requirements and issued the 2015 and 2016 proposed volume requirements. For
instance, EPA proposes to lower the 2014 total renewable fuel mandate from 18.15 billion gallons
to 15.93 billion gallons. The agency’s reasoning includes the amount of ethanol that can be
blended into gasoline (e.g., the blend wall) leading to “inadequate supply” concerns and the
inability of industry to produce sufficient volumes of advanced biofuel. EPA anticipates it will
finalize volume requirements for 2014, 2015, and 2016 by November 30, 2015. Although EPA
has not yet issued the 2014 or 2015 final standard, biofuel producers, obligated parties, and others
continue to operate, but they do so in an uncertain RFS environment.
This report discusses the process and criteria for EPA to waive various portions of the RFS, and
the modification of applicable volumes.
Congressional Research Service
The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
Contents
Introduction...................................................................................................................................... 1
RFS Requirements ........................................................................................................................... 1
RFS Annual Volume Reduction Deadlines ...................................................................................... 2
Current RFS Requirements .............................................................................................................. 2
Biofuel Production ........................................................................................................................... 3
RFS Waiver Provision...................................................................................................................... 4
General Waiver .......................................................................................................................... 5
Cellulosic Biofuel Waiver.......................................................................................................... 5
Biomass-Based Diesel Waiver ................................................................................................... 5
Modification of Applicable Volumes ......................................................................................... 6
RFS Waiver Authority Use .............................................................................................................. 6
Current RFS Waiver Requests ......................................................................................................... 6
RFS Waiver Impacts ........................................................................................................................ 7
Impacts of the RFS Modification-of-Applicable-Volumes Section ................................................. 7
Figures
Figure 1. Scheduled Renewable Fuel Standard (RFS) Mandates Under EISA ............................... 2
Tables
Table 1. EISA and EPA Proposed 2014, 2015, and 2016 RFS Requirements ................................. 3
Table 2. Actual Biofuel Production.................................................................................................. 4
Contacts
Author Contact Information............................................................................................................. 8
Congressional Research Service
The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
Introduction
The Renewable Fuel Standard (RFS) requires that renewable fuel be blended into the nation’s
transportation fuel supply.1 This mandate—established in the Energy Policy Act of 2005 (EPAct;
P.L. 109-58 authority when implementing the RFS. In late 2015, EPA announced in its final rule for the RFS that it was using its waiver authority to reduce the total renewable fuel volume required for 2014, 2015, and 2016. EPA used both the general waiver and the cellulosic biofuel waiver to do so. For the first time since the program's implementation, EPA issued a general waiver implicitly reducing the volume allowed for conventional biofuel. EPA has repeatedly issued a cellulosic biofuel waiver to reduce the volume allowed for cellulosic biofuel. According to the agency, it has done so due to lack of actual production of cellulosic biofuel at the volumes required to meet the RFS cellulosic biofuel mandate. For various reasons, the cellulosic biofuel industry has been unable, by a wide margin, to produce the volume amounts identified in statute. EPA reports the volume reductions for 2014, 2015, and 2016 were necessary due to "real-world challenges." Last, the final rule issued by EPA triggers the RFS reset provision for both advanced biofuel and cellulosic biofuel. It is unclear what impact the reset provision will have on RFS standards in future years.
This report discusses the process and criteria that EPA may use to waive various portions of the RFS, and the modification of applicable volumes.
The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
Introduction
The Renewable Fuel Standard (RFS) requires that the nation's transportation fuel supply contain renewable biofuels.1 This mandate—established in the Energy Policy Act of 2005 (EPAct; P.L. 109-58) and expanded in the Energy Independence and Security Act of 2007 (EISA; P.L.
110-140)—requires the use of renewable fuel, but it does not explicitly require the production of
renewable that fuel. Obligated parties, such as refiners or importers of gasoline or diesel fuel, are
responsible for complying with the RFS requirements. The Environmental Protection Agency
(EPA) administers the mandate, which is an amendment of the Clean Air Act, under its authority
to regulate fuels.
22 The statutory renewable fuel volume amounts increase annually until 2022,
with EPA determining the volume amounts after 2022 within certain limitations.
EPA has the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail.
The RFS is a complex and highly technical policy initiative. It deals with multiple sectors and
requires the use of some advanced renewable fuel technologies that have yet to reach maturity. The RFS also
incorporates greenhouse gas emission reduction thresholds. All of this complexity is combined
with multiple stakeholders that have unique perspectives of what the RFS should accomplish,
how it should be implemented, and whether it should even exist, which leads to intense
discussions about the RFS and its future. Congressional debate about the RFS is expected to
continue, particularly about how EPA administers the program.
33 As Congress proceeds with
discussing the RFS, it may be useful to understand the RFS waiver authority granted to EPA. This
report discusses the waiver provision of the RFS, including the modification-of-volumes section.
RFS Requirements
RFS Requirements
The RFS statute calls for the consumption of 9 billion gallons of total renewable fuel in 2008 and
ascends to 36.0 billion gallons in 2022
, with EPA determining the annual volume amounts after 2022. The statute identifies four categories of renewable fuels
that must be used to meet the mandate, but essentially these four categories can be aggregated
into two major categories: unspecified biofuel (i.e., cornstarch ethanol) and advanced biofuel (i.e.,
cellulosic biofuel, biomass-based diesel, and other advanced biofuels). (See Figure 1.) Over time,
the growth in the RFS slowly transitions from consisting primarily of biofuels made mostly from
food and feed crops to biofuels made from non-food and non-feed crops. If actual renewable fuel
production were to match what is in the statute for 2022, advanced biofuels would constitute
close to 60% of the 36.0 billion gallon mandate and unspecified biofuel would constitute about
40%.
1
For more information on the Renewable Fuel Standard (RFS), see CRS Report R43325, The Renewable Fuel
Standard (RFS): In Brief, by Kelsi Bracmort.
2
Clean Air Act, Section 211(o); 42 U.S.C. 7545.
3
Legislation has been introduced in the 114th Congress that would repeal or modify the RFS (S. 1584, S. 577, S. 934,
H.R. 434, H.R. 703, and H.R. 704). The 113th Congress held seven hearings related to the RFS or renewable fuels.
Congressional Research Service
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The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
Figure 1. Scheduled Renewable Fuel Standard (RFS) Mandates Under EISA
Billion Gallons
40
30
20
10
0
2008
2010
2012
2014
2016
Unspecified (Corn Ethanol)
2018
2020
Advanced Biofuel
2022
40%.
Figure 1. Scheduled Renewable Fuel Standard (RFS) Mandates Under EISA
Sources: Congressional Research Service (CRS) with mandates in
the Energy Independence and Security Act of
2007 (EISA; P.L. 110-140
).
).
RFS Annual Volume Reduction Deadlines
Congress gave the EPA Administrator waiver authority to adjust the renewable fuel volume
amounts identified in statute given certain conditions (e.g., inadequate domestic renewable fuel
supply).
44 The EPA Administrator is required to set all of the standards by November 30 of the
preceding year (e.g., the
20142017 standard should
have beenbe announced by November 30,
2013).5
When2016).5 Further, when the EPA Administrator reduces the cellulosic biofuel volume amount, she also may reduce
the total renewable fuel and total advanced biofuel volume amounts by the same or a lesser
volume. For biomass-based diesel, the statute specifies volume amounts for four years (
200920122009-2012) and requires EPA to announce the remaining annual biomass-based diesel volume amounts
“ "14 months before the first year for which such applicable volume will apply
”" (e.g., the
2014
2018 biomass-based diesel standard should
have beenbe announced by November
2012).
Current RFS Requirements
EPA has not yet issued the 2014 standard or the 2015 standard. In May 2015, the agency reproposed the 2014 volume requirements and issued the 2015 and 2016 proposed volume
4
5
These conditions are further explained in the “RFS Waiver Provision” section of this report.
42 U.S.C. 7545 (o)(3)(B)(i).
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The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
requirements.6 EPA anticipates it will finalize volume requirements for 2014, 2015, and 2016 by
November 30, 2015.2016).
Current RFS Requirements
EPA issued the 2014, 2015, and 2016 standards (and the 2017 standard for biomass-based diesel) in late 2015, putting the RFS back on statutory schedule.6 The RFS statutory requirements and the EPA
proposed requirements for
2014, 2015, and 2016 those years are provided in Table 1
.
.
Table 1. EISA and EPA
Proposed 2014, 2015, and 2016 RFS Requirements
(in billions of gallons)
Total
Renewable Fuel
Advanced Biofuel (cellulosic
biofuel component)
Unspecified
Biofuel
2014
18.15
3.75 (1.75)
14.4
2014 EPA
Proposal
15.93
2.68 (0.033)
13.25
2015
20.5
5.5 (3.0)
15.0
2015 EPA
Proposal
16.3
2.9 (0.106)
13.4
2016
22.25
7.25 (4.25)
15.0
2016 EPA
Proposal
17.4
3.4 (0.206)
14.0
Year
Sources: EISA (P.L. 110-140); U.S. Environmental Protection Agency, “Renewable Fuel Standard Program:
Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017; Proposed Rule,” 80 Federal
Register 33099, June 10, 2015. All volumes are ethanol-equivalent.
Biofuel Production
One indicator of whether the goals of the RFS are being met is actual renewable fuel gallons
produced.7 Cornstarch ethanol is the dominant biofuel produced in the United States. The actual
volumes produced for both unspecified biofuel and biomass-based diesel were in alignment with
what the RFS required (see Table 2). Cellulosic biofuel production is not as easy to quantify.
Measurable amounts of cellulosic biofuel production have begun only over the last year, and
some of the production may not be reported.
6
U.S. Environmental Protection Agency, “Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and
Biomass-Based Diesel Volume for 2017; Proposed Rule,” 80 Federal Register 33099, June 10, 2015. For more
information on the proposed volume requirements, see CRS Report R43325, The Renewable Fuel Standard (RFS): In
Brief, by Kelsi Bracmort.
7
For simplicity purposes, this section discusses actual fuel production as a measure of RFS accomplishment. It could
be argued that a better RFS accomplishment indicator is the Renewable Identification Numbers (RINs) generated each
year, which take into consideration the energy content of the fuel with an equivalence value. A RIN is a credit that is
assigned to each gallon of renewable fuel, and each year obligated parties are to submit a certain number of RINs to
Environmental Protection Agency (EPA) to demonstrate RFS compliance. There has been a host of issues with RINs,
leading with price volatility and transparency concerns. For more information on RINs, see CRS Report R42824,
Analysis of Renewable Identification Numbers (RINs) in the Renewable Fuel Standard (RFS), by Brent D. Yacobucci.
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The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
Table 2. Actual Biofuel Production
(in billions of gallons)
RFS
Unspecified
Biofuel
Requirement
Actual U.S.
Ethanol
Productiona
RFS
BiomassBased Diesel
Requirement
Actual
BiomassBased
Dieselb
RFS Cellulosic
Biofuel
Requirement
Actual
Cellulosic
Biofuelc
2009
10.5
10.9
0
0.55
0
—
2010
12.0
13.3
1.15
0.31
0.0065
0
2011
12.6
13.9
0.80
1.10
0
0
2012
13.2
13.2
1.00
1.10
0
0.00002d
2013
13.8
13.3
1.28
1.80
0.006
0.0005e
2014
14.4
14.3
1.28
1.75
1.75
0.033f
Year
Sources: EISA (P.L. 110-140); U.S. Environmental Protection Agency RFS Final Rules.
Notes: RFS requirements for 2014 are the statutory requirements, except for the biomass-based diesel
requirement, which EPA was authorized to set starting in 2013.
a.
Renewable Fuels Association, Historic U.S. Fuel Ethanol Production, 2015.
b.
National Biodiesel Board, Production Statistics, 2015; National Biodiesel Board, “National Biodiesel Board
Calls for EPA to Act on RFS,” press release, January 30, 2015.
c.
EPA Moderated Transaction System (EMTS) RFS2 Data.
d.
Production amount from cellulosic ethanol (20.1 thousand gallons.) and cellulosic diesel (1.0 thousand
gallons).
e.
Production amount from cellulosic renewable gasoline (281.8 thousand gallons) and cellulosic diesel (232.8
thousand gallons).
f.
Renewable compressed natural gas (CNG) and renewable liquefied natural gas (LNG) consisted of
approximately 98% of the 2014 cellulosic biofuel production total (728.5 thousand gallons of cellulosic
ethanol; 29.4 thousand gallons of cellulosic renewable gasoline; 5.2 thousand gallons of cellulosic diesel; 50.4
thousand gallons cellulosic heating oil; 15.2 million gallons of renewable CNG; 17.4 million gallons of
renewable LNG). EPA reports that 2014 was the first year where some Renewable Identification Numbers
were generated using imported cellulosic biofuel, specifically cellulosic heating oil.
RFS Waiver Provision
The RFS statute contains a waiver provision.8 The provision contains three waivers that the EPA
Administrator may use—a general waiver, a cellulosic biofuel waiver, and a biomass-based diesel
waiver—to waive, in whole or in part, the volume of renewable fuel mandated by the RFS. If a
waiver is issued, it expires after one year, but the Administrator may renew the waiver.
Additionally, the waiver provision allows for a modification of applicable volumes. The waivers
and the modification of applicable volumes are described in further detail in the following
sections of this report.
8
42 U.S.C. 7545(o)(7).
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The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
General Waiver
The general waiver gives the EPA Administrator the authority to waive the RFS requirements, in
whole or in part, if
1. there is inadequate domestic renewable fuel supply to meet the mandate, or
2. implementation of the requirement would severely harm the economy or
environment of a state, a region, or the United States.9
The Administrator may issue the general waiver at her discretion or if petitioned by a state or fuel
provider. In those instances in which the Administrator receives a petition for a waiver, she has 90
days after receipt of the petition to approve or disapprove the petition. Further, prior to making
her decision, the Administrator is to consult with the Secretaries of Agriculture and Energy and to
allow for public notice and the opportunity for comment. If a general waiver is granted, any
adjustment applies to the total national renewable fuel requirement. Thus, EPA may not issue a
general waiver to waive the requirement for an individual state or supplier within a state. To date
EPA has not granted a waiver under this provision, but it has proposed doing so for 2014, 2015,
and 2016.10
Cellulosic Biofuel Waiver
The cellulosic biofuel waiver obligates the EPA Administrator to reduce the cellulosic biofuel
mandate when the projected volume amount for a given year is less than what is identified in
statute.11 As written, the law does not require the EPA Administrator to consult with the
Secretaries of Agriculture or Energy when issuing a cellulosic biofuel waiver, or to give public
notice and opportunity for comment, but the Administrator must base the projection on the U.S.
Energy Information Administration estimate provided under the applicable percentages
provision.12 Although it is not written in statute, EPA consultation has been carried out with
federal agencies, industry, and others when EPA has discussed issuance of a cellulosic biofuel
waiver, and opportunity for public comment also has been provided. The Administrator must set
the new required amount at the “projected available volume during that calendar year” by
November 30 of the preceding year. Should the Administrator reduce the cellulosic biofuel
volume, she also may reduce the volumes of advanced biofuel and renewable fuel by the same or
lesser volume. When a cellulosic biofuel waiver is issued, the Administrator must offer cellulosic
biofuel waiver credits for obligated parties to purchase for that compliance year.13
Biomass-Based Diesel Waiver
The biomass-based diesel waiver gives the EPA Administrator the authority to reduce the amount
of biomass-based diesel mandated for up to 60 days if she determines that there are significant
9
42 U.S.C. 7545(o)(7)(A).
U.S. Environmental Protection Agency, “Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016
and Biomass-Based Diesel Volume for 2017; Proposed Rule,” 80 Federal Register 33099, June 10, 2015.
11
42 U.S.C. 7545(o)(7)(D).
12
42 U.S.C. 7545(o)(3)(A).
13
The formula to calculate the price of these credits is written in statute. For more information on cellulosic biofuels
and the RFS, see CRS Report R41106, The Renewable Fuel Standard (RFS): Cellulosic Biofuels, by Kelsi Bracmort.
10
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The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
market circumstances (including feedstock disruptions) “that would make the price of biomassbased diesel fuel increase significantly.”14 If these market circumstances continue past the initial
60-day period, the Administrator may issue another waiver for an additional 60 days. The
Administrator is to consult with the Secretaries of Energy and Agriculture prior to issuing such a
waiver. If the Administrator issues a biomass-based diesel waiver, she also may reduce the
volumes of advanced biofuel and renewable fuel by the same or lesser volume.
Modification of Applicable Volumes
The modification-of-applicable-volumes section of the RFS is referred to by some as the “reset”
section for the RFS.15 This section gives the EPA Administrator the authority to adjust the
applicable volumes of the RFS starting in 2016 if certain conditions are met. Specifically, it
requires that, starting in 2016, the EPA Administrator modify the applicable volumes of the RFS
for subsequent years if the Administrator waives the renewable fuel mandate, the advanced
biofuel mandate, the cellulosic biofuel mandate, or the biomass-based diesel mandate by at least
20% for two consecutive years or by at least 50% for a single year. The section does not state that
the Administrator must “reduce” the volume amount, nor does it allude to what the modified
amount must be (i.e., projected available volume during that calendar year).
RFS Waiver Authority Use
Thus far, the EPA Administrator has issued only cellulosic biofuel waivers. Indeed, the
Administrator has done so repeatedly, issuing cellulosic biofuel waivers in 2010, 2011, 2012, and
2013.16 The Administrator has not granted a biomass-based diesel waiver or a general waiver,
even when petitioned to do so by states in 2008 and 2012.17 The 2014, 2015, and 2016 RFS
proposal included waivers for cellulosic biofuel, advanced biofuel, and total renewable fuel
(including a lowering of the unspecified portion).
Current RFS Waiver Requests
If the time frame written in law for determining waivers had been met, stakeholders already
would be aware of their 2015 RFS obligations and possibly could be in discussions with EPA
about a forthcoming 2016 proposed rule. However, the 2014 and 2015 standards—due November
30, 2013, and November 30, 2014, respectively—have not yet been issued by EPA. As a result,
the present RFS discussion is focused on what the 2014, 2015, and 2016 RFS standards will be
and what waiver authority may be used. The 2014, 2015, and 2016 proposed rule was released in
14
42 U.S.C. 7545(o)(7)(E); for more information on biodiesel, see CRS Report R41282, Agriculture-Based Biofuels:
Overview and Emerging Issues, by Mark A. McMinimy.
15
42 U.S.C. 7545(o)(7)(F).
16
The EPA Administrator used the cellulosic biofuel waiver in 2010 to reduce the mandate from the statutory volume
of 100 million gallons to 6.5 million ethanol-equivalent gallons, in 2011 from 250 million gallons to 6.0 million
ethanol-equivalent gallons, in 2012 from 500 million gallons to 10.45 million ethanol-equivalent gallons, and in 2013
from 1 billion gallons to 810,185 ethanol-equivalent gallons. EPA’s 2012 standard was vacated by a court decision, and
in its 2014 proposed rule for the RFS EPA proposes to rescind the 2011 cellulosic biofuel standard.
17
For more information on waiver petitions from the states, particularly for 2008 and 2012, see CRS Report RS22870,
Waiver Authority Under the Renewable Fuel Standard (RFS), by Brent D. Yacobucci.
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The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
May 2015. EPA proposes using both the general waiver authority and the cellulosic biofuel
waiver authority to reduce the volume amount for both advanced biofuel and total renewable fuel.
Its reasons include the blend wall18 and the inability of industry to produce sufficient volumes of
advanced biofuel.19
RFS Waiver Impacts
Waiver authority can impact RFS implementation and market confidence, as well as contribute to
RFS uncertainty. Waiver authority is intended to assist EPA with timely administration of the
RFS. In practice, it appears to have done the opposite, contributing to the delay of final standards.
Waiver authority, in conjunction with other factors, could weaken confidence in renewable fuels
policy and the chosen technologies, specifically cellulosic biofuel.20 Many aspects of the RFS and
biofuels could be viewed as unsteady (e.g., approval of fuel pathways for the RFS, bringing
advanced biofuels on line at a sizeable scale, issuing federal support for biofuels, biofuel
infrastructure) partly because Administration decisions—including the use of RFS waiver
authority—have not been made in a timely manner.
Impacts of the RFS Modification-of-ApplicableVolumes Section
There are questions and concerns about how EPA will implement the modification-of-applicablevolumes section of the RFS in 2016. These concerns are partly due to the history of cellulosic
biofuel volumes being reduced by significant percentages every year, making it very likely that
the modification-of-applicable-volumes section will be implemented for cellulosic biofuels. Also,
it is not clear how the section will be implemented. Moreover, the Administrator has the sole
discretion to set the modified amounts, which in theory could be similar to what is listed in statute
already or completely different. There may be questions about whether the impact of the
modification section could be contained to one advanced biofuel (e.g., cellulosic biofuel) or
whether there would be a domino effect whereby other renewable fuels were impacted. Lastly, if
the modification section were implemented for cellulosic biofuels, with EPA drastically lowering
the cellulosic biofuel volumes, would the opportunity to satisfy one of the original purposes of the
policy be undermined (i.e., promoting a steep expansion in the use of advanced biofuels)? Going
forward, the implementation of this section could have important implications for the biofuel
18
The blend wall is the upper limit of how much ethanol can be blended into gasoline. In general, only a certain
amount of ethanol can be blended into gasoline for use in vehicles and other equipment. Currently, much of the RFS is
being met with ethanol. Because the RFS is a volume mandate, it is possible that the RFS could require more biofuel
(e.g., ethanol) than can be blended into gasoline. Thus, some are concerned the blend wall is in direct conflict with the
biofuel volumes mandated by the RFS. For more information, see CRS Report R40445, Intermediate-Level Blends of
Ethanol in Gasoline, and the Ethanol “Blend Wall”, by Kelsi Bracmort.
19
For more information on EPA’s proposal, see CRS Report R43325, The Renewable Fuel Standard (RFS): In Brief,
by Kelsi Bracmort and CRS Report IN10294, The Renewable Fuel Standard (RFS): EPA Releases the Proposed Rule
for 2014, 2015, and 2016, by Kelsi Bracmort.
20
Advanced Ethanol Council, “33 Advanced Biofuel Companies Ask President Obama to Reconsider the Proposed
RFS Rule for 2014,” press release, May 16, 2014; Advanced Ethanol Council, “AEC, BIO Joint Letter to White House
over Proposed 2014 RFS Volumetric Blending Requirements,” October 29, 2013.
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The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes
industry, with a potential for EPA to significantly reduce the applicable volumes or to maintain
ambitious targets.
Author Contact Information
Kelsi Bracmort
Specialist in Agricultural Conservation and Natural
Resources Policy
kbracmort@crs.loc.gov, 7-7283
Congressional Research Service
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|
Year
|
Total Renewable Fuel
|
Unspecified Biofuel
|
Advanced Biofuel (cellulosic biofuel component)
|
|
2014 Statutory
|
18.15
|
14.4
|
3.75 (1.75)
|
|
2014 EPA Final
|
16.28
|
13.61
|
2.67 (0.033)
|
|
2015 Statutory
|
20.5
|
15.0
|
5.5 (3.0)
|
|
2015 EPA Final
|
16.93
|
14.05
|
2.88 (0.123)
|
|
2016 Statutory
|
22.25
|
15.0
|
7.25 (4.25)
|
|
2016 EPA Final
|
18.11
|
14.5
|
3.61 (0.230)
|
Sources: EISA (P.L. 110-140); U.S. Environmental Protection Agency, "Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017; Final Rule," 80 Federal Register 239, December 14, 2015.
Note: All volumes are ethanol-equivalent.
Biofuel Production
One indicator of whether the goals of the RFS are being met is actual renewable fuel gallons produced.7 The actual volumes produced for both unspecified biofuel and biomass-based diesel were generally in alignment with what the RFS required through 2015 (see Table 2). Cellulosic biofuel production has been produced only in very limited quantities, far short of the quantities called for in statute.
Table 2. Actual Biofuel Production
(in billions of gallons)
Year
|
RFS Unspecified Biofuel Requirement
|
Actual U.S. Ethanol Productiona
RFS Biomass-Based Diesel Requirement
|
Actual Biomass-Based Dieselb
RFS Cellulosic Biofuel Requirement
|
Actual Cellulosic Biofuelc
|
2009
|
10.5
|
10.9
|
0
|
0.55
|
0
|
—
|
|
2010
|
12.0
|
13.3
|
1.15
|
0.31
|
0.0065
|
0
|
|
2011
|
12.6
|
13.9
|
0.80
|
1.10
|
0
|
0
|
2012
|
13.2
|
13.2
|
1.00
|
1.10
|
0
|
0.00002d
2013
|
13.8
|
13.3
|
1.28
|
1.80
|
0.0008
|
0.0005e
2014
|
13.61
|
14.3
|
1.63
|
1.75
|
0.033
|
0.033f
2015
|
14.05
|
14.53g
1.73
|
1.2h
0.123
|
0.13i
Sources: EISA (P.L. 110-140); U.S. Environmental Protection Agency RFS Final Rules.
Notes: RFS requirements for 2014 are the statutory requirements, except for the biomass-based diesel requirement, which EPA was authorized to set starting in 2013.
a.
Renewable Fuels Association, Historic U.S. Fuel Ethanol Production, 2015.
b.
National Biodiesel Board, Production Statistics, 2015; National Biodiesel Board, "National Biodiesel Board Calls for EPA to Act on RFS," press release, January 30, 2015.
c.
EPA Moderated Transaction System (EMTS) RFS2 Data.
d.
Production amount from cellulosic ethanol (20.1 thousand gallons) and cellulosic diesel (1.0 thousand gallons).
e.
Production amount from cellulosic renewable gasoline (281.8 thousand gallons) and cellulosic diesel (232.8 thousand gallons).
f.
Renewable compressed natural gas (CNG) and renewable liquefied natural gas (LNG) consisted of approximately 98% of the 2014 cellulosic biofuel production total (17.4 million gallons of renewable LNG; 15.2 million gallons of renewable CNG; 728.5 thousand gallons of cellulosic ethanol; 50.4 thousand gallons cellulosic heating oil; 29.4 thousand gallons of cellulosic renewable gasoline; and 5.2 thousand gallons of cellulosic diesel). EPA reports that 2014 was the first year where some Renewable Identification Numbers were generated using imported cellulosic biofuel, specifically cellulosic heating oil.
g.
"US ethanol production rises to 14.53 billion gallon annual rate," Biofuels Digest, October 25, 2015.
h.
January to November 11-month total for 2015; U.S. Energy Information Administration, Monthly Biodiesel Production Report, January 2016.
i.
Renewable compressed natural gas (CNG) and renewable liquefied natural gas (LNG) consisted of approximately 98% of the 2015 cellulosic biofuel production total (72.8 million gallons of renewable CNG; 53.2 million gallons of renewable LNG; 2.2 million gallons of cellulosic ethanol; and 275.3 thousand gallons cellulosic heating oil).
RFS Waiver Provision
The RFS statute contains a waiver provision.8 The provision contains three waivers that the EPA Administrator may use—a general waiver, a cellulosic biofuel waiver, and a biomass-based diesel waiver—to waive, in whole or in part, the volume of renewable fuel mandated by statute. If a waiver is issued, it expires after one year (60 days for the biomass-based diesel waiver), but the Administrator may renew the waiver. Additionally, the waiver provision allows for a modification of applicable volumes. The waivers and the modification of applicable volumes are described in further detail in the following sections of this report.
General Waiver
The general waiver gives the EPA Administrator the authority to waive the overall RFS requirements, in whole or in part, if
- 1. there is inadequate domestic renewable fuel supply to meet the mandate, or
- 2. implementation of the requirement would severely harm the economy or environment of a state, a region, or the United States.9
The Administrator may issue the general waiver at her discretion or if petitioned by a state or fuel provider. In those instances in which the Administrator receives a petition for a waiver, she has 90 days after receipt of the petition to approve or disapprove the petition. Further, prior to making her decision, the Administrator is to consult with the Secretaries of Agriculture and Energy and to allow for public notice and the opportunity for comment. If a general waiver is granted, any adjustment applies to the total national renewable fuel requirement. Thus, EPA may not issue a general waiver to waive the requirement for an individual state or supplier within a state.
Cellulosic Biofuel Waiver
The cellulosic biofuel waiver obligates the EPA Administrator to reduce the cellulosic biofuel mandate when the projected production capacity for a given year is less than what is identified in statute.10 As written, the law does not require the EPA Administrator to consult with the Secretaries of Agriculture or Energy when issuing a cellulosic biofuel waiver, or to give public notice and opportunity for comment, but the Administrator must base the projection on the U.S. Energy Information Administration estimate provided under the applicable percentages provision.11 Although it is not required by the statute to do so, EPA has consulted with federal agencies, industry, and others when EPA has considered issuance of a cellulosic biofuel waiver. EPA has also provided opportunity for public comment. The Administrator must set the new required amount at the "projected available volume during that calendar year" by November 30 of the preceding year. Should the Administrator reduce the cellulosic biofuel volume, she also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume. When a cellulosic biofuel waiver is issued, the Administrator must offer cellulosic biofuel waiver credits for obligated parties to purchase for that compliance year.12
Biomass-Based Diesel Waiver
The biomass-based diesel waiver gives the EPA Administrator the authority to reduce the amount of biomass-based diesel mandated for up to 60 days if she determines that there are significant market circumstances (including feedstock disruptions) "that would make the price of biomass-based diesel fuel increase significantly."13 If these market circumstances continue past the initial 60-day period, the Administrator may issue another waiver for an additional 60 days. The Administrator is to consult with the Secretaries of Energy and Agriculture prior to issuing such a waiver. If the Administrator issues a biomass-based diesel waiver, she also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume.
Modification of Applicable Volumes
The modification-of-applicable-volumes section of the RFS is referred to by some as the "reset" section for the RFS.14 This section gives the EPA Administrator the authority to adjust the applicable volumes of the RFS in future years starting in 2016 if certain conditions are met. Specifically, it provides that, starting in 2016, the EPA Administrator shall modify the applicable volumes of the RFS for subsequent years if the Administrator waives the renewable fuel mandate, the advanced biofuel mandate, the cellulosic biofuel mandate, or the biomass-based diesel mandate by at least 20% for two consecutive years or by at least 50% for a single year. The section does not state that the Administrator must "reduce" the volume amount, nor does it allude to what the modified amount must be (i.e., projected available volume during that calendar year).
RFS Waiver Authority Use
The EPA Administrator has issued one general waiver and seven cellulosic biofuel waivers for 2010 through 2016.15 The Administrator used the waivers for 2014, 2015, and 2016 to reduce the total renewable fuel (including a lowering of the unspecified biofuel), advanced biofuel, and cellulosic biofuel volume requirements. EPA reports that it used the general waiver and cellulosic biofuel waiver to reduce the 2014, 2015, and 2016 standards to address "real-world challenges" including fuel infrastructure, lack of advanced biofuel production, and other constraints.16 The Administrator has not granted a biomass-based diesel waiver.
RFS Waiver Impacts
Waiver authority can impact RFS implementation and market confidence, as well as contribute to RFS uncertainty. Waiver authority is intended to assist EPA with timely administration of the RFS. In practice, it appears to have done the opposite, contributing to the delay of final standards. Waiver authority, in conjunction with other factors, could weaken confidence in renewable fuel markets and the chosen technologies, specifically cellulosic biofuel.17 Many aspects of the RFS and biofuels could be viewed as unstable (e.g., approval of fuel pathways for the RFS, bringing advanced biofuels on line at a sizeable scale, issuing federal support for biofuels, biofuel infrastructure) partly because Administration decisions—including the use of RFS waiver authority—have not been made in a timely manner.
Impacts of the RFS Modification-of-Applicable-Volumes Section
The volume requirements announced by EPA in the RFS three-year final rule trigger the "reset" provision for both advanced biofuels and cellulosic biofuels. Many have questions and concerns about how EPA will implement the reset provision (the modification-of-applicable-volumes section of the RFS) in 2016. This provision allows the EPA Administrator to modify the applicable volumes of the RFS in its entirety starting in 2016 if certain conditions are met. It is not clear how the provision will be implemented. The Administrator has the sole discretion to set the modified amounts, which in theory could be similar to or completely different from what is listed in statute. Some may question whether the impact of this provision could be limited to one renewable fuel category (e.g., cellulosic biofuel) or whether there would be a domino effect whereby other renewable fuel categories (e.g., advanced biofuel) would be impacted. For instance, could public and private investment for other advanced biofuels be influenced by a significant reset of the cellulosic biofuels requirement? Finally, if the provision were implemented solely for cellulosic biofuels, with EPA drastically lowering the cellulosic biofuel volumes, would the opportunity to satisfy one of the original purposes of the policy (i.e., promoting a steep expansion in the use of advanced biofuels) be undermined? Going forward, the implementation of this provision could have important implications for the biofuel industry, with a potential for EPA to significantly reduce the applicable volumes or to maintain ambitious targets.
Author Contact Information
[author name scrubbed], Specialist in Agricultural Conservation and Natural Resources Policy
([email address scrubbed], [phone number scrubbed])
Footnotes
| 1.
|
For more information on the Renewable Fuel Standard (RFS), see CRS Report R43325, The Renewable Fuel Standard (RFS): In Brief, by [author name scrubbed].
|
| 2.
|
Clean Air Act, Section 211(o); 42 U.S.C. 7545.
|
| 3.
|
Legislation has been proposed in the 114th Congress that would repeal or modify the RFS (e.g., S. 1584, S. 577, S. 934, H.R. 434, H.R. 703, H.R. 704, and H.R. 3228). To date, the 114th Congress has held seven hearings related to the RFS or renewable fuels.
|
| 4.
|
These conditions are further explained in the "RFS Waiver Provision" section of this report.
|
| 5.
|
42 U.S.C. 7545 (o)(3)(B)(i).
|
| 6.
|
U.S. Environmental Protection Agency, "Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017; Final Rule," 80 Federal Register239, December 14, 2015. For more information on the proposed volume requirements, see CRS Report R43325, The Renewable Fuel Standard (RFS): In Brief, by [author name scrubbed].
|
| 7.
|
For simplicity purposes, this section discusses actual fuel production as a measure of RFS accomplishment. It could be argued that a better RFS accomplishment indicator is the Renewable Identification Numbers (RINs) generated each year, which take into consideration the energy content of the fuel with an equivalence value. A RIN is a credit that is assigned to each gallon of renewable fuel, and each year obligated parties are to submit a certain number of RINs to Environmental Protection Agency (EPA) to demonstrate RFS compliance. There has been a host of issues with RINs, leading with price volatility and transparency concerns. For more information on RINs, see CRS Report R42824, Analysis of Renewable Identification Numbers (RINs) in the Renewable Fuel Standard (RFS), by [author name scrubbed].
|
| 8.
|
42 U.S.C. 7545(o)(7).
|
| 9.
|
42 U.S.C. 7545(o)(7)(A).
|
| 10.
|
42 U.S.C. 7545(o)(7)(D).
|
| 11.
|
42 U.S.C. 7545(o)(3)(A).
|
| 12.
|
The formula to calculate the price of these credits is written in statute. For more information on cellulosic biofuels and the RFS, see CRS Report R41106, The Renewable Fuel Standard (RFS): Cellulosic Biofuels, by [author name scrubbed].
|
| 13.
|
42 U.S.C. 7545(o)(7)(E); for more information on biodiesel, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues, by [author name scrubbed].
|
| 14.
|
42 U.S.C. 7545(o)(7)(F).
|
| 15.
|
The three-year final rule issued in 2015 marks the first time the Administrator has used the general waiver. Previously, the Administrator had not issued a general waiver, even when petitioned to do so by states in 2008 and 2012. For more information on waiver petitions from the states, particularly for 2008 and 2012, see CRS Report RS22870, Waiver Authority Under the Renewable Fuel Standard (RFS), by [author name scrubbed]. The EPA Administrator used the cellulosic biofuel waiver in 2010 to reduce the mandate from the statutory volume of 100 million gallons to 6.5 million ethanol-equivalent gallons, in 2011 from 250 million gallons to 6.0 million ethanol-equivalent gallons, in 2012 from 500 million gallons to 10.45 million ethanol-equivalent gallons, in 2013 from 1 billion gallons to 810,185 ethanol-equivalent gallons, in 2014 from 1.75 billion gallons to 33 million ethanol-equivalent gallons, in 2015 from 3.0 billion gallons to 123 million ethanol-equivalent gallons, and in 2016 from 4.25 billion gallons to 230 million ethanol-equivalent gallons. EPA's 2012 standard was vacated by a court decision, and EPA rescinded the 2011 cellulosic biofuel standard.
|
| 16.
|
U.S. Environmental Protection Agency, "Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017; Final Rule," 80 Federal Register 239, December 14, 2015.
|
| 17.
|
Advanced Ethanol Council, "33 Advanced Biofuel Companies Ask President Obama to Reconsider the Proposed RFS Rule for 2014," press release, May 16, 2014; Advanced Ethanol Council, "AEC, BIO Joint Letter to White House over Proposed 2014 RFS Volumetric Blending Requirements," October 29, 2013.
|