Are Things Big and Beautiful for Biofuels?

Doug Durante, Clean Fuels Development Coalition

The massive Trump legislation passed last month with some tax goodies for ethanol and biodiesel. Up to a $1 per gallon tax credit survived the legislative process and could mean great returns for ethanol plants that demonstrate ghg reductions. After the usual delays by EPA that have plagued the RFS for decades, the much-anticipated Renewable Volume Obligations (RVOs) were announced recently and met with great joy in biofuels land.  This comes on the heels of the “emergency waiver” to allow E15 to be used during the summer months. So, by some accounts all is well, but I have different take on that. There is little to gripe about with the tax credit so let’s put that aside. The RVO and E15 issues, however, come with some poison pills.

Ever since the RFS volumes became discretionary to EPA – although in a sense they always were – it has unnecessarily taken a lot of time, resources and political capital to argue for what we are entitled to. It has been a contentious issue every year – often with volumes not being announced months late and into the following year of the compliance period.

But wait, you say. EPA proposed the full 15 billion gallons targeted for ethanol and a hefty 5 billion gallons of biodiesel. Happy days, right? Well, here is the twist: EPA’s proposal is based on RINs, as opposed to wet/actual gallons. (Quick refresher: every gallon of biofuels is assigned a renewable identification number, or a RIN. That is what obligated parties turn in to EPA to show they complied with the law.)

 That is a significant distinction. A RIN is essentially a piece of paper, and EPA has come right out and said they do not anticipate 15 billion gallons of actual ethanol to be used. And why is that? Because they continue to hide behind the blend wall, they have constructed that, other than the temporary allowance for ethanol to be used during the summer months, limits blends to 10 percent volume. With a gasoline market of roughly 137 billion gallons in 2023-24, 13.5 billion of that was ethanol. Assuming we stay at that level of demand, how do you put 15 billion gallons into that pool if limited to 10 percent? You don’t. The missing 1-2 billion RINS will be pieces of paper that come from the multiplier that biomass diesel gets, which is 1.5 or more RINs for every gallon. Extra RINs after the Advanced Biofuel category is met can be used to satisfy the conventional category which is where corn ethanol resides.

So right out of the gate we are not likely to see 15 billion gallons of ethanol. Further eroding the 15 billion ethanol gallons and undermining the program is the small refinery waiver provision that currently has a line around the block of nearly 180 requests to wriggle out of the requirement. While we do not have at this writing a definite amount that will be exempted, it could be 1-2 billion gallons, and it is not known if EPA would simply reduce that from the total or reassign it to the remaining refiners.

The RIN system is both the strength and the weakness of the RFS. When the petroleum industry signed on to the RFS so they could get out of forced oxygenate requirements, they fully supported RINS. It gave them the ability to meet RFS volumes by either using renewables or to use RINS, either purchased from others or generated from their own use. That flexibility is a strength of the program.

When RIN prices are too high, it becomes a weakness in that refiners can claim the RIN costs are an unfair economic burden as well as costs that are passed on to consumers.

Here is where E15 and higher blends could enter the picture and save the day. While some RINS above a 10 percent volume will be generated, the fact that this is an “emergency waiver” for the summer leaves the issue unresolved so we can once again argue, fight, cajole, beg and stamp our feet calling for a permanent solution. If any blend of ethanol was allowed to be used throughout the year, these higher volumes would generate so many RINS they could be worth pennies, and the complaints would stop and the true full volumes would be met with gallons and not paper RINS.

By the way, the permanent solution both corn and ethanol stakeholders are supporting is federal legislation, and that’s great but the bills being considered would limit the extension of the waiver to only 15 percent. Previous legislative efforts such as the now forgotten Next Generation Fuels Act would have extended RVP relief to all blends. For the industry to sign on to a deal that caps future growth to 15 percent when the higher the blend volume the more benefits are provided is puzzling, to say the least. If 15 is good, 20 is even better and 30 is a home run, particularly given the fact that vapor pressure is constantly decreasing as volumes increase.

Further strengthening the argument for any blend is the data we are getting from Brazil. The mandatory 27 percent volume blend is now increasing to 30 percent. A common misconception with regards to Brazil is that these higher ethanol volumes are only possible because all their vehicles are flex fuel. This is simply not true – hundreds of thousands of vehicles in Brazil are imported and not considered flex. In 2024 alone, 365,000 vehicles were imported that were not flex, electric or hybrids. There have been no performance or operational problems with an entire nation that runs on a minimum of E27. Add to that the fact that Brazil’s air quality is among the best in the world and it begs the question of what are we doing here in the U.S. where we can’t get past 10 percent? 

Growth Energy VP Chris Bliley, who has been at the forefront of the effort to secure E15 approval, recently noted in an interview that yearround E15 would spur demand for E30. While that is true, as we have seen from the Brazilian experience, getting to that level is a stairstep exercise and we need Rvp  approval for the 20 and 25 percent volumes that will be needed to get to the pinnacle of 30 percent.

With electric vehicles in free fall, this is the time to ensure we get the minimum gallons we are entitled to under the RFS but also demand the ability to blend at any level.