Introduction

The Renewable Fuel Standard (RFS) requires that the nation's transportation fuel supply contain renewable fuels.¹ This mandate—established in the Energy Policy Act of 2005 (EPAct05; P.L. 109-58) and expanded in the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140)—requires the use of renewable fuel, although it does not explicitly require the production of that fuel. Obligated parties, such as refiners or importers of gasoline or diesel fuel, are responsible for complying with the RFS requirements. The U.S. Environmental Protection Agency (EPA) administers the mandate, which is an amendment to Clean Air Act (CAA) provisions governing the regulation of fuels.² The statutory renewable fuel volume increases annually until 2022, with EPA determining the volume after 2022 within certain limitations. In general, EPA has the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail.

The RFS is a complex and highly technical policy initiative. It deals with multiple sectors of the economy and requires the use of some advanced renewable fuel production technologies that have yet to reach maturity. The RFS also incorporates thresholds for greenhouse gas emission reduction. This complexity is heightened by multiple stakeholders with differing perspectives on what the RFS should accomplish, how it should be implemented, and whether it should exist, which leads to debate about the RFS and its future. Congressional debate about the RFS is expected to continue with special attention to how EPA administers the program.³ As Congress continues its oversight of the RFS, it may be useful to understand the RFS waiver authority granted to EPA. This report discusses the waiver provisions of the RFS, including the modification-of-applicable-volumes ("reset") section.

RFS Requirements

EPAct05 established a renewable fuel program (i.e., the RFS) requiring that transportation fuel sold or introduced into commerce in the United States, on an annual average basis, contain a specified amount of renewable fuel. The RFS mandate, as amended by EISA, calls for the consumption of 9 billion gallons of total renewable fuel in 2008, ascending to 36 billion gallons in 2022, with EPA determining the annual volume after 2022. The statute identifies four categories of renewable fuels that are to be used to meet the mandate. These four categories can be aggregated into two major categories: unspecified biofuel (mainly cornstarch ethanol) and advanced biofuel (e.g., cellulosic biofuel, biomass-based diesel, and other advanced biofuels), shown in Figure 1.⁴ Over time, the growth in the RFS transitions from biofuels that, in practice, are made mostly from food and feed crops to biofuels made from nonfood and nonfeed crops. For instance, in 2022, the statute requires that advanced biofuels constitute close to 60% of the 36 billion gallon mandate and unspecified biofuels constitute about 40%.

Figure 1. Scheduled Renewable Fuel Standard (RFS) Mandates Under EISA

Sources: Congressional Research Service (CRS) using mandates in the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140).

RFS Annual Volume Announcement Deadlines

Congress gave the EPA Administrator an annual deadline to determine and publish the renewable fuel obligations (i.e., final volume requirements). The EPA Administrator is required to announce the renewable fuel obligations (typically referred to as "set the standards") by November 30 of the preceding year (e.g., under statute, the 2022 standard is required to be finalized by November 30, 2021).⁵ For biomass-based diesel, the statute specifies volumes for four years (2009-2012) and requires EPA to announce the remaining annual biomass-based diesel standards "14 months before the first year for which such applicable volume will apply" (e.g., the 2022 biomass-based diesel standard is required to be finalized by November 2020).⁶ The requirement that EPA announce the standard 14 months prior is scheduled to apply to the other renewable fuel categories for calendar years 2023 and onward.

Current RFS Requirements

EPA issued the final 2020, 2021, and 2022 standards (and the 2021 standard for biomass-based diesel) in June 2022.⁷ The RFS statutory requirements and the EPA requirements for 2014 through 2022 are provided in Table 1.

RFS Waiver Provisions

The statute for the RFS contains a waiver section with a set of waiver provisions.⁸ The provisions describe three separate waivers—a general waiver, a cellulosic biofuel waiver, and a biomass-based diesel waiver—that the EPA Administrator may use to waive, with certain stipulations for certain waivers, the volume of renewable fuel mandated by statute. The waivers referred to in this report should not be confused with small refinery exemptions.⁹ Additionally, there is a provision for the modification of applicable volumes (i.e., a "reset") that the EPA Administrator may use. The waivers and the modification of applicable volumes are described in further detail in the following sections of this report.

General Waiver

The RFS statute gives the EPA Administrator the authority to waive the RFS requirements, in whole or in part, "by reducing the national quantity of renewable fuel required" if

• implementation of the requirement would severely harm the economy or environment of a state, a region, or the United States, or
• domestic renewable fuel supply is inadequate to meet the mandate.¹⁰

The Administrator may issue the general waiver at his or her discretion or if petitioned by a state or any person subject to the RFS requirements (e.g., refiners and importers). Prior to making a decision, the Administrator is required to consult with the Secretary of Agriculture and Secretary of Energy and to allow for public notice and the opportunity for comment. In those instances in which the Administrator receives a petition for a waiver, the Administrator has 90 days after receipt of the petition to approve or disapprove it.¹¹ If a general waiver is issued, it expires after one year, unless the Administrator renews the waiver.¹²

Cellulosic Biofuel Waiver

The RFS statute obligates the EPA Administrator to reduce the cellulosic biofuel mandate when the projected production capacity for a given year is less than the volume required in the statute.¹³ The law does not require the EPA Administrator to consult with the Secretary of Agriculture or the Secretary of Energy when issuing a cellulosic biofuel waiver, or to give public notice and opportunity for comment. However, the Administrator is to use the projected volume estimate for cellulosic biofuel that the U.S. Energy Information Administration (EIA) is required to provide to EPA.¹⁴ The EPA Administrator is to set the new required amount at the "projected available volume during that calendar year" by November 30 of the preceding year. Should the Administrator reduce the cellulosic biofuel volume, the Administrator also may reduce the volumes of advanced biofuel and total renewable fuel by the same or lesser volume. When the Administrator issues a cellulosic biofuel waiver, the Administrator must offer cellulosic biofuel waiver credits for obligated parties to purchase for that compliance year in lieu of using actual cellulosic biofuel.¹⁵ In prior waiver determinations, EPA has provided opportunity for public comment.¹⁶

Biomass-Based Diesel Waiver

The RFS statutory provisions give the EPA Administrator authority to reduce the amount of biomass-based diesel required for up to 60 days if the Administrator determines that there are significant market circumstances (including feedstock disruptions) "that would make the price of biomass-based diesel fuel increase significantly."¹⁷ If these market circumstances continue past the initial 60-day period, the Administrator may issue another waiver for an additional 60 days. The Administrator is to consult with the Secretaries of Energy and Agriculture prior to issuing such a waiver. If the Administrator issues a biomass-based diesel waiver, the Administrator also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume. As of July 2022, EPA has not used the biomass-based diesel waiver authority.

Modification of Applicable Volumes

The last provision of the waiver section is the modification of applicable volumes provision, referred to by some as the "reset" provision for the RFS.¹⁸ This provision requires that the EPA Administrator modify the applicable volumes—for each fuel specified in the tables in the statute—of the RFS in future years if certain conditions are met. This "reset" authority is for applicable volumes starting in 2016 through 2022, and is to be used after the conditions are met and not retroactively. Specifically, it provides that, starting in 2016, the EPA Administrator shall modify the applicable volumes of the RFS for subsequent years if the Administrator waives the renewable fuel mandate, the advanced biofuel mandate, the cellulosic biofuel mandate, or the biomass-based diesel mandate by at least 20% for two consecutive years or by at least 50% for a single year. This reset section does not state what the modified amount must be. Rather, it requires that the Administrator determine the applicable volumes—in coordination with the Secretaries of Energy and Agriculture—based on a review of program implementation thus far and an analysis of certain factors (e.g., the impact of the production and use of renewable fuels on the environment).¹⁹ This reset provision does not apply to other calendar years—years after the calendar years specified in the statutory tables (e.g., 2023 and beyond for total renewable fuel).

RFS Waiver Authority Use

Since 2010, EPA has repeatedly used its cellulosic biofuel waiver authority to reduce the cellulosic biofuel volume required, and, since 2014, to also reduce both the advanced biofuel and total renewable fuel volume required.²⁰ In June 2022, EPA announced that it was using the cellulosic waiver authority along with the reset authority to reduce the applicable volumes for the various fuel categories for 2020, 2021, and 2022.²¹ The Administrator has not issued a biomass-based diesel waiver.

To date, EPA has exercised the general waiver authority once to reduce the total renewable fuel volumes for 2014, 2015, and 2016, which the U.S. Court of Appeals for the D.C. Circuit subsequently vacated after concluding that EPA's interpretation of "inadequate domestic supply" was not a permissible one.²² In that rule, EPA had interpreted the general waiver provision as allowing the agency to reduce all or any of the four renewable fuel volume requirements (i.e., total renewable fuel, advanced biofuels, biomass-based diesel fuel, or cellulosic biofuel) in whole or in part.²³ In notices denying petitions for waivers, EPA has taken the position that any waiver must be nationwide in scope (i.e., reduce the statutory volumes nationwide).²⁴ However, EPA has not codified this position in its regulations and no court has reviewed this interpretation. The general waiver authority has not been fully exercised; thus, it is not clear if only the total renewable fuel category can be reduced or if any of the renewable fuel categories (e.g., advanced biofuel) can be reduced.

RFS Waiver Impacts

Waiver authority is intended, in part, to assist EPA with implementation of the RFS.²⁵ One of EPA's program tasks is to use the waiver authority, when required, to determine the annual final standard, and to announce that final standard by the statutory deadline. The challenge of projecting advanced biofuel production, pressure from some stakeholders, and other factors may have contributed to past delays (during the 2012-2015 and 2021-2022 timeframes) in issuing final standards under the waiver authority.²⁶ Such delays could lead to difficulty for obligated parties who have to demonstrate program compliance and for renewable fuel producers who are interested in producing the required fuel. For 2016 through 2020, EPA has generally issued the final rule according to the statutory schedule.²⁷

Three stakeholders generally have had distinct views about the impacts of the waiver authority: the advanced biofuel industry, the conventional biofuel industry, and the petroleum industry. Some advanced biofuel advocates assert that issuing waivers, in conjunction with other factors, could weaken confidence in renewable fuel markets and the chosen technologies, specifically cellulosic biofuel.²⁸ Advanced biofuel, particularly cellulosic biofuels, have not been produced at the levels called for in the statutory provisions by relatively large margins. Some conventional biofuel advocates have not always agreed with EPA's proposals to use the waiver authority to reduce conventional biofuel volumes.²⁹ Conventional biofuel production has remained in line with what the statutory provisions require. Some in the petroleum industry assert that the waiver authority can be used as an option to address the "blend wall," or, the maximum ethanol limit that would serve to avoid causing damage to many engines, fuel systems, and fueling infrastructure of vehicles.³⁰

While perspectives about EPA's use of the waiver authority vary among stakeholders, the waivers have provided EPA with the flexibility to establish volume requirements that have been attained.

Impacts of RFS Modification of Applicable Volumes

In the final rule for 2020, 2021, and 2022, EPA reports the "reset" provision (i.e., the modification-of-applicable-volumes provision of the RFS) has been triggered for three of the four renewable fuel categories identified in statute.³¹ EPA reports the "reset" was triggered for cellulosic biofuel volumes by the 2010 annual standard, for advanced biofuel volumes by the 2014 and 2015 annual standards, and for total renewable fuel volumes by the 2018 and 2019 annual standards. The 2020, 2021, and 2022 final rule is the first time that EPA has used the "reset" authority. EPA reports it is using the "reset" authority, along with the cellulose waiver authority, to reduce the applicable volumes for 2020, 2021, and 2022 for total renewable fuel, advanced biofuel, and cellulosic biofuel. Come 2023, the "reset" authority will no longer be relevant, as the EPA Administrator is to set the statutory requirements in the first instance for calendar years 2023 onward based on certain statutory criteria.³²