EPA denies cellulosic waiver filed by APFM

By Erin Voegele | January 19, 2017

On Jan. 17, the U.S. EPA sent a letter to the American Petrochemical and Fuel Manufacturers denying its petition for a partial supplemental waiver of the 2016 cellulosic biofuel standard under the renewable fuel standard (RFS).

APFM filed the petition on Dec. 28, asking the agency to waive a portion of 2016 RFS cellulosic volume obligation, citing a shortfall in 2016 cellulosic production.

In its petition, AFPM projects that 173.8-190 million gallons of cellulosic biofuel were produced last year, approximately 40-60million gallons short of the 230 million gallons assumed necessary for compliance with the 2016 cellulosic biofuel standard. According to the AFPM, if its refining members are unable to acquire enough cellulosic biofuel RINs, these obligated parties will need to purchase cellulosic waiver credits (CWCs) in order to meet compliance obligations. AFPM estimates the cost to purchase these CWCs at approximately $50-75 million.

In its response, the EPA said that although the 2016 cellulosic biofuel percentage standard was based on a projected production volume of 230 million gallons, the actual number of cellulosic RINs or waiver credits that will need to be retired for compliance will not be known until the compliance deadline, when obligated parties report their gasoline and diesel production and import volumes to the EPA.

“As the compliance obligation is calculated on a percentage basis, if the gasoline and diesel volumes are different from the EIA estimate used to derive the percentage standard, the actual amount of cellulosic biofuel RINs or waiver credits required may be different than the production projection used to derive the standard,” said the EPA in its response. “Based on the January 2017 EIA estimate of gasoline and diesel demand, the most recent estimate available, obligated parties would be required to retire 227 million cellulosic RINs or waiver credits for compliance with the 0.128 percent 2016 cellulosic standard. This value represents the most up-to-date assessment of 2016 cellulosic biofuel compliance obligations.”

As of Jan. 1, the EPA said approximately 178 million cellulosic RINs have been generated for 2016. The agency said it expects an additional 19 million 2016 cellulosic biofuel RINs to be generated after Jan. 1, and noted these cellulosic RINS would represent cellulosic biofuel that was produced and used as transportation fuel in 2016. The estimate is based on the number of 2015 cellulosic RINs that were generated after Jan. 1, 2016.

Overall, the EPA estimates that 197 million 2016 cellulosic RINs will be generated. In addition, the agency expects 39 million cellulosic carryover RINs will be available for compliance with the 2016 standard. In accordance with statute, the EPA said it will make 2016 CWCs available for purchase by obligated parties who have insufficient cellulosic biofuel RINS for compliance. CWCs can be used as an alternative or supplement to the use of 2016 cellulosic RINs or carryover RINs for compliance, the agency said.

In total, the EPA said the 197 million cellulosic RINs it expects to be generated for 2016, when combined with the estimated 39 million carryover RINs, means a total of 236 million RINS should be available to meet the 2016 standard. That number is more than the 227 million RINs expected to be necessary for compliance.

A full copy of the AFPM petition, the EPA’s letter to the AFPM, and the agency’s decision document can be downloaded from the EPA website