Obligated parties and the organizations that represent them continue efforts to challenge and weaken the federal Renewable Fuel Standard (RFS). Several lawsuits have been filed recently in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court) challenging the final rule issued by the U.S. Environmental Protection Agency (EPA) setting the 2013 RFS requirements. Monroe Energy, a subsidiary of Delta Airlines, the American Fuel and Petrochemical Manufacturers (AFPM), and the American Petroleum Institute (API) have each filed challenges to the EPA's final 2013 RFS rule and its renewable and cellulosic volume requirements.
On October 10, 2013, Monroe Energy filed an emergency motion for expedited consideration of its case challenging EPA's final 2013 RFS rule. The company argues that expedited review is necessary given the June 2014 deadline for compliance with the rule that would require Monroe to spend millions on the purchase of Renewable Identification Numbers (RIN).
On Friday, October 11, 2013, API petitioned EPA to reconsider the renewable volume obligations (RVO) set in the final 2013 RFS rule. Under the RFS, EPA is directed to set the following year's RVOs by November 30. EPA did not finalize the 2013 RVOs until August 2013, nine months after the deadline. API argues that EPA improperly used updated Energy Information Administration (EIA) production estimates and that the cellulosic RVO is too high.
Last week, part of EPA's much anticipated 2014 proposed RFS rule, or at least a draft of the rule, was leaked and widely disseminated. If the text of the leaked proposed rule is representative of the actual proposed rule, the oil and gas industry would likely view it more favorably than would the biofuels industry. In the leaked version of the proposal, EPA would use its authority under the RFS to adjust downward the cellulosic, advanced, and overall renewable fuel volume requirements for 2014. It would require obligated parties to blend or use 15.21 billion gallons of renewable fuel in 2014, as opposed to the 18.15 which is required under the 2007 statute.
In the past few months, AFPM and API filed a joint petition, and Valero Energy Corporation filed a petition, requesting that EPA grant a partial waiver of the 2014 statutory RFS requirements. Generally, AFPM and API argued that because the 2014 RFS requirements would require obligated parties to blend more E10 than they are permitted to under the law, they would necessarily restrict the U.S. fuel supply, which would harm consumers. To avoid this harm, AFPM and API requested that EPA waive the 2014 RFS requirements to no more than 9.7 percent of the U.S. fuel supply. Valero's letter pointed out that due to the blend wall, RIN prices are higher than they should be, which reportedly is causing economic harm to affected parties, including consumers.
The Renewable Fuels Association (RFA) and the Biotechnology Industry Organization (BIO) sent separate letters to EPA urging EPA to deny the AFPM and API joint petition. They both assert that there are several options obligated parties have to meet their 2014 RFS requirements, including the greater use of E85, E15, and drop-in fuels.
Both U.S. Department of Agriculture (USDA) Secretary Tom Vilsack and EPA Administrator Gina McCarthy have issued statements denouncing the leak and reiterating that the final version of the 2014 RFS proposed rule is still being deliberated.
It is being reported that API and the Advanced Biofuels Association (ABFA) are working together on potential legislative language to increase the value of RINs associated with advanced biofuels and to allow them to help make up conventional RINs due to blend wall constraints under the federal RFS. According to news reports, the two groups are working to present this potential language to members of the House Energy and Commerce Committee who are working on developing legislation to modify the RFS.
Several of API's largest members, including Shell and BP, are working on projects to produce advanced biofuels. Reportedly, API and ABFA contend that increasing the value of advanced biofuel RINs and allowing them to help make up conventional RINs due to blend wall constraints would help spur investment in and development of advanced biofuels to help meet the RFS. All other major biofuels trade associations are advocating against any legislative change to the RFS. They argue that, however well-intentioned, opening the RFS up to amendment would make the law vulnerable to repeal, for which the oil industry is heavily lobbying.
In addition, several biofuels groups argue that there are sufficient RFS compliance options and solutions to the blend wall, which they say has been intentionally created by the oil industry that has chosen not to take steps to address it. For instance, these groups argue the oil industry could encourage greater investment in E85 and its distribution. While API is still advocating for RFS repeal, it is reported that the group recognizes that outcome is unlikely in this Congress. Reportedly, this is the reason the group is working with ABFA on the advanced RINs amendment.
Leaders of the House of Representatives have named 29 Representatives to the conference committee that will work to consolidate the House and Senate versions of the next five-year Farm Bill into a final piece of legislation that will be passed by both Houses of Congress and signed into law by President Obama.
While House and Senate leaders assert their commitment to settling on and passing a final version of the next Farm Bill, getting to agreement will likely be difficult. One of the most contentious disagreements remains over how much to cut from nutrition programs, which have traditionally been funded by the Farm Bill.
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. It includes $4 billion in cuts to nutrition programs. 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 in recent weeks. 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.
The nine month extension of the 2008 Farm Bill expired on September 30.
On the first day of its new term on October 15, the U.S. Supreme Court announced that it would grant review of parts of EPA's greenhouse gas (GHG) regulations. The Court will review part of the June 2012 decision issued by the U.S. Court of Appeals for the District of Columbia Circuit, which upheld EPA's GHG program. It will review whether EPA's GHG regulations for motor vehicles should have triggered Prevention of Significant Deterioration permitting for stationary sources. The case and its outcome could impact the current efforts of the Obama Administration to develop and finalize new GHG regulations for new and existing stationary sources. It is reported that the Court is likely to hear arguments in the first few months of the new year.
RFA sponsored a study released this month by the Department of Energy's National Renewable Energy Laboratory (NREL). The study is available online. In the study, NREL analyzed various studies on the effects of E15 use in Model Year 2001 and newer cars and found no meaningful difference in the use of E10 and E15 in those vehicles. This is a significant finding because many in the oil and gas industries, among others, have warned of potentially harmful effects of using E15 in cars. EPA has approved E15 for use in Model Year 2001 and newer vehicles. Many in the biofuels industry have argued that, if more widely used, E15 could be one potential way to overcome the E10 blend wall, because it would allow for greater blending of ethanol in the U.S. fuel supply.
On October 14, 2013, Target announced a new Sustainable Product Standard (SPS). Under the SPS, Target will rate products on ingredient stability, transparency, and overall environmental impact. The ingredient category makes up half of the overall rating. Products will not be given a favorable ingredient score if they include substances listed on a hazard list or if they include "potentially high-hazard generic ingredients." More information on the new SPS is available online.
On October 9, 2013, enzyme producer Novozymes and biofuels producer Beta Renewables announced the opening of a new advanced biofuels facility located in Crescentino, Italy, that will make commercial quantities of cellulosic biofuels. More information on the announcement is available online.
On Tuesday, October 8, 2013, the American Petroleum Institute (API) filed a lawsuit with the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court) challenging the U.S. Environmental Protection Agency's (EPA) final rule setting the 2013 renewable volume obligations (RVO) under the federal Renewable Fuel Standard (RFS). While the petition for review lacks details about the lawsuit as such petitions are for notice purposes only, it is reported that API's main arguments against the rule will be that it was issued too late to be effective and that the 2013 cellulosic RVO set at six million gallons is higher than cellulosic gallons available on the market.
Under the RFS, EPA must issue the following year's RVOs by November 30. EPA did not release its final 2013 RFS rule setting all of this year's RVOs until August 6, 2013. Earlier this year, the D.C. Circuit Court directed EPA to set the cellulosic gallon requirement to levels of actual production expected based on company and other information. The court stated that EPA could not set the volumes at the maximum level of production possible to drive production.
API has been advocating for the full repeal of the RFS on legislative, regulatory, and legal levels. It also challenged EPA's 2011 and 2012 final RFS rules in court. In August 2013, API, along with the American Fuel & Petrochemical Manufacturers (AFPM), petitioned EPA to grant a partial waiver of the yet-to-be-proposed 2014 RFS RVOs.
Several biofuel trade groups have responded to this latest legal challenge. Growth Energy and the Renewable Fuels Association (RFA) denounced the lawsuit. In its press release, available online, RFA called it a "lawsuit in search of a problem."
On September 30, 2013, the U.S. Department of Agriculture (USDA) announced it had completed its second sale of sugar under the Food, Conservation and Energy Act of 2008 (the 2008 Farm Bill) Feedstock Flexibility Program (FFP). Reportedly, USDA purchased the sugar for $65.9 million and sold it immediately for $12.6 million, a $53.3 million loss. Currently, no information is available about the sale on USDA's website because the website is suspended during the government shutdown.
The 2008 Farm Bill, which expired on September 30, directs USDA to keep sugar prices at or above certain levels, and authorizes USDA either to 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 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).
On October 7, 2013, House Committee on Energy and Commerce Ranking Member Henry Waxman (D-CA) sent a letter to American Chemistry Council (ACC) President Calvin Dooley asking him whether ACC is "abandoning its 2009 principles for reform of the Toxic Substances Control Act." The letter is available online.
In his letter, Representative Waxman tells Dooley that he has been hopeful that reform of the Toxic Substances Control Act (TSCA) would include many of the principles for reform released by ACC in 2009. He alleges that ACC appears to have abandoned six key reform principles and asks Dooley to clarify ACC's current position. In closing, Representative Waxman states that "t would be disappointing and a blow to the chances for successful TSCA reform if the ACC has abandoned its 2009 principles."
ACC has publicly supported S. 1009, the bi-partisan Chemical Safety Improvement Act (CSIA). Bergeson & Campbell, P.C. has issued a section-by-section in-depth analysis of CSIA, which is available online.
On Monday, October 7, 2013, the White House announced that Heather Zichal, Deputy Assistant to President Obama for Energy and Climate Change, will be leaving her post in the coming weeks. Zichal has been advising the President on these issues for the past five years and is considered a friend to the biofuels, renewable chemicals, and biobased products industries. For instance, she has been a strong proponent of maintaining the federal RFS and encouraging investment in biofuels. This year, Zichal helped lead the effort to roll out the President's comprehensive Climate Action Plan to reduce greenhouse gas emissions. There is no word on who will replace Zichal.
Butamax™ Advanced Biofuels LLC, a joint venture between BP PLC and DuPont, announced that it has broken ground on a plant to produce isobutanol, a renewable fuel that EPA has determined can qualify for credit under the federal RFS. Butamax is working to retrofit Highwater Ethanol LLC, an existing ethanol plant located in Lamberton, Minnesota.
The announcement is significant because Butamax has been in ongoing litigation with the other U.S. isobutanol producer, Gevo. Also, isobutanol may be one potential solution to the blend wall.
A copy of Butamax's press release on the groundbreaking is available online.
On October 2, 2013, Royal DSM announced that it has partnered with Minnesota-based PlastiComp, Inc. to develop biobased Long Fiber Thermoplastic (LFT) composite materials for the automotive and other markets. A copy of DSM's press release is available online.
On October 7, 2013, A*STAR's Institute of Chemical and Engineering Sciences (ICES) inked a Memorandum of Understanding with the Korea Institute of Industrial Technology (KITECH) to promote joint research and collaboration in the field of sustainable chemicals -- specifically in biomass-to-chemicals research. A copy of A*STAR's press release on the announcement is available online.