|Monday, July 8, 2019 – On Friday, the EPA proposed increasing the volume of renewable fuels to 20.04 billion gallons in 2020, up from 19.92 billion gallons in 2019. The corn ethanol mandate was not reduced, but will remain at the 15 billion-gallon statutory maximum set by Congress under the RFS. On the biodiesel front, the rulemaking also proposes to set the 2021 renewable fuel volume for biomass-based diesel at 2.43 billion gallons, level with the 2020 blending requirement.
Overall, the proposed 2020 renewable fuel volumes are a mixed bag for petroleum marketers. The good news is that the rule did not propose to force large refiners to make up for the lost gallons of obligated blending volume lost in 2019 due to blending waivers issued by the EPA to small refineries based on financial hardship. Carrying those gallons over to large refiner obligated blending volumes for 2020 likely could have caused the value of corn RIN blending credits to increase.
The corn ethanol industry and many midwestern lawmakers are not pleased with EPA’s move which indirectly reduces the corn ethanol mandate and the potential market for E15 blends. They argue that it has reduced the ethanol mandate by 2 billion gallons below statutory volume requirements.
Under the RFS, refiners must blend certain volumes of biofuels into their fuel each year or purchase credits from those that do. Small refineries with a capacity of less than 75,000 barrels per day can receive waivers if they prove that compliance with RFS would cause them significant economic harm. The EPA has granted over 40 SREs for 2016 and 2017 compliance years and has indicated that it has received 40 petitions for SREs for 2018.
For petroleum marketers, the corn ethanol mandate continues to put marketers in a precarious situation given UST system incompatibility with E10 plus blends with regard to the seals, glues, gaskets and other components that would force them to break concrete to sell higher ethanol blends.
PMAA will be filing comments to the EPA on the proposed blending volumes prior to the deadline.
Below are detailed graphs of EPA’s proposal.