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EPA Proposes to Further Lower 2018 RVOs

 

On September 26, EPA issued a notice proposing to further lower the proposed 2018 Renewable Volume Obligations (RVO).  The Notice of Data Availability added a brief comment period.

EPA initially issued the Proposed 2018 RVOs on July 5, 2017, gaining criticism from the renewable fuel industry for proposing to lower volume obligations. EPA exercised the waiver authority granted under the Clean Water and Air Act to be able to propose the 2018 RVOs. The exercise of the waiver authority is legally allowed to issue lower RVO volumes, proposed or final, when EPA feels the industry cannot meet the standards of the increased amounts for the Renewable Fuel Standard (RFS) for any given year. This waiver authority allows EPA to reduce the volume of biomass-based diesel by up to 15% of the annual volume requirement for up to 60 days. In order to exercise this authority, EPA must be able to determine that there is significant renewable feedstock disruption or other market circumstances that would significantly affect the price of biomass-based diesel.

For the year 2018, EPA has used this authority, considerably lowering the proposed RVOs for the year 2018 and 2019 but has gained much criticism for doing so. Proponents of both the ethanol and biodiesel industry have indicated that they are disappointed in EPA’s decision and had hoped for a higher standard. However, the DC Circuit Court has recently decided that EPA may have exceeded its waiver authority in prior years and could have possibly done so again for the years 2018 and 2019. 

Some factors that have influenced EPA’s decision is the loss of the biodiesel tax credit, and the abundance of fuel from Indonesia and Argentina flooding the market, which could potentially decrease the supply for the biodiesel as costs would most likely increase. These factors, among others, have EPA considering issuing the greatest reduction possible as is allowed under the waiver authority.

EPA is taking comment on the reduction and is actively considering reducing the 2018 RVO and the 2019 bio-mass based diesel volume further. EPA is also taking comment on their waiver authority and whether the statute creating RFS would allow for the implementation. Finally, EPA is taking comment on whether there might be inadequate domestic supply which would greatly affect the price of renewable fuel as well as whether the market is suffering “severe economic harm under current conditions.” The additional comment period is to be open for 15 days after the date of publication of the NODA in the Federal Register.

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