Contents

• Introduction
• RFS Requirements
• RFS Annual Volume Reduction Deadlines
• Current RFS Requirements
• RFS Waiver Provisions
• General Waiver
• Cellulosic Biofuel Waiver
• Biomass-Based Diesel Waiver
• Modification of Applicable Volumes
• RFS Waiver Authority Use
• RFS Waiver Impacts
• Impacts of RFS Modification of Applicable Volumes

Summary

The Clean Air Act requires that transportation fuels contain a minimum volume of renewable fuel. This renewable fuel standardRenewable 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 includes scheduled volume mandates that grow each year (starting with 9 billion gallons in 2008 and ascending to 36 billion gallons in 2022). The U.S. Environmental Protection Agency (EPA), which is responsible for administering the RFS, determines the annual volume after 2022. Within the overall RFS, there are submandates for advanced biofuels, including cellulosic biofuel, biomass-based diesel, and other advanced biofuels.

EPA has the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail. More specifically, the statute identifies a general waiver for the overall RFS and waivers for two types of advanced biofuel: cellulosic biofuel and biomass-based diesel. Statute requires EPA to announce each year's standards by November 30 of the previous year, except for biomass-based diesel, which must be announced 14 months before the year for which the applicable volume is to apply. Further, the final section of the waiver provision—which some refer to as the "reset" section—requires a permanent modification of applicable volumes of the RFS starting in 2016 and carried forward, if certain conditions are met.

In several instances, EPA has used, has proposed to use, or has been petitioned to use its waiver authority when implementing the RFS. In November 2018December 2019, EPA announced in its final rule for 20192020 for the RFS that it was using the cellulosic biofuel waiver authority to reduce the cellulosic biofuel, advanced biofuel, and total renewable fuel volume requirements. EPA's use of the cellulosic biofuel waiver authority is not new. EPA has repeatedly issued a waiver, reducing the volume required for cellulosic biofuel. For the last few years, the use of the cellulosic biofuel waiver led EPA to also reduce the total advanced biofuel volume requirement. For various reasons (e.g., technology issues, financial support, policy uncertainty), the U.S. cellulosic biofuel industry has been unable, by a wide margin, to produce the volume amounts identified in statute.

EPA also has the authority to "reset" the RFS. The 2019 final RFS program rule issued by EPA triggerstriggered the RFS "reset" section of the waiver provision for total renewable fuel. The reset was triggered in previous final rules for both advanced biofuel and cellulosic biofuel. It is unclear what impact the use of the reset sectionby EPA will have on RFS standards in future years. EPA reports it will issue a rulemaking in early 2019 that proposes to reset the cellulosic biofuel, advanced biofuel, and total renewable fuel volume targets for the years 2020-2022.

A possible issue for Congress is whether the waiver authority and the reset provisionsfor future years given that only two years remain that have statutory volume requirements—2021 and 2022. EPA has statutory authority to determine the volume amounts after 2022. At issue for Congress is the effectiveness of the RFS waiver authority and a potential programmatic reset. Congress may consider whether the waiver authority and the reset authority are sufficient options for EPA to address the statutory advanced biofuel volume shortfalls—shortfalls that may have been more than what Congress envisioned when it expanded the RFS in 2007. Another issue is how the Administration might apply the reset provisionauthority, and if it would contribute to uncertainty for industry, financiers, and other interested parties.

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Introduction

The Renewable Fuel Standard (RFS) requires that the nation's transportation fuel supply contains renewable fuels.¹ This mandate—established in the Energy Policy Act of 2005 (EPAct05; 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, although it does not explicitly require the production of that fuel. Obligated parties, such as refiners or importers of gasoline or diesel fuel, are responsible for complying with the RFS requirements. The U.S. Environmental Protection Agency (EPA) administers the mandate, which is an amendment to Clean Air Act (CAA) provisions governing the regulation of fuels.² The statutory renewable fuel volume increases annually until 2022, with EPA determining the volume after 2022 within certain limitations. In general, 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 of the economy and requires the use of some advanced renewable fuel production technologies that have yet to reach maturity. The RFS also incorporates thresholds for greenhouse gas emission reduction. This complexity is exacerbatedheightened by multiple stakeholders with differing perspectives on what the RFS should accomplish, how it should be implemented, and whether it should exist, which leads to debate about the RFS and its future. Congressional debate about the RFS is expected to continue with special attention to how EPA administers the program.³ As Congress continues its oversight of the RFS, it may be useful to understand the RFS waiver authority granted to EPA. This report discusses the waiver provisions of the RFS, including the modification-of-applicable-volumes ("reset") section.

RFS Requirements

EPAct05 established a renewable fuel program (i.e., the RFS) requiring that transportation fuel sold or introduced into commerce in the United States, on an annual average basis, contain a specified amount of renewable fuel. The RFS mandate, as amended by EISA, calls for the consumption of 9 billion gallons of total renewable fuel in 2008, ascending to 36 billion gallons in 2022, with EPA determining the annual volume after 2022.⁴ The statute identifies four categories of renewable fuels that must be used to meet the mandate. However, theseThese four categories can be aggregated into two major categories: unspecified biofuel (mainly cornstarch ethanol) and advanced biofuel (e.g., cellulosic biofuel, biomass-based diesel, and other advanced biofuels), shown in Figure 1. Over time, the growth in the RFS transitions from biofuels that, in practice, are made mostly from food and feed crops to biofuels made from nonfood and nonfeed crops. For instance, in 2022, the statute requires that advanced biofuels constitute close to 60% of the 36 billion gallon mandate and unspecified biofuels constitute about 40%.

Figure 1. Scheduled Renewable Fuel Standard (RFS) Mandates Under EISA

Sources: Congressional Research Service (CRS) using 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 volumes specified in statute given certain conditions (e.g., inadequate domestic renewable fuel supply).⁵4 The EPA Administrator is required to set the standards by November 30 of the preceding year (e.g., under statute the 20202021 standard is required to be finalized by November 30, 2019).⁶ Further, when the EPA Administrator reduces the cellulosic biofuel volume, the Administrator also may reduce the total renewable fuel and total advanced biofuel volumes by the same or a lesser volume. 2020).⁵ For biomass-based diesel, the statute specifies volumes for four years (2009-2012) and requires EPA to announce the remaining annual biomass-based diesel volumestandards "14 months before the first year for which such applicable volume will apply" (e.g., the 20212022 biomass-based diesel standard is required to be finalized by November 2019).

2020).⁶ The requirement that EPA announce the standard 14 months prior is scheduled to apply to the other renewable fuel categories for calendar years 2023 and onward.

Current RFS Requirements

EPA issued the final 20192020 standards (and the 20202021 standard for biomass-based diesel) in November 2018December 2019.⁷ The RFS statutory requirements and the EPA requirements for 2014 through 20192020 are provided in Table 1.

RFS Waiver Provisions

The RFS provisions of the CAA containsstatute for the RFS contains a waiver section with a set of waiver provisions.⁸ The provisions containdescribe three separate waivers—a general waiver, a cellulosic biofuel waiver, and a biomass-based diesel waiver—that the EPA Administrator may use to waive, in whole or in partwith certain stipulations for certain waivers, the volume of renewable fuel mandated by statute. The waivers referred to in this report should not be confused with small refinery exemptions.⁹ If a waiver is issued, it expires after one year (60 days for the biomass-based diesel waiver), unless the Administrator renews the waiver. Additionally, starting in 2016, the waiver provision allows for a modification of applicable volumesAdditionally, there is a provision for the modification of applicable volumes (i.e., a "reset") that the EPA Administrator may use starting in 2016. The waivers and the modification of applicable volumes are described in further detail in the following sections of this report.

General Waiver

The RFS statute gives the EPA Administrator the authority to waive the overall RFS requirements, in whole or in part, if

• domestic renewable fuel supply is inadequate to meet the mandate, or
• implementation of the requirement would severely harm the economy or environment of a state, a region, or the United States.¹⁰

The Administrator may issue the general waiver at his or her discretion or if petitioned by a state or fuel provider. In those instances in which the Administrator receives a petition for a waiver, the Administrator has 90 days after receipt of the petition to approve or disapprove it.¹¹ Prior to making a decision, the Administrator is required to consult with the Secretary of Agriculture and Secretary of Energy and to allow for public notice and the opportunity for comment. If a general waiver is grantedissued, any adjustment applies to the total national renewable fuel requirement. Thus, EPA may not issue a general waiver for an individual state or supplier within a state.

If a general waiver is issued, it expires after one year, unless the Administrator renews the waiver.

Cellulosic Biofuel Waiver

CAA Section 211(o)The RFS statute 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.¹² The law does not require the EPA Administrator to consult with the Secretary of Agriculture or the Secretary of Energy when issuing a cellulosic biofuel waiver, or to give public notice and opportunity for comment. However, the Administrator must base the projection onuse the projected volume estimate from the U.S. Energy Information Administration estimate provided under the applicable percentages provisionsection of the statute.¹³ Although it is not required by the statute to do so, EPA has consulted with federal agencies, industry, and others when the agency has considered issuance of a cellulosic biofuel waiver. EPA also has 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, the Administrator also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume. When the Administrator issues a cellulosic biofuel waiver, the Administrator must offer cellulosic biofuel waiver credits for obligated parties to purchase for that compliance year in lieu of using actual cellulosic biofuel.¹⁴

Biomass-Based Diesel Waiver

The RFS statutory provisions give the EPA Administrator authority to reduce the amount of biomass-based diesel required for up to 60 days if the Administrator determines that there are significant market circumstances (including feedstock disruptions) "that would make the price of biomass-based diesel fuel increase significantly."¹⁵ 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, the Administrator also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume. To date, EPA has not used the biomass-based diesel waiver authority.

Modification of Applicable Volumes

The last sectionprovision of the waiver provisionsection is the modification-of-applicable-volumes section of applicable volumes provision, referred to by some as the "reset" sectionprovision for the RFS.¹⁶ This sectionprovision requires that the EPA Administrator modify 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. This reset section does not state what the modified amount must be. Rather, it requires that the Administrator determine the applicable volumes—in coordination with the Secretaries of Energy and Agriculture—based on a review of program implementation thus far and an analysis of certain factors (e.g., the impact of the production and use of renewable fuels on the environment).¹⁷

RFS Waiver Authority Use

EPA has repeatedly used its cellulosic biofuel waiver authority to reduce the cellulosic biofuel volume required, and, since 2014, to also reduce both the advanced biofuel and total renewable fuel volume required. In November 2018December 2019, EPA announced that it used the cellulosic biofuel waiver to reduce the applicable total renewable fuel, advanced biofuel, and cellulosic biofuel volume requirements for 20192020.¹⁸ According to the agency, "the "1315.0 billion gallons specified in the statute for advanced biofuel cannot be reached in 20192020 … primarily due to the expected continued shortfall in cellulosic biofuel.…"¹⁹

The EPA Administrator issued a general waiver for prior final rules (which covered 2014 through 2016) and repeatedly issued cellulosic biofuel waivers for 2010 through 20182020.²⁰ The Administrator used the waivers for 2014, 2015, and 2016 to reduce the total renewable fuel (including a lowering of the unspecified biofuel mandate), advanced biofuel, and cellulosic biofuel volume requirements. The Administrator has not grantedissued a biomass-based diesel waiver.

RFS Waiver Impacts

Waiver authority is intended, in part, to assist EPA with implementation of the RFS. One of EPA's program tasks is to use the waiver authority, when required, to determine the annual final standard, and to announce that final standard by the statutory deadline. The challenge of projecting advanced biofuel production, political pressure from some stakeholders, and other factors may have contributed to past delays in issuing final standards under the waiver authority.²¹ Such delays could lead to difficulty for obligated parties who have to demonstrate program compliance and for renewable fuel producers who are interested in producing the required fuel. For 2016 through 20192020, EPA has generally issued the final rule according to the statutory schedule.

There are three stakeholders that generally have had distinct views about the impacts of the waiver authority: the advanced biofuel industry, the conventional biofuel industry, and the petroleum industry. Some advanced biofuel advocates assert that granting ofissuing waivers, in conjunction with other factors, could weaken confidence in renewable fuel markets and the chosen technologies, specifically cellulosic biofuel.²² Advanced biofuel production, particularly cellulosic biofuel production, hasbiofuels, have not been produced at the levels called for in the statutory provisions by relatively large margins. Some conventional biofuel advocates have not always been content with EPA's proposals to use the waiver authority to reduce conventional biofuel volumes.²³ Conventional biofuel production has remained in line with what the statutory provisions require. Some in the petroleum industry assert that the waiver authority is an option that addresses the use of more ethanol than can be used by certain vehicles (i.e., the blend wall) or supported by existing infrastructure.²⁴ can be used as an option to address the "blend wall," or, the maximum ethanol limit that would serve to avoid causing damage to engines, fuel systems, and fueling infrastructure of vehicles.²⁴While perspectives about EPA's use of the waiver authority vary among stakeholders, the waivers have provided EPA with the flexibility to establish volume requirements that have been attained.

Impacts of RFS Modification of Applicable Volumes

The 2019 final rule has triggered the reset section of the waiver provision"reset" (i.e., the modification-of-applicable-volumes provision of the RFS) for total renewable fuel. Previous final rules had already triggered a reset for both advanced biofuels and cellulosic biofuels. EPA reports that in early 2019 it will issue a rulemaking that proposes to "reset" the cellulosic biofuel, advanced biofuel, and total renewable fuel volume targets for the years 2020- to 2022.²⁵ Many have questions and concerns about how EPA may implement the reset section (the modification-of-applicable-volumes section of the RFS). This section—which requires 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 EPA may carry out this action.

The Administrator has the discretion to set the modified amounts.²⁶ Depending on how the reset is applied, there could be interest in its impact on public and private investment for biofuelsrenewable fuels. There might also be interest in the reset's potential impact on the transition of the program from mostly conventional biofuel to mostly advanced biofuel by 2022. Additionally, there may be interest about whether a reset could address the concerns expressed by some obligated parties (i.e., refiners) about high compliance costs. Going forward, reset implementation could have implications for the entire fuel industry, given the potential for EPA to reduce the applicable volumes or maintain ambitious targets.

Author Contact Information

Footnotes

42 U.S.C. §7545 (o)(3)(B)(i).

The Administrator may do so based on a review of program implementation and an analysis of certain factors, among other things.

&RIN=2060-AU28.

1.	For more information on the Renewable Fuel Standard (RFS) and related issues, see CRS Report R43325, The Renewable Fuel Standard (RFS): An Overview, by Kelsi Bracmort.
2.	P.L. 109-58 (Title XV, Subtitle A, Section 1501) established the RFS under Clean Air Act Section 211(o); 42 U.S.C. 7545(o). P.L. 110-140 expanded the RFS partly with the requirement of larger annual volumes and the addition of greenhouse gas accounting requirements, among other things.
3.	Legislation was has been introduced in the 1156th Congress that would have limited, reduced,modify or repealed the RFS (e.g., H.R. 119, H.R. 776, H.R. 1314, and H.R. 1315). . For example, see S. 2873, S. 1840, H.R. 5113 (identical to S. 2873), H.R. 3427, and H.R. 3411.
4.	For a discussion about RFS compliance, including obligated party requirements, see CRS In Focus IF10121, The Renewable Fuel Standard (RFS): Compliance and Penalties, by Kelsi Bracmort.
5.	These conditions are further explained in the "RFS Waiver Provision" section of this reportThese conditions are further explained in the "RFS Waiver Provision" section of this report.	5.
6.	42 U.S.C. §7545 (o)(32)(B)(i). ii).
7.	EPAU.S. Environmental Protection Agency, "Renewable Fuel Standard Program: Standards for 20192020 and Biomass-Based Diesel Volume for 2020; Final Rule," 832021 and Other Changes," 85 Federal Register, December 11, 2018 7016, February 6, 2020.
8.	42 U.S.C. §7545(o)(7).
9.	Small refiners may petition the EPA Administrator for an exemption from the RFS mandate if they can prove compliance would subject them to disproportionate economic hardship. For more information on small refinery exemptions, see 42 U.S.C. §7545(o)(9) or U.S. Environmental Protection Agency, CRS Report R46244, The Renewable Fuel Standard (RFS): Frequently Asked Questions About Small Refinery Exemptions (SREs), by Kelsi BracmortRenewable Fuel Standard Exemptions for Small Refineries, https://www.epa.gov/renewable-fuel-standard-program/reneewable-fuel-standard-exemptions-small-refineries.
10.	42 U.S.C. §7545(o)(7)(A).
11.	Information regarding petitions to waive the RFS requirements is available at the EPA Requests for Volume Requirement Waiver under the Renewable Fuel Standard Program website, https://www.epa.gov/renewable-fuel-standard-program/requests-volume-requirement-waiver-under-renewable-fuel-standard.
12.	42 U.S.C. §7545(o)(7)(D).
13.	42 U.S.C. §7545(o)(3)(A).
14.	EPA reports that "[t]hese credits can then be used by obligated parties to comply with the cellulosic biofuel volume obligation in lieu of RINs [Renewable Identification Numbers] generated with the production of the cellulosic biofuel. Cellulosic biofuel waiver credits are for obligated parties who do not acquire sufficient RINs for their cellulosic biofuel RVO [Renewable Volume Obligation] in a given compliance year." U.S. Environmental Protection Agency, What Is the Purpose of a Cellulosic Biofuel Waiver Credit? https://www.epa.gov/fuels-registration-reporting-and-compliance-help/what-purpose-cellulosic-biofuel-waiver-credit. The formula to calculate the price of these credits is in statute. For more information on cellulosic waiver credits, see U.S. Environmental Protection Agency, Cellulosic Waiver Credits under the Renewable Fuel Standard Program, April 7, 2020, https://www.epa.gov/renewable-fuel-standard-program/cellulosic-waiver-credits-under-renewable-fuel-standard-program. For more information on cellulosic biofuels and the RFS, see CRS Report R41106, The Renewable Fuel Standard (RFS): Cellulosic Biofuels, by Kelsi Bracmort.
15.	42 U.S.C. §7545(o)(7)(E); for. For more information on biodiesel, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues, by Mark A. McMinimy.
16.	42 U.S.C. §7545(o)(7)(F).
17.	The Administrator is directed to promulgate a rule that modifies the applicable volumes in compliance with 42 U.S.C. §7545(o)(2)(B)(ii).
18.	EPAU.S. Environmental Protection Agency, "Renewable Fuel Standard Program: Standards for 20192020 and Biomass-Based Diesel Volume for 2020; Final Rule," 832021 and Other Changes," 85 Federal Register 63704, December 11, 20187016, February 6, 2020.
19.	Ibid.
20.	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 77420, December 14, 2015. The three-year final rule issued in 2015 marks the first time the Administrator 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 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. On July 28, 2017, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) vacated EPA's decision to reduce the 2016 total renewable fuel volume requirements through its general waiver authority and remanded the 2015 final rule for review consistent with the court's decisions. The court agreed with a petitioner that EPA erred in its interpretation of "inadequate domestic supply" to use of the general waiver authority to reduce the volume requirements. Americans for Clean Energy v. EPA, No. 16-1005, 2017 U.S. App. LEXIS 13692, at *4-5 (D.C. Cir. July 28, 2017). The EPA Administrator used the A list of annual 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, in 2016 from 4.25 billion gallons to 230 million ethanol-equivalent gallons, and in 2017 from 5.5 billion gallons to 311 million ethanol-equivalent gallons. EPA's 2012 standard was vacated by a court decision, and EPA rescinded the 2011 cellulosic biofuel standardreductions from 2010 to the present is available in Table 1 of CRS Report R43325, The Renewable Fuel Standard (RFS): An Overview, by Kelsi Bracmort.
21.	For a list of final rule release dates for the RFS, see Table 1 in CRS Report R43325, The Renewable Fuel Standard (RFS): An Overview, by Kelsi Bracmort. For an explanation of some of the challenges with cellulosic biofuel projection, see CRS Report R41106, The Renewable Fuel Standard (RFS): Cellulosic Biofuels, by Kelsi Bracmort. Discussions—with input from elected officials, the oil and gas sector, the agricultural sector, the environmental community, and others—regarding the RFS hashave been ongoing since its expansion. For example, see Devin Henry and Timothy Cama, "Pruitt Aims to Assure GOP Senators on Biofuels Mandate," The Hill, October 17, 2017Humeyra Pamuk and Jarrett Renshaw, "EPA Chief Defends Biofuel Waivers in Meeting with Farm Senators: Sources," Reuters, July 30, 2019, or Robert Z. Lawrence, How Good Politics Results in Bad Policy: The Case of Biofuel Mandates, Harvard Kennedy School, Belfer Center for Science and International Affairs, September 2010.
22.	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.
23.	Renewable Fuels Association, "EPA's Draft 2017 RFS Rule Relies on Illegal Interpretation of Waiver Authority," press release, May 18, 2016.
24.	American Petroleum Institute, "Court Decision on EPA RFS Waiver Underscores Need for Legislative RFS Reform," press release, July 28, 2017.
25.	U.S. Environmental Protection Agency, Renewable Fuel Standard Program: Modification of Applicable Volumes, 2020 Standards, and Other Changes, 2018Statutory Volume Targets, RIN: 2060-AU28, 2019, https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201810201910&RIN=2060-AU28.	26.