All legislative and regulatory efforts on the federal RFS are at a standstill until the government re-opens. RFS legislative and regulatory efforts, however, were strong in the days before the government shutdown.
Last week, the Biotechnology Industry Organization (BIO) sent a letter to EPA Administrator Gina McCarthy urging EPA to deny the joint petition by the American Petroleum Institute and American Fuel & Petrochemical Manufacturers requesting EPA grant a partial waiver of the 2014 RVOs under the RFS. Petitioners had argued that waiving the RVOs for 2014 to 9.7 percent of the U.S. gasoline supply is necessary so their members may fulfill their volume obligations under the RFS without exceeding the 10 percent ethanol "blend wall."
In its letter, BIO argued that petitioners may not make the waiver request because the RVO requirements do not apply to them as trade associations and, in any case, the joint petition is premature since EPA has not even yet released its proposed 2014 RVOs. In addition, BIO argued that the projected harm by the petitioners due to the blend wall is the result of "ongoing dilatory tactics of the very parties seeking the waivers" and that there exist ample options for obligated parties to comply with the 2014 RVOs. The Renewable Fuels Association (RFA) sent a similar letter to EPA opposing the joint petition.
Also last week, the heads of six biofuel trade associations met with Republican staff of the House Energy and Commerce Committee about Committee Chair Fred Upton's (R-MI) efforts to reform the federal RFS law. The six associations represented were: BIO; the National Biodiesel Board; Growth Energy; RFA; the Advanced Ethanol Council; and the National Corn Growers Association. The associations were unified in their message to staff that the RFS should remain intact as-is, with no changes. The associations argue that the consistency and stability of the RFS law drives investment in biofuels, especially advanced and cellulosic biofuels, and it contains sufficient administrative flexibility to enable EPA to make appropriate adjustments to its implementation, including any necessary lowering of annual RVO requirements for obligated parties. It is reported that the biofuels groups were told not to expect any legislative proposal to be released before EPA issues its proposed rule to set the 2014 RVOs.
In addition, last week, 20 conservative leaning business groups sent a letter to Congress urging the repeal of the RFS. Also, Americans for Tax Reform, a conservative anti-tax group led by Grover Norquist, began a letter writing campaign to Congress advocating for RFS repeal.
Finally, biofuels supporter Senator Chuck Grassley (R-IA) sent a letter to EPA asking what measures EPA is taking to investigate claims of RFS Renewable Identification Number (RIN) market manipulation and speculation.
Not only did the U.S. government shut down at midnight on Monday, but so did the nine month extension of the 2008 Farm Bill. With no new five-year Farm Bill, the future is uncertain for rural energy programs supported by the U.S. Department of Agriculture (USDA), including the Biorefinery Assistance Program that promotes the development of biorefineries in the U.S.
As we have reported earlier this year, the U.S. Senate passed its version of the next five-year Farm Bill, including funding for farm, nutrition, and energy programs. Importantly, the Senate bill continues and provides mandatory funding for existing Farm Bill energy programs and extends eligibility to renewable chemicals. After failing to pass a combined bill, the U.S. House of Representatives passed a "farm-only" bill this summer and a nutrition-only bill cutting $40 billion in food stamps just last week. The House farm-only Farm Bill contains an energy title without mandatory funding that will instead be subject to annual appropriations, and it does not extend the energy programs to renewable chemicals.
There has been hope that though the differences are deep, the House and Senate will be able to pass a five-year Farm Bill by the end of the year when mandatory funds for commodity subsidies and food stamps expire. Whether this is true now largely depends on how quickly Congress re-opens the government and raises the debt ceiling to ensure the ability of the U.S. to meet its financial obligations.
On Monday, September 30, 2013, the U.S. Department of Energy (DOE) announced that it intends to award $100 million for cutting edge energy research in areas including biofuels as part of its Energy Frontier Research Centers (EFRC). In 2009, DOE granted five-year awards ranging from $2 million to $5 million per year to each of 46 EFRCs throughout the country. The current Funding Opportunity Announcement (FOA) is available online. Under the FOA, applicants must submit a letter of intent to apply by November 13, 2013, and applications are due by January 9, 2014. Existing and new EFRCs may apply.
The $100 million for this program is part of DOE's Fiscal Year 2014 funding request. Whether DOE is provided the funds is uncertain, especially given the government shutdown and standstill in Congress on passing a Fiscal Year 2014 budget.
On August 28, 2013, California's Office of Administrative Law (OAL) approved the California Department of Toxic Substances Control (DTSC) Safer Consumer Products Regulations (Regulations). The Regulations took effect on October 1, 2013.
The Regulations are the much anticipated regulatory implementation of California's Green Chemistry Initiative. DTSC's implementing regulations have gone through several iterations, including an initial draft released on June 23, 2010, a revised draft released on November 16, 2010, an "informal draft" released on October 31, 2011, proposed regulations released on July 27, 2012, revised proposed regulations released on January 29, 2013, another revised proposed regulations released on April, 10, 2013, and revisions proposed on August 23, 2013 (the 15-day comment period for these last comments was open until September 9, 2013, despite the issuance of final Regulations). Memoranda providing background information on past iterations are available online. The Regulations and Final Statement of Reasons are available online.
On September 26, 2013, cellulosic biofuels company KiOR, Inc. announced that it intends to build a second cellulosic biorefinery near its existing plant in Columbus, Mississippi. This second plant, or "Columbus II," is expected to cost $225 million and the Company intends to build it in 18 months after it raises sufficient capital. This announcement is significant, especially as it comes at a time when federal RFS opponents are strong and have waged a campaign to dismantle the law in part by arguing about the lack of development in the cellulosic biofuels space. KiOR's press release on Columbus II is available online.
California-based renewable chemical company Rennovia, Inc. announced on October 1, 2013, that it has "produced, and shipped to a prospective partner, samples of what it believes to be the world's first 100% bio-based nylon-6,6 polymer, under Rennovia's RENNLON brand, made from Rennovia's renewable monomers, RENNLON adipic acid (AA) and RENNLON hexamethylenediamine (HMD)." The Company estimates this production will cost 20-25 percent less than conventional AA and HMB, and will result in approximately 85 percent less greenhouse gas emissions. A copy of the Company's press release is available online.
The California Department of Toxic Substances Control (DTSC or Department) Safer Consumer Products Regulations (Regulations) take effect today. Memoranda providing background information on the Regulations are available online. The Regulations and Final Statement of Reasons are available online.
The most onerous requirements for "responsible entities" (i.e., manufacturers, importers, assemblers, and retailers) will not be felt until DTSC identifies the first Priority Products, that is, a consumer product containing a listed Candidate Chemical for which responsible entities must conduct an Alternatives Analysis (AA) to determine how best to limit potential exposures or the level of potential adverse public health and environmental impacts posed by the substance in the Priority Product.
There are, however, initial steps that companies can take to understand how these Regulations may affect operations in the near future. DTSC has created a Safer Consumer Products Web Portal where it has posted, and will continue to add, information pertinent to the Regulations. Please see BRAG's full memorandum, for more information.
On September 19, 2013, in a partisan vote, the U.S. House of Representatives passed by a vote of 217-210 its version of the nutrition portion of the next Farm Bill. All Democrats and 15 Republicans in the House of Representatives voted against the bill, which would cut $40 billion from the national food stamp program over the next decade and will almost surely delay final passage of the next five-year Farm Bill. The current Farm Bill expires on September 30.
Historically, the Farm Bill has combined funding for farm and nutrition programs. This summer, by a bi-partisan vote, the Senate passed S. 954, its version of the next five-year Farm Bill that included funding for farm, rural energy, and nutrition programs. It continues funding for Farm Bill energy programs that help encourage biofuels production, and expands coverage to include renewable chemicals. S. 954 would cut only $4 billion from the food stamp program over the next decade.
The House split the farm and nutrition portions of the Farm Bill because in June of this year, it failed to pass a combined bill that would have cut $20 billion from food stamps. At the time, generally, Democrats felt the food stamp cuts were too steep, while Republicans thought they did not go far enough. Over the summer, House leadership opted to split the bill into farm and nutrition only parts, and to get the votes to pass the nutrition portion by answering the Republican call for steeper cuts.
Now that the House has passed both the farm and nutrition portions of the next Farm Bill, it is expected that House leadership will appoint conferees to meet with the already named Senate conferees in an effort to prepare a bill in final that may be passed by both the House and Senate and signed into law by the President. No one expects this process will be complete by September 30, but they are hopeful it could happen by the end of the year when farm support will revert back to a 1949 agriculture law. If that happens, there will not be any continuing support for biofuels and renewable chemicals.
Last week, the U.S. Department of Agriculture (USDA) announced that it is seeking bids from bioenergy producers to purchase sugar from the Department as part of the Food, Conservation and Energy Act of 2008 (the 2008 Farm Bill) Feedstock Flexibility Program (FFP). This will be the second time that USDA will utilize the FFP. The 2008 Farm Bill directs USDA to keep sugar prices at or above certain levels, and authorizes USDA to either acquire sugar through forfeiture of sugar loans made by the USDA's Commodity Credit Corporation or to buy sugar and sell it to bioenergy producers until prices raise to those levels. Domestic sugar prices have been falling this year.
USDA was criticized for its first sale of sugar as part of the FFP about a month ago because in that instance USDA had purchased 7,118 short tons of refined beet sugar for $3.6 million and sold it to renewable fuel producer Front Range Energy for $900,000 (a loss of $2.7 million).
If the Continuing Resolution (CR) currently funding the government is allowed to expire on September 30, it could prove devastating to the U.S. Environmental Protection Agency (EPA). Unlike other federal agencies, EPA cannot claim exceptions for many of its employees. In the event the CR expires, as EPA Administrator Gina McCarthy asserted in public remarks this week, EPA "would effectively shut down." It would only have skeletal staff and would surely impact Renewable Fuel Standard (RFS) and Toxic Substances Control Act (TSCA) work, among others.
This fear about current EPA funding comes at a time when the Republican Members of the Senate Committee on Environment and Public Works sent a letter this week to Committee Chair Barbara Boxer (D-CA) urging her to move ahead with a hearing on EPA's Fiscal Year (FY) 2014 budget request. EPA requested $8.2 billion for FY 2014, which is 3.5 percent less than 2012 enacted funding levels for the Agency.
Last week, federal securities regulators charged Imperial Petroleum, Inc. and its subsidiary, Indiana-based E-Biofuels LLC, with carrying out a fraudulent federal RFS renewable identification number (RIN) and tax credit scheme. It is alleged that from November 2009 to January 2012, this scheme generated 52 million fraudulent RIN credits and $35 million in false tax credits, and cost investors approximately $60 million. More information is available online.
This is the fourth major biodiesel RIN fraud case, but the industry's leading voice in Washington, D.C., the National Biodiesel Board (NBB), reportedly argues it should not change anything with respect to RFS RIN enforcement because the alleged illegal activities occurred before NBB and others worked with EPA on a new RIN enforcement proposal, which is expected to be promulgated this year.
This week, Senator Debbie Stabenow (D-MI) sent a letter to the Commodity Futures Trading Commission (CFTC) asking for an investigation into claims that speculators are manipulating the RIN market in which RIN credits are bought and sold to help obligated parties meet their annual renewable volume obligations (RVO) under the federal RFS. Senator Stabenow expressed concern with the lack of transparency in the RIN market.
Ethanol RIN prices have dramatically risen this year and there have been allegations that the increase has been the result of speculation.
The Federal Aviation Administration (FAA) has announced that it will provide $40 million for a Center of Excellence (COE) on sustainable aviation fuel and the environment. The funds will be distributed in $4 million increments each year for the next ten years. Washington State University and the Massachusetts Institute of Technology will be leading the effort, and several other universities will be involved. For a full list of participants and more information on the initiative, please see a copy of FAA's press release, which is available online.
This announcement illustrates the federal government's important role in and commitment to facilitating the ongoing development and commercialization of U.S. biofuels. This year, the FAA and the U.S. Department of Agriculture (USDA) renewed their joint agreement to promote the development of aviation biofuels. They are aiming for one billion gallons of commercial aviation capacity by 2018.
USDA is continuing its work to promote the U.S. biofuels industry, which USDA Secretary Tom Vilsack believes helps bolster the U.S. agriculture sector and rural economy. On September 12, 2013, USDA announced that it will provide a total of $15.5 million to 188 advanced biofuel producers under USDA's Advanced Biofuel Payment Program, which was created under the 2008 Farm Bill (P.L. 110-234, the "Food, Conservation and Energy Act of 2008"). It is reported that through that program to date, USDA has provided $211 million to 290 biofuel producers. This federal support is an important component to efforts of producers in the still nascent advanced biofuels industry to get up and running. USDA's press release on this announcement is available online.
The group of four Republican members of the House Energy and Commerce Committee tasked with examining proposals to reform the federal Renewable Fuel Standard (RFS) are reportedly still considering options for reform and compromise. This week, one of the members of the task force, Representative John Shimkus (R-IL), stated publicly that there may be avenues for compromise under the RFS' Renewable Identification Number (RIN) credit trading program. Other members of the task force include Representatives Lee Terry (R-NE), Cory Gardner (R-CO), and Steve Scalise (R-LA). The Biobased and Renewable Products Advocacy Group's (BRAG™) previous report on the task force is available online.