On April 22, 2014, the U.S. Environmental Protection Agency (EPA) signed off on a Direct Final Rule requiring petroleum refiners and importers to blend 810,185 gallons of cellulosic fuels into the fuel supply in 2013 in response to petitions for reconsideration of the Final Rule from the American Petroleum Institute (API) and the American Fuel & Petrochemical Manufacturers (AFPM). The pre-publication version of the Direct Final Rule is available online. Petitioners successfully argued that cellulosic fuel production was well below EPA's projections. Previously, EPA had mandated that the petroleum industry blend six million gallons of cellulosic fuels into the fuel supply under the Renewable Fuel Standard (RFS) for 2013. EPA granted the motion for reconsideration because one of the two companies that EPA expected to produce cellulosic biofuel in 2013 announced shortly after EPA signed the final rule that it intended to produce significantly lower volumes of cellulosic biofuel in 2013 that it had reported to EPA. The rule will be effective 60 days after it is published in the Federal Register.
Oral argument was heard on April 7, 2014, on a joint motion filed in the U.S. Court of Appeals for the D.C. Circuit by EPA, API, and AFPM to sever certain issues and hold them in abeyance pending administrative reconsideration. Monroe Energy LLC et al. v. EPA, D.C. Cir., No. 13-1265. According to the Respondent-Intervenors Biotechnology Industry Organization (BIO), Growth Energy, and Renewable Fuels Association (RFA) in their April 16, 2014, response opposing EPA's motion, severing the case serves no purpose. EPA requested that the API and AFPM petitions be pulled out of the case and held in abeyance arguing that these petitions challenged EPA's decision to use revised fuel production and consumption estimates in the 2013 final RFS and to add a small refinery exemption. They argued that these matters should be held in abeyance while EPA addresses other aspects of the 2013 RFS. The renewable fuel groups countered that no purpose would be served as the case has already been argued and it is too late to sever these issues.
On April 15, 2014, the U.S. Department of Energy (DOE) announced that it would provide up to $10 million to promote the production of "advanced biofuels, substitutes for petroleum-based feedstocks, and bioproducts made from renewable, non-food-based biomass, such as agricultural residues and woody biomass." For more information, and to apply for this opportunity, please visit DOE's Funding Opportunity Exchange website. A copy of the press release is available online.
On April 11, 2014, the American Petroleum Institute (API) and American Fuel & Petrochemical Manufacturers (AFPM) petitioned the U.S. Court of Appeals for the District of Columbia Circuit to place a hold on their challenge to EPA's 2013 RFS final rule until EPA completes its reconsideration of the rule. EPA joined in the motion.
Just days earlier, on Monday, April 7, 2014, the parties to the litigation challenging EPA's 2013 final RFS rule, including API, AFPM, and EPA, were in court arguing the merits of the case. The Biobased and Renewable Products Advocacy Group's (BRAG™) coverage of these oral arguments is available online.
API, AFPM, and ExxonMobil urged EPA and the Office of Management and Budget (OMB) to eliminate the ability of biodiesel producers to sever RINs from batches of fuels produced as part of an upcoming final rule establishing a quality assurance program for the fuels credit market.
The rule, as proposed, would establish qualifications for third-party auditors who would determine the validity of the RINs. It would also establish audit procedures for renewable fuel production facilities, including minimum frequency, site visits, review of records, and reporting requirements. The rule is open for comment now, and EPA is requesting feedback on whether renewable fuel producers should be allowed to separate and sell their own RINs. The groups emphasized that allowing biodiesel producers to separate and sell fuel credits creates opportunities for fraud in the RIN market.
Biodiesel producers are authorized to sever RINs from fuel batches and sell them as credits to comply with the annual RFS blending mandates. This generates two revenue streams -- one from fuel sales, and another from RIN credit sales. This anomaly resulted from a settlement between 30 refiners and other companies and EPA in April 2013, where $3.65 million was paid to EPA in penalties for purchase of fraudulent credits. The National Biodiesel Board and the Renewable Energy Group emphasized that "[t]he biodiesel marketplace is not as mature as other biofuel markets" and "often the value of the RIN provides biodiesel producers with [their] only opportunity to create a margin."
On April 8, 2014, House Committee on Ways and Means Chair Dave Camp (R-MI) held a hearing on the "Benefits of Permanent Tax Policy for America's Job Creators." The hearing focused on the expiring business tax provisions that are made permanent or extended under Camp's recently released discussion draft of the "Tax Reform Act of 2014" (TRA). Unlike his Senate counterpart -- Senate Committee on Finance Chair Ron Wyden (D-OR) -- Camp is not very supportive of passing a tax extender package to extend retroactively the approximately 50 incentives that expired at the end of 2013, including several for advanced biofuels development. In fact, the TRA would eliminate most clean energy incentives. The House Ways and Means Hearing Advisory is available online.
Last week, the Senate Finance Committee approved its version of tax extender legislation, the "Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act." The EXPIRE Act includes extensions through December 31, 2015 (and retroactive to January 1, 2014) of the following key biofuels incentives that have expired: the Alternative Fuel Refueling Property Credit; the Second Generation Biofuel Producer Tax Credit; the Special Depreciation Allowance for Second Generation Biofuel Plant Property; the Biodiesel and Renewable Diesel Fuels Credit; and the Alternative Fuel and Alternative Fuel Mixture Excise Tax Credit. A copy of the EXPIRE Act is available online. A summary of the bill is available online.
Whether a tax extenders package will pass this year depends on several factors. It is likely to be more difficult to pass in the House of Representatives than in the Senate.
On April 8, 2014, the Senate Committee on Agriculture, Nutrition and Forestry held a hearing on "Advanced Biofuels: Creating Jobs and Lower Prices at the Pump." The following witnesses testified at the hearing: Mr. Richard Childress, CEO, Richard Childress Racing, LLC; Mr. Jan Koninckx, Global Business Director for Biorefineries, DuPont Industrial Biosciences; Mr. Brooke Coleman, Executive Director, Advanced Ethanol Council; Dr. Sumesh Arora, Vice President, Innovate Mississippi, Director of Strategic Biomass Solutions; and, Ms. Nancy Young, Vice President, Environmental Affairs, Airlines for America. More information about the hearing is available online.
Senate Agriculture Committee Chair Debbie Stabenow (D-MI) held the hearing to highlight positive developments in the advanced biofuels space. Stabenow's home state of Michigan has a heavy biobased manufacturing sector and the Senator has been working hard to garner federal support for the industry. She is opposed to the U.S. Environmental Protection Agency's (EPA) proposed 2014 Renewable Fuel Standard (RFS) rule that would lower the 2014 renewable volume obligations (RVO) for corn ethanol, cellulosic biofuels, and advanced biofuels. At the hearing this week, witnesses warned that lowering the 2014 RVOs for corn ethanol and advanced biofuels will chill investment in U.S. biofuels.
EPA Administrator Gina McCarthy made a recent public statement suggesting that the 2014 RFS rule is expected to be finalized by June.
On April 7, 2014, the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in Monroe Energy, LLC v. EPA (No. 13-1265). In the case, Monroe Energy, a subsidiary of Delta Airlines, the American Petroleum Institute (API), and the American Fuel & Petrochemical Manufacturers (AFPM) are challenging EPA's final 2013 RFS rule. The plaintiffs' arguments include that the rule should be overturned because EPA improperly considered the availability of carryover Renewable Identification Numbers and illegally issued the rule in final nine months after the statutory deadline to do so.
Several large biofuels trade associations intervened in the case on behalf of EPA, including the Biotechnology Industry Organization, Renewable Fuels Association, Growth Energy, and the National Biodiesel Board. They asked the court to uphold the 2013 RFS rule, but to not address the bounds of EPA's discretion to reduce RFS volume requirements due to concerns related to the E10 "blendwall."
Plaintiffs have asked the court for an expedited ruling before the June 30, 2014, compliance deadline for the 2013 RFS requirements.
On April 1, 2014, the University of Delaware announced that the Catalysis Center for Energy Innovation (CCEI), a U.S. Department of Energy-Energy Frontier Research Center, has entered a two-year program with ExxonMobil. The research initiative will focus on converting lignocellulosic biomass to polymers that are identical to existing petrochemical products. A copy of the press release is available online.
The U.S. Environmental Protection Agency (EPA) has announced that it will take approximately the next six months to evaluate and improve the petition process for new fuel pathways under the federal Renewable Fuel Standard (RFS). Every producer that wants their renewable fuel to qualify under the RFS must have its fuel pathway, including feedstock and technology process, approved by EPA. EPA intends to make the process more efficient and transparent, and thereby reduce the amount of time it takes to make determinations on new fuel pathway petitions. The Agency also intends to develop and issue improved guidance for petitioners, and to have a more automated review process for petitions using previously approved feedstocks and well known production process technologies.
EPA suggests that parties intending to submit new fuel pathway petitions wait to do so until after the Agency issues its new guidance. EPA will continue to review petitions currently under review, but will prioritize them based on the following criteria:
* Ability to contribute to the cellulosic biofuel mandate.
* Potential for reducing greenhouse gas emissions on a per gallon basis, for example by using feedstocks that likely do not have significant indirect land use change emissions (such as non-food feedstocks).
* Ability to contribute to near-term increases in renewable fuel use. This criterion would include, for example, consideration of the ability of the intended biofuel product to be readily incorporated into the existing fuel distribution network.
This review comes after years of criticism that the petition process for new fuel pathway approvals under the RFS takes too long and impedes progress of projects that could produce fuels that meet the annual RFS volumetric requirements. Some companies have been waiting for over two years for EPA's determination on their petitions.