On May 2, 2013, EPA published a proposed rule and a direct final rule that would amend its 2013 cellulosic requirement published on August 15, 2013. The rules are available here and here.
Through these actions, EPA is proposing a revised and reduced cellulosic standard for 2013 of 810,185 gallons. As EPA explains, the direct final rule will be "effective on July 1, 2014 without further notice, unless EPA receives relevant adverse comment by June 2, 2014. If EPA receives relevant adverse comment, [it] will publish a timely withdrawal of this direct final rule in the Federal Register informing the public that this rule will not take effect."
EPA also explains that the proposed rule and direct final rule follow from EPA having granted petitions for reconsideration of the 2013 cellulosic biofuel standard by API and AFPM. Further, EPA explains that it granted the petitions because KiOR, which was "one of the two companies that EPA expected to produce cellulosic biofuel in 2013 announced soon after EPA signed its final rule that it intended to produce substantially lower volumes of cellulosic biofuel in 2013 than it had earlier reported to EPA. Since the cellulosic biofuel standard was based on EPA's projection of cellulosic biofuel production in 2013, EPA deemed this new information to be of central relevance to the rule, warranting reconsideration. On reconsideration, EPA is directed to base the standard on the lower of 'projected' production of cellulosic fuel in 2013 or the cellulosic biofuel applicable volume set forth in the statute. Since data are available to show actual production volumes for 2013, EPA's 'projection' and final rule are based on actual cellulosic biofuel production in 2013."
The U.S. Senate is expected to consider its version of tax extender legislation, S. 2260, the "Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act," as early as next week. On April 3, 2014, the Senate Finance Committee approved its version of the 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 also available online.
The White House Office of Management and Budget (OMB) has reportedly received the final rule on "RFS Pathways II and Technical Amendments to the RFS2 Standards" (RFS Pathways II rule) from EPA. This is the last step in the process before EPA publishes the final rule. EPA's summary of its proposed RFS Pathways II rule is available online. A copy of the 38-page proposed rule, which was published in the Federal Register on June 14, 2013, is also available online.
The Biobased and Renewable Products Advocacy Group (BRAG™) reported on and summarized the proposed RFS Pathways II rule when it was published last year. A copy of that report is available online.
EPA has stated publically that it expects to issue its final rule setting the 2014 RFS in June 2014. As that date nears, lobbying activity on both sides has intensified. For instance, on April 30, 2014, the American Petroleum Institute released a letter claiming that "ask[ing] EPA to build in an adequate margin of safety when setting the final ethanol mandates for 2014 because projections of gasoline demand often miss the mark." A copy of the letter is available online. On April 29, 2014, Representatives Tim Walz (D-MN), Rick Nolan (D-MN), and Cheri Bustos (D-IL) -- three Democratic Members of the House of Representatives from corn-producing Midwestern states -- met with senior White House officials to argue that the final 2014 RFS rule should not include the deep cuts proposed to the corn ethanol and advanced biofuel volumetric targets. A copy of Representative Walz's press release on the meeting is available online.
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.