On April 22, EPA issued a direct final rule to revise the 2013 cellulosic biofuel renewable fuel standard (“RFS”) that it had originally issued on August 15, 2013.  The new rule reduces the cellulosic biofuel RFS to 0.0005%, which reflects the number of cellulosic biofuel renewable identifications numbers (“RINs”) that were actually produced and available for use by obligated parties in 2013. As defined by statute, cellulosic biofuel is “renewable fuel derived from any cellulose, hemicellulose, or lignin that is derived from renewable biomass and that has lifecycle greenhouse gas emissions” that the EPA Administrator determines are “at least 60 percent less than the baseline lifecycle greenhouse gas emissions.” 42 U.S.C. § 7545(o)(1)(E). EPA has approved as cellulosic biofuel fuel that is made from, among other things, crop residue, tree residue, switchgrass, and cellulosic components of yard and food waste.

The original August 2013 final rule had projected that 6 million ethanol-equivalent gallons of cellulosic biofuel would be produced in 2013. EPA projected that INEOS Bio would produce 0-1 million ethanol-equivalent gallons and KiOR would produce 5-6 million ethanol-equivalent gallons. In August 2013, however, KiOR lowered its production projection for 2013 to 1-2 million actual gallons, from 3-4 million actual gallons, which EPA had used as the basis for its cellulosic biofuel projection in the final RFS rule. The American Petroleum Institute and American Fuel & Petrochemical Manufacturers filed petitions for reconsideration, citing, among other grounds, KiOR’s decreased production projection. EPA granted the petitions for reconsideration with respect to the cellulosic biofuel standard, and the new direct final rule is the result of the reconsideration process. The new cellulosic biofuel RFS in the direct final rule was calculated based on the 810,185 cellulosic biofuel RINs that were produced and available for obligated parties to use for compliance for 2013.

EPA explained that it decided to change the cellulosic biofuel RFS via a direct final rule in order “reduce regulatory uncertainty and avoid unnecessary cost or burden for obligated parties,” which would otherwise have to purchase cellulosic biofuel waiver credits from EPA to comply with the higher cellulosic biofuel RFS from the August 2013 rule and then seek refunds from EPA. The direct final rule will become effect 60 days after it is published in the Federal Register, unless EPA receives adverse comments.