EPA Proposes Major Biofuels Regulation

• Published date: 06 December 2022
• Subject Matter: Energy and Natural Resources, Energy Law, Oil, Gas & Electricity, Renewables
• Law Firm: Foley Hoag LLP
• Author: Shailesh Sahay, Aaron Lang and Cloe Pippin

On December 1, 2022, the Environmental Protection Agency ("EPA") proposed a sweeping new rule for the Renewable Fuel Standards ("RFS") Program, the federal government's flagship program for facilitating the production of renewable transportation fuels to offset fossil fuels. Administered correctly, the Program could be a critical tool to combat climate change, including by incentivizing needed low-carbon fuels for air travel and other difficult-to-electrify sectors.

The proposed rule is significant in many ways. It sets the volume targets and percentage standards for renewable fuels for the next three years (from 2023 to 2025). It establishes a new regulatory program for "eRINs," which are credits for "renewable electricity" produced from biogas and used to power electric vehicles. It also makes a host of other changes to how the RFS program is administered.

We summarize several of the key provisions below. Comments to the proposed rule are due to EPA by February 10, 2023.

Renewable Fuels Volume Targets and Percentage Standards for 2023-2025

Every year EPA must set the total volume of renewable transportation fuel required to be produced to offset fossil fuels. "Obligated parties," that is, gasoline/diesel refiners and importers, must either blend renewable fuels with fossil fuels or obtain credits, called RINs, that renewable fuel producers generate for each gallon of renewable fuel they produce. These volume requirements are converted to percentage standards. Obligated parties must multiply the percentages by the total amount of fossil fuel they produce to determine how many RINs they must procure each year.

As of this year, EPA's power to set volume targets and percentage standards has been largely dictated by specific volume requirements in the Clean Air Act. Beginning in 2023, however, the Clean Air Act directs EPA to determine the volume targets and percentage standards itself.

Accordingly, EPA has proposed volume and percentage standards for 2023, 2024, and 2025:

Setting these requirements for multiple years potentially provides certainty to industry. Yet the approach carries certain risks. In the past, EPA has developed the percentage standards using the Energy Information Administration's ("EIA") forecasts projecting gasoline and diesel volumes for the coming year in EIA's Short Term Energy Outlook ("STEO"). However, because the STEO's are only published annually for the coming year, EIA does not have STEO reports prepared for 2024 and 2025...