EV withdrawal from RVO package raises hopes for biodiesel lift

US biomass-based diesel sources are hoping the Environmental Protection Agency’s (EPA) final renewable volume obligations for 2023, 2024, and 2025 will boost biomass-based diesel volumes, correcting what some see as an oversight that failed to fully account for a sharp increase in production capacity.

The agency was working to confirm final figures ahead of a July 14 deadline, but the decision has now been pushed to July 21, according to a statement issued on Tuesday by ethanol lobby Growth Energy.

Industry reaction has focused on what they see as an imbalance between biomass-based diesel proposals and the ramp-up in renewable diesel production capacity across the US.

A key assumption is also coming from the news – first reported by Reuters – that a proposal to roll electric vehicles into the biofuel blending program will be dropped, and with it, the loss of potentially billions of credits that the commentators have dubbed eRINs.

The so-called eRINS may only temporarily be dropped, however, while the EPA deals with complaints over their legality, although no real time frame exists for their possible return, and Fastmarkets Agriculture understands it could take an act of Congress to have them properly installed into the RVO, which is likely to be no earlier than 2025 or 2030.

While this has maybe raised hopes that an increase to the biomass-based diesel or the advanced biofuel categories could be on the cards, with the initially proposed volumes revealed back in December 2022 dividing the market, experts previously told Fastmarkets that the removal of eRINs does not actually open the door for additional biomass-based diesel volumes.

Industry groups focusing on ethanol welcomed the proposed volumes, while biomass-based diesel groups were dismayed at the relatively modest proposals.

Detail

Typically, EPA reveals its thinking ahead of a final deadline in a call for feedback, and the agency proposed the following figures for the 2023, 2024, and 2025 years:

The bedrock of the total figures is a 15 billion gallon conventional biofuel allowance for 2023, topped up with a 250 million gallon additional award, following an earlier court case.

From 2024 and 2025, that additional allowance is rolled into a 15.25 billion gallon baseline that is typically filled by corn-based ethanol.

However, the relatively modest figures for biomass-based diesel of 2.82 billion gallons rising to 2.95 billion gallons in 2025 has caused angst, with industry bodies, senators and members of Congress from big agriculture states writing to the EPA’s administrator government to raise the volumes.

Their argument has been rooted in the increase in production capacity – both current and still expected – which they argue has not been taken fully into account.

“Projections from the Energy Information Administration (EIA) anticipate renewable diesel capacity doubling to 5.9 billion gallons by the end of 2025,” a letter signed by 37 members of Congress and addressed to EPA administrator Michael Regan.

“EPA’s proposed blending targets for biomass-based diesel account for less than 10 percent of the volume increases estimated by EIA, reaching only 2.95 billion gallons in the final year.

Industry reaction

Trade sources spoken to by Fastmarkets expect some modest movement on the advanced biofuel category – which would include renewable diesel or sustainable aviation fuel volumes, the crux of the upcoming expansion – but there is a wide range of estimates.

Prices for refined, bleached, and deodorized (RBD) soybean oil in Illinois – a major feedstock into the production process – have already responded to the potential for an increased mandate, with cash prices published by Fastmarkets service showing a steady increase since May 31.

RBD soybean oil prices in central Illinois are up more than 10 cents, or about 17 percent, since the end of May to the highest level in three months, above 70 cents per pound, according to Fastmarkets’ data.

RBD soybean oil is a preferred feedstock for many US producers, particularly ones that do not have pre-treatment on-site at their renewable diesel (RD) facilities.

Rising demand from both the food and fuels sectors has led to tight interior supply, with capacity generally sold out through the third quarter of this year.

A decision by the EPA to raise the RVO targets would require more soybean oil for domestic use.

The EPA is expected to confirm the 2023, 2024, and 2025 volumes by July 14, although speculation is mounting that the decision may be pushed back to next week.