Where Are We and Whats Next with the RFS? A VIEW FROM A FORMER - PowerPoint PPT Presentation

Where Are We and What’s Next with the RFS? A VIEW FROM A FORMER REGULATOR PAUL ARGYROPOULOS PRESIDENT POLICY NEXUS ADVISORS POLICY NEXUS ADVISORS

2 Background A Little Program Question History Presentation Overview Conclusions 2018 in Review Current What’s Next? Situation

3 Policy Nexus Advisors Retired in March after 35 years in Transportation and Fuel  Policy and Regulatory World  25 in Government  10 in Private Sector In May of this year, I Started Policy Nexus Advisors (PNA)  General Focus: Provide strategic advice on federal fuel and  transportation program policies and the interface between the environmental, energy and agricultural related sector business interests. Working with Several Great Companies, Associations and  Consultants  Consulting with Several Individual Clients in the Renewable Fuel Space  Working with the Advance Biofuels Association  Partnering with Business Government Solutions on Several Fronts with Several Clients

Some Foundation 4 and Ground Rules No one, and I mean no one knows this program better than the  staff in EPA’s Office of Transportation and Air Quality. This Program has been, without question, the most challenging  program to be a regulator of in my experience. It’s not just about setting standards, it’s about every other issue  surrounding what’s in the law, what the divergence of interests are and the constantly evolving changes necessary to support implementation. I know what I know. I’ll tell you what I can. I won’t tell you what I  can’t. What’s presented is my perspective, based on my experiences.  Everything is Subject to Interpretation and Change!  This Photo by Unknown Author is licensed under CC BY-SA-NC

5 RFS: It All Seems So Simple Let’s Break it Down into Simple Terms: Congress Established a Law. How hard can it be?

How Hard Can It Be?????? 6 Multiple Inputs -- Parties -- Perspectives -- Varying Interests Environment Infrastructure Global Influences Sustainable Feedstocks Economics Metrics: Lifecycle, Federal / State Incentives Energy, Hybrid Public Policy Energy Security, Diversity and Vehicles/Engines Sustainability Fleet Efficiency Environmental Protection: Multi-Media Issues Fuel Types and Usage Scenarios Energy Fuel Blends / Market Absorption Economics

“The” RFS 7 RFS 1 – Complex – Only at that time.  RFS 2 – Let the Fun Begin  National Standard -- 4 categories  Significantly increased volumes  Extended Timeline – No Sunset  Expanded coverage -- gasoline and  diesel, on/non-road Explicit definitions for qualification   Land  Types of Feedstocks  Lifecycle – GHGs Grandfathering  Waivers and Exemptions!  Other specific qualification requirements  Reset AND MORE!!!!! 

Program Structure 8 - Nested Fuel Categories - Total Renewable Fuel – 36 Billion Gallons Total Advanced Renewable Fuels – 21 Billion Gallons Includes - 21 Billion Gallons Cellulosic - 16 Billion Gallons of Total Advanced Includes Biofuels By 2022 Other Advanced - 4 - 1 Billion Gallons - 15 Billion Gallons Minimum Biomass Billion Gallons of Non Advanced Based Diesel by Biomass Based by 2015 2012 Diesel - Minimum - 16 Billion Gallons of 1 Billion Gallons of Cellulosic Biofuels by 2022 - 4 Billion Gallons of Non Cellulosic Advanced by 2022

9 Things to Consider in Establishing the Regulations AND Progressively Implementing the Policy

Propose and Finalize 10 RFS RVOs Small MID-LEVEL Point of REGS Rule Refiner BLENDS Obligation Exemptions MARKET RESET AND Ongoing RFS ISSUES and New FOIA’s SET RULES PROGRAM E15 / E85 /E0 Litigation CELLULOSIC FUNDING, Fuel Related Ongoing DEPLOYMENT, Pathway Congressional Compliance ECONMICS Evaluations Activity Renewable Inspector D8 Biomass GAO Audits General RIN Market Determinations Audits LIFECYCLE EXPORT REFORM or GHG RINS REPEAL ANTII E15 RVP BACKSLIDING It’s Not Just the MANY OTHER ISSUES Volume Standards!!!! DEFINITIONAL FFVS NEW Actions: Direct and Indirect CERT FUELS

2018 - Year In Review 11  Lots of Controversy with Former Administrator Pruitt  Pruitt out – Acting Administrator Andy Wheeler In  What might change?  Tone – Yes  Approach to decisions – maybe  Direction of decisions – not so much  Impact Decisions of 2018  Small Refiner Exemptions - What is the true impact?  Volume Standard Increases

12 Small Refinery Exemptions

13 What does the Future Hold for the RFS? What are the Key influencing factors?

Current Market Dynamics for Ethanol 14 (Conventional and Advanced) and Why They Are Important Nearly all gasoline today in the U.S. contains 10% ethanol (“E10”)   Some E15, Some E85, Some E0 100% utilization of E10 in gasoline = “blendwall”   To blend additional volumes of ethanol will require manufacture and sale of higher ethanol blends Currently there are some limitations for E15 and E85 related to both  market and regulatory factors that affect distribution and consumption HOWEVER, THINGS COULD AND CAN CHANGE   Reinstate FFV Incentives, transition to E15 overtime, E85 Market Increases, Possible Octane / Mid-Level Blends in the Future  Importance of Biodiesel

Current Market Dynamics 15 for Biodiesel  Meeting / Exceeding Biodiesel Standards  Market Restrictions Still Exist but they are changing  More supply, distribution, feedstock flexibility, etc.  Growing opportunities for non ethanol fuels: biobutanol, renewable gasoline, biodiesel, renewable diesel, cellulosic diesel, jet and heating fuels

Monthly Biodiesel 16 Production Trends Production - 163 million gallons in July  2018. 7 million gallons higher than production  in June 2018 . Biodiesel production from the Midwest)  accounted for 66 percent of the United States total. Production came from 92 biodiesel  plants with capacity of 2.4 billion gallons per year. Sales - Producer sales of biodiesel during  July 2018 included 71 million gallons sold as B100 96 million gallons of B100 sold in  biodiesel blends with diesel fuel derived from petroleum. Feedstocks - There were a total of 1,260 million pounds of feedstocks used to produce biodiesel in July 2018. Soybean oil remained the largest  biodiesel feedstock during July 2018 with 671 million pounds consumed.

17 Access to RIN Generation / Volume Data

Impediments or 18 Opportunities?  Currently there are some limitations related to market absorption of ethanol – some regulatory, others as well  How might this influence the overall renewable fuel market?  In the future, there may be growing opportunities for non ethanol fuels:  biobutanol, renewable gasoline, diesel and jet, heating fuels  Legislative and regulatory actions may be necessary to support growth of biofuels

19 Where Are We Now????? We Know What We Know AND We Know What We Don’t Know

20 Cellulosic Biofuels

RFS Standards – What We Know 21 Past and Current Year Volume Standards Billions of Gallons 2014 2015 2016 2017 2018 2019 Proposed 2020 + Cellulosic biofuel (million 33 123 230 311 288 381 ? gallons) Biomass-based diesel (bgs) 1.63 1.73 1.9 2.0 2.1* 2.1 Total Advanced biofuel (bgs) 2.67 2.88 3.61 4.28 4.21 4.88 Total Renewable fuel (bgs) 16.28 16.93 18.11 19.28 19.29 19.88 Conventional Fuels =15BGS BBD Standard for 2020 is set at 2.43 bg

Setting the Standards - What’s Different for Biodiesel - 22  EPA Sets EISA Standards Every Year  Formula used per regulations - 4 obligations  The Biomass Based Diesel Standard is Different  Minimum of 1 billion gallons  Multiple Criteria to Evaluate  Complicated by Nested Nature of the Program  Set 14 Months in Advance  Rolling the dice but the dice are somewhat loaded and it’s a little like playing Craps  Final Standards --- November 30 th by Law

23 Moving Forward and Next Steps What to Consider?

What We Know and 24 Projections Current RFS Standards and Likely Global Draws  Current Fleet of Vehicles and Equipment  Sales Projections   Type  Fuel / Energy Type Petroleum Projections by Type   Production, consumption, cost Feedstocks / Availability   Some Future dependent on qualifications  Pathways Matter Renewable Fuels   Types, Production Capacity  Approved Fuels Near and Likely Mid-Term Market Conditions 

25 Key Action Items  Volume standards – The Key Action Starts with RESET  New Feedstock Qualifications Under EPA Pathway Evaluations  Policy Determinations  Qualifications / Determinations Under Existing Authorities and Current Regulations  New Regulatory Actions are Unlikely – At least for now  Global Actions For:  Climate  Sustainability  Other

26 Down, Reset, Set, HIKE R  What is Reset  What is Set  Criteria  Why  Timing  Implications