This week, the National Advanced Biofuels Conference and Expo was held in Omaha, Nebraska. During the three-day conference, industry leaders presented on and discussed major issues facing the industry, from legal considerations to advancing the aviation biofuels industry, supply, and feedstock successes and challenges. During the conference, Michael McAdams, President of the Advanced Biofuels Association, and Joe Jobe, CEO of the National Biodiesel Board, discussed some of their current federal policy priorities and work. Both spoke about the importance of the federal RFS to the industry and stressed the need for industry to unite at this time when it is increasingly under attack.
McAdams addressed the work this year of the House Energy and Commerce Committee to examine and reform the RFS. He mentioned that Committee's two-day hearing this summer on the subject during which he testified on the importance of the policy. He stated his expectation that legislation to reform the RFS could be drafted and considered by the House of Representatives by mid-October. He urged everyone to contact their Members of Congress on behalf of the RFS, if their trade associations asked them to do so.
Jobe made similarly supportive statements of the RFS and the need for the industry to unite. In addition, he stated the importance to the biodiesel industry of not only the RFS, but of maintaining the biodiesel tax credit. He attributed both policies to the industry's recent substantial growth, and cited them as important to achieving the industry's new goal of making up 10 billion gallons of the fuel supply by 2022.
Also during the conference, on behalf of Agriculture Secretary Tom Vilsack, Rural Development Acting Under Secretary Doug O'Brien announced that the U.S. Department of Agriculture (USDA) is making payments to support the production of advanced biofuel. USDA is making nearly $15.5 million in payments to 188 producers through the Advanced Biofuel Payment Program. USDA remains focused on carrying out its mission, despite a time of significant budget uncertainty. This announcement is one part of the Department's efforts to strengthen the rural economy. The funding is being provided through USDA's Advanced Biofuel Payment Program, which was established in the 2008 Farm Bill. Under this program, payments are made to eligible producers based on the amount of advanced biofuels produced from renewable biomass, other than corn kernel starch. Examples of eligible feedstocks include but are not limited to: crop residue; animal, food, and yard waste; vegetable oil; and animal fat. Through the Advanced Biofuel Payment Program and other USDA programs, USDA is working to support the research, investment, and infrastructure necessary to build a strong biofuels industry that creates jobs and broadens the range of feedstocks used to produce renewable fuel. More than 290 producers in 47 states and territories have received $211 million in payments since the program's inception. It has supported the production of more than three billion gallons of advanced biofuel and the equivalent of more than 36 billion kilowatt hours of electric energy.
Renewable fuel and chemical company Aemetis, Inc. announced this week that EPA has approved its Renewable Fuel Standard (RFS) pathway to produce ethanol using grain sorghum and biogas with the Company's existing Combined Heat & Power system to generate D5 Advanced Biofuels Renewable Identification Numbers (RIN). This announcement means that additional fuel will qualify to fulfill the annual renewable volumetric targets under the federal RFS statute. It comes as EPA is preparing its proposed RFS volumes for 2014, which the Agency indicated it would likely reduce from those set in the statute to adjust for supply and the impending ethanol blendwall.
Aemetis' press release on the announcement is available online.
Despite the August Congressional Recess, much regulatory and legislative action continues in Washington, D.C. on the federal Renewable Fuel Standard (RFS). Earlier this month, the leading trade groups representing the oil and gas industry, the American Petroleum Institute (API) and American Fuel & Petrochemical Manufacturers (AFPM), petitioned EPA to lower the 2014 RFS renewable volume obligations (RVO) to below 10 percent of total U.S. gasoline supply. Under the RFS, EPA is directed to set the following year's RVOs by November 30. API and AFPM argue 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."
The Renewable Fuels Association (RFA), one of the leading biofuels trade associations, has already responded to the API/AFPM waiver petition by sending a letter to EPA urging the Agency to deny the waiver request for several reasons. A copy of the letter is available online. Among other things, RFA argues that API and AFPM lack standing to petition EPA to reduce the 2014 RVOs since the associations themselves are not obligated to comply with the RFS. In addition, RFA argues that there are several ways that obligated parties in the oil and gas industry may meet their 2014 RFS RVOs, including an increase in E15 and E85 sales, and carry over Renewable Identification Numbers (RIN) from 2013.
Earlier this month, Senators Chuck Grassley (R-IA) and Amy Klobuchar (D-MN) sent a letter to the Federal Trade Commission and U.S. Department of Justice requesting that they investigate allegations that certain petroleum companies are deliberately blocking the introduction of higher ethanol blends in violation of antitrust laws. A copy of the letter is available online.
As we have reported, a group of four Republican Members of the U.S. House Energy and Commerce Committee are working during the August recess on developing potential legislative reforms to the federal RFS. It has been reported this week that House Majority Leader Eric Cantor (R-VA) is considering potentially attaching an RFS legislative reform package to a "must-pass" bill similar to the one expected this fall to address the "debt ceiling."
While in Brazil last week, U.S. Secretary of Energy Ernest Moniz stressed the importance of biofuels as part of President Obama's Climate Action Plan to reduce greenhouse gas emissions. To this end, Secretary Moniz called for greater partnership between the U.S. and Brazil on biofuels. Significantly, it was reported that Secretary Moniz stated that the U.S. Environmental Protection Agency (EPA) has the authority and ability, and will continue to consider imports when EPA sets the annual renewable volume obligations (RVO) under the federal Renewable Fuel Standard (RFS). This statement is important and signifies that EPA could continue to allow imported Brazilian sugarcane ethanol to meet annual RFS requirements.
As we recently reported, the U.S. Chamber of Commerce's Export Green Initiative continues plans for an upcoming trip to Brazil September 30-October 2, 2013, to encourage an increased relationship between that country and the U.S. on biofuels. Representatives from the Renewable Fuels Association (RFA), the trade association representing the Brazilian sugarcane industry (UNICA), and the Advanced Biofuels Association, along with 15 companies that produce biofuels in the U.S., are expected to attend the trip. More information is available online.
As we have reported, EPA has released its final rule setting the RVOs for the federal RFS (more information is available online). The final rule was officially published, and therefore became effective, on August 15, 2013. A copy of the final rule, as published in the Federal Register, is available online.
Last week, a professor from Purdue University, Wallace Tyner, published an article concluding that EPA should reduce the overall and advanced RVOs under the RFS in years 2014-2016 to make the policy "workable." As we have reported, earlier this month, EPA released its final rule setting the 2013 RFS, in which the Agency included language indicating that it will likely reduce the overall and advanced RVOs for 2014 in that upcoming rulemaking. Tyner's article, which can be found online, illustrates that it is not possible to meet the mandated RFS RVOs in 2014-2016 due to constraints imposed by the impending "blend wall." Based on this, Tyner concludes that EPA must reduce both the overall and advanced RVOs for those years to continue to make the RFS a "workable" policy.
This article is significant for several reasons. Purdue is considered a leading pro-biofuels academic voice on biofuels policy and the RFS. In addition, as Tyner points out in the article, the recommended reductions would represent a marked shift in the way EPA implements the RFS. To date, while EPA annually has reduced the cellulosic RVOs, it has maintained the levels for the overall and advanced RVOs contained in the RFS law, allowing those gallons to make up for the reduced cellulosic gallons. Reducing the overall and advanced gallons in future years would represent that those gallons are no longer expected to be able to make up the shortfall in cellulosic biofuels, due in part to restraints caused by the impending "blend wall."
On August 12, 2013, the U.S. Department of Agriculture (USDA) released its "World Agricultural Supply and Demand Estimates" report in which it projects the U.S. will produce a record 13.76 billion bushels of corn in 2013. The report is available online.
Representatives from ethanol trade groups Growth Energy and the Renewable Fuels Association (RFA) praised the news and argued that it showed the federal Renewable Fuel Standard (RFS) was not contributing to higher food prices and that it "should be the last nail in the coffin of the ridiculous 'food versus fuel' argument." RFA's press release is available online.
The American Petroleum Institute (API) this week launched its second ad in selected markets against the federal RFS. The ad is being aired in California, Colorado, Illinois, Kentucky, Michigan, Ohio, and Washington, D.C. It comes just after EPA issued its final 2013 RFS rule (more information is available online), and as the House Energy & Commerce Committee leadership is working on potential modifications to the RFS (more information is available online). The ad continues the message of the refining industry that the RFS mandates "unworkable" volumes of renewable fuel in the U.S. fuel supply. The renewable fuel industry continues to argue that the RFS law contains sufficient flexibility to account for changes in the market. The industry points to the final 2013 RFS rule to illustrate this, as EPA significantly lowered the cellulosic volumes to adjust for market realities.
Also this week, API and the American Fuel and Petrochemical Manufacturers (AFPM) jointly petitioned EPA to lower its 2014 total ethanol requirements to 9.7 percent of total gasoline supply in the country. This request follows language in EPA's final 2013 RFS rule suggesting that the Agency is considering lowering renewable fuels obligations to help account for the impending blend wall in its upcoming 2014 rule. API and AFPM argue that lowering the 2014 renewable volume obligations would reduce the cost burden of the RFS to the refining industry.
The House Energy & Commerce Committee's Subcommittee on Energy and Power held its much anticipated two-day hearing on the RFS, with 16 witnesses from both sides testifying. The following is the full list of witnesses:
• Mr. Jack N. Gerard, President and CEO, American Petroleum Institute
• Mr. Charles T. Drevna, President, American Fuel & Petrochemical Manufacturers
• Mr. Bob Dinneen, President and CEO, Renewable Fuels Association
• Mr. Michael McAdams, President, Advanced Biofuels Association
• Dr. Jeremy I. Martin, Senior Scientist, Clean Vehicles Program, Union of Concerned Scientists
• Mr. Tom Buis, CEO, Growth Energy
• Mr. Shane Karr, Vice President, Federal Government Affairs, The Alliance of Automobile Manufacturers
• Mr. Todd J. Teske, Chairman and CEO, Briggs & Stratton Corporation
• Mr. Robert Darbelnet, President and CEO, AAA
• Mr. Joseph H. Petrowski, CEO, The Cumberland Gulf Group, on behalf of Society of Independent Gasoline Marketers of America and National Association of Convenience Stores
• Mr. Joe Jobe, CEO, National Biodiesel Board
• Ms. Pam Johnson, President, National Corn Growers Association
• Mr. Bill Roenigk, Senior Vice President, National Chicken Council
• Mr. Ed Anderson, CEO, Wen-Gap, LLC, on behalf of National Council of Chain Restaurants
• Mr. Scott Faber, Vice President of Government Affairs, Environmental Working Group
• Mr. Chris Hurt, Professor, Department of Agricultural Economics, Purdue University
Information on the hearing and the witness statements are available online.
The Subcommittee's background memo on the hearing is available online.
The hearing follows the five white papers recently released by the Subcommittee requesting stakeholder input on various aspects of the RFS. It is believed that Subcommittee Chair Ed Whitfield (R-KY) is working to ultimately modify the RFS through the legislative process. In fact, on the first day of the hearing, Subcommittee Member John Shimkus (R-IL) asserted that the petroleum and biofuels industries must work toward advocating in good faith for constructive modifications to the law. He also mentioned that he does not believe there are enough votes to repeal the law. The petroleum industry is advocating for the law's repeal, while the biofuels industry generally is advocating that the RFS is working as intended and that any changes to it should be made under the existing law and within the regulatory process.
Witnesses representing these industries made these points during the hearing on July 23, 2013. On July 24, 2013, witnesses from the livestock industry argued that the RFS negatively impacts the cost and availability of feed. The livestock industry helped lead the charge for EPA to temporarily waive RFS requirements due to the drought which affected crops last year. EPA denied the waiver request, which came from governors of states heavily involved in the livestock industry. It found that the RFS requirements would not severely harm the economy or environment of a state, a region, or the United States. EPA's Fact Sheet on this waiver decision is available online.
Activity on the federal Renewable Fuel Standard (RFS) is in full swing on Capitol Hill. Last week, the House Energy & Commerce Committee's Subcommittee on Energy and Power issued its fifth and final white paper on the RFS seeking input from stakeholders on "implementation issues" with the policy. The white paper is available online.
The white paper follows the Subcommittee's hearing last month at which government witnesses testified on the effectiveness and implementation of the RFS. Specifically in this latest white paper, the Subcommittee is requesting, among other things, input on the effectiveness of EPA's annual process of setting the required volume obligations (RVO) for each of the four types of fuels under the RFS: biodiesel, conventional, advanced, and cellulosic. The questions appear to target oil industry criticisms that EPA sets the annual RVOs for cellulosic biofuels too high compared with the availability of those biofuels on the market.
On Monday, June 15, 2013, the Subcommittee announced that it will hold a two-day hearing on the RFS beginning on July 23, 2013, to examine stakeholder input on the policy. The hearing details, which will be updated closer to the hearing date, are available online. A witness list has not yet been published, but witnesses are expected to include representatives from all sides of the debate, including refiners, biofuel producers, and environmentalists. Comments made by Subcommittee Chair Ed Whitfield (R-CA), combined with the white papers and hearings, suggest that legislation may be introduced to modify the RFS.
Members of the Fuels America Coalition, including many in the biofuels industry, are working to avoid this result and protect the RFS in its current form. The group is advocating this message on Capitol Hill this week ahead of next week's House Subcommittee hearing, and as the Senate Energy and Natural Resources Committee this week held a hearing "to explore the effects of ongoing changes in domestic oil production, refining and distribution on U.S. gasoline and fuel prices." In response to expected criticisms during the hearing of the RFS and its impact on gas prices, members of the Fuels America Coalition made public statements attempting to "dispel the myths" the refiners portray about the policy, including its impact on gas prices. The group argues that the RFS has had only a positive effect on gas prices, with the increase in ethanol helping to reduce gas prices.
In the meantime this week, the refining industry announced that it is strengthening its campaign for the repeal of the RFS.