By Lauren M. Graham, Ph.D.
On August 1, 2017, the U.S. Environmental Protection Agency (EPA) held a public hearing to hear from all segments of the fuel industry on the proposed rule to set the 2018 renewable volume obligations (RVO) under the Renewable Fuel Standard (RFS) program. Among the nearly 150 individuals and organizations scheduled to testify at the hearing were numerous biofuel industry stakeholders who praised EPA for issuing the proposed rule on time and for maintaining the statutory 15 billion gallon volume requirement for conventional renewable fuels, but urged the agency to increase the proposed requirements for advanced and cellulosic fuels.
During its testimony, the Renewable Fuels Association (RFA) stated that it believes that EPA “erred on the side of pessimism with regard to the potential for significant growth in cellulosic ethanol commercialization.” According to Bob Dinneen, Chief Executive Officer (CEO) of the RFA, many plants are in the process of adding bolt-on fiber conversion technology to their existing facilities, which could dramatically increase cellulosic ethanol production next year. RFA intends to provide EPA with updated projections for cellulosic fuel before the comment period ends. Dinneen also highlighted concerns with Renewable Identification Number (RIN) market manipulation and suggested that EPA continue to allow imported biofuels to help comply with the RFS program.
With a group of approximately 20 speakers, the National Biodiesel Board (NBB) highlighted key data and information regarding market realities and underutilized capacity, and the impacts on small businesses and manufacturing, feedstock availability, and consumer choice. Donnell Rehagen, NBB CEO, stated that the “current numbers shortchange the progress we have made. They are a step back for the RFS, job creation, small businesses and rural economies.” Rehagen clarified that “these steps backwards are not about paper but people.”
The Renewable Energy Group (REG) informed EPA that ample feedstocks, technology and quality advances, and subsidized imported biofuel are three reasons why the agency should increase the biomass-based diesel and advanced biofuel minimum volumes. Derek Winkel, Executive Director of Manufacturing, stated that “investments [into the biofuel sector] would not have been made without increasing demand for biodiesel and renewable diesel. This demand, in part, is supported by a strong, growing and consistent RVO and RFS.” Paul Nees, Executive Director of REG’s Operations Control Team, testified that “[t]he domestic biodiesel industry is ready and able to fulfill demand gaps with low-cost, high-quality fuel with no market disruption.”
During its testimony, the Iowa Renewable Fuels Association (IRFA) suggested that the recent verdict in Americans for Clean Energy v. EPA should radically alter the factors EPA considers when determining RFS levels this year and going forward. “The Court clearly affirmed that Congress’ intent for the RFS from the very beginning was to crack the petroleum monopoly and to push biofuels into the marketplace,” stated Monte Shaw, IRFA Executive Director. “Whether in a reset discussion or in setting biodiesel and ethanol levels, the EPA must act according to the clear directive from the Court.”
The American Coalition for Ethanol's (ACE) testimony highlighted its view on conventional biofuel levels, the general waiver authority as it relates to inadequate domestic supply, the use of the reset provisions, and updating the greenhouse gas modeling for corn ethanol as it relates to Brazilian sugarcane ethanol. The Coalition intends to detail its position on these topics in written comments. Jonathon Lehman, ACE legislative counsel, also praised Nebraska Governor Pete Ricketts and Iowa Governor Kim Reynolds for their strong public support for keeping the RFS on track.
Stakeholders representing the oil industry were also present to testify to the problems they see with the RFS program, including the representatives from the American Petroleum Institute (API), the American Fuel and Petrochemical Manufacturers (AFPM), and Valero.
Written statements and supporting information concerning the proposed rule are available under Docket ID No. EPA-HQ-OAR-2017-0091. As stated in the Federal Register notice, EPA will consider the written comments with the same weight as any oral comments presented at the public hearing.
On January 17, 2017, the U.S. Environmental Protection Agency (EPA) wrote to the American Petrochemical and Fuel Manufacturers (AFPM) denying its petition for partial supplemental waiver of the 2016 cellulosic biofuel standard under the Renewable Fuel Standard (RFS). The letter was sent in response to AFPM’s December 28, 2016, petition for a supplemental waiver on the basis of an inadequate domestic supply of cellulosic biofuel, as reported in the Biobased and Renewable Products Advocacy Group’s (BRAG ® ) blog post Petition for Waiver of 2016 Cellulosic Biofuel Volumetric Requirements. In its response, EPA stated that the actual number of cellulosic biofuel Renewable Identification Numbers (RIN) or waiver credits that will need to be retired for compliance will not be known until the compliance deadline, since the compliance obligation is calculated on a percentage basis. EPA anticipates that an additional 19 million 2016 cellulosic biofuel RINs will be generated in 2017, resulting in 197 million 2016 cellulosic RINs overall. When combined with the 39 million carryover RINs from cellulosic biofuel produced in 2015, EPA estimates the total number of cellulosic biofuels RINs to be 236 million, which is greater than the 227 million RINs expected to be necessary for compliance.
On December 28, 2016, the American Fuel & Petrochemical Manufacturers (AFPM) submitted a petition requesting that EPA waive the cellulosic biofuel volumetric requirements for the 2016 compliance year citing an inadequate domestic supply of the fuel. Based on the amount of cellulosic fuel produced through November, AFPM estimated that between 173.8 and 190 million gallons will be produced in 2016, which is approximately 40 to 60 million gallons below the 230 million gallon target set by EPA in December 2015. With a cellulosic waiver credit price of $1.33 for 2016, obligated parties would be required pay approximately $50 to $75 million to meet the cellulosic biofuel mandate. The petition requests that a partial supplemental cellulosic biofuel waiver equal to the shortfall be granted to prevent am unjust penalty on obligated parties. Since RFS compliance must be confirmed by March 30, 2017, the petition also urges EPA to defer the 2016 cellulosic biofuel waiver credit requirement until EPA can formally act on the petition.
On November 15, 2013, U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy signed the long-awaited and much anticipated Notice of Proposed Rulemaking (NPRM) to set the 2014 renewable volume obligations (RVO) under the federal Renewable Fuel Standard (RFS). Included in the NPRM is a proposal to repeal retroactively the 2011 cellulosic RVOs and refund obligated parties nearly $5 million to recover their costs for trying to meet them. Simultaneously, the Agency issued a pre-publication of its request for comment on several petitions it has received from the American Petroleum Institute (API), American Fuel and Petrochemical Manufacturers (AFPM), and individual obligated parties requesting that EPA grant a partial waiver of the 2014 RFS statutory RVOs. Copies of the pre-published NPRM and the pre-published request for comment notice are available online.
The NPRM appears to be similar to the draft of it that was leaked publicly last month. It marks a shift in EPA's implementation of the RFS, as it proposes to reduce the overall and advanced RVOs, in addition to the cellulosic RVOs. EPA cites blend wall concerns for the proposed overall and advanced reductions. The Agency proposes to maintain the 2013 RVOs for biodiesel in both 2014 and 2015 at a level of 1.28 billion gallons. The cellulosic, advanced, and total renewable RVO gallons contained in the RFS statute for 2014 are: 1.75 billion for cellulosic, 3.75 billion for advanced, and 18.15 billion for total renewable fuel (the RVO for corn starch ethanol is this number minus those for advanced, cellulosic and biodiesel). The proposed RVO gallons for 2014 are: 17 million for cellulosic, 2.2 billion for advanced, and 15.21 billion for total renewable.
Advocates on both sides have ramped up their advocacy since the release of the NPRM. The oil industry continues to call for full repeal of the RFS through the legislative process and the biofuels industry has denounced EPA's shift in RFS implementation, stressing the importance of the stability of the RFS to continue investment in biofuels, especially advanced and cellulosic biofuels. In addition, new groups have formed to add to the debate. A veterans group, VoteVets.org, and Americans United for Change have plans for a media campaign to support ethanol and the RFS. The Bipartisan Policy Center is forming an advisory committee of biofuels stakeholders to develop proposals for RFS reform. Just before the release of the NPRM, a group of 32 Senators, including Patty Murray (D-WA), Al Franken (D-MN), Roy Blunt (R-MO), and Chuck Grassley (R-IA), sent a letter to EPA, calling on the Agency to increase the biodiesel RVO for 2014 instead of holding it at this year's levels as was proposed in the leaked draft 2014 RFS proposed rule (and as is maintained in the official NPRM).
A hearing will be held on December 5, 2013, beginning at 9:00 a.m. at the Hyatt Regency in Crystal City located in Arlington, Virginia. A copy of the notice is available online.
On November 1, 2013, the Biotechnology Industry Organization (BIO), Growth Energy, and RFA filed a motion to intervene on behalf of EPA in the current lawsuit by Monroe Energy, the American Petroleum Institute (API), and the American Fuel and Petrochemical Manufacturers (AFPM) challenging EPA's final rule establishing the 2013 RVOs under the federal RFS. The filing was made in the U.S. Court of Appeals for the District of Columbia Circuit, where the case is pending. Copies of press releases issued by BIO, Growth Energy, and RFA are available online.
On October 30, 2013, the U.S. Court of Appeals for the District of Columbia approved the request by Monroe Energy to expedite review of the current RFS litigation challenging EPA's final rule setting the 2013 renewable volume obligations under the federal RFS (the 2013 RFS rule). In October 2013, Monroe, the American Petroleum Institute (API), and the American Fuel and Petrochemical Manufacturers (AFPM) filed individual cases before the court challenging the 2013 RFS rule. These cases have been consolidated.
In response to Monroe's petition for expedited review, the court issued an order encouraging all parties to work together and propose a mutually agreed upon expedited schedule. The parties, including EPA, submitted a proposed expedited briefing schedule on October 24 and the court approved it on October 30. Under the schedule, all briefs will be submitted by the end of February 2014.
Also on October 24, 2013, the National Biodiesel Board (NBB) filed a petition with the court to intervene in the case on behalf of EPA. NBB asserts that its member companies would be harmed if the 2013 RFS rule were to be changed or weakened.
The U.S. Environmental Protection Agency (EPA) reportedly has completed its proposed rule setting the 2014 renewable volume obligations (RVO) for obligated parties under the federal Renewable Fuel Standard (RFS). The proposal is now being reviewed by the Office of Management and Budget before being published in the Federal Register, which will open the public comment period. By law, EPA is required to set the following year's RFS RVOs by November 30. The 2013 RVOs were not prepared in final until August of this year, which was likely due to EPA concerns about setting the volumes amidst legal, legislative, and regulatory challenges by obligated parties to the final 2011 and 2012 RVOs.
EPA included language in the final 2013 RFS rule indicating that it may reduce the overall RVOs in its upcoming 2014 RFS rulemaking. Just before EPA issued the 2013 final rule containing this language, leading trade groups representing the oil and gas industry, the American Petroleum Institute (API) and American Fuel & Petrochemical Manufacturers (AFPM), filed a joint waiver petition with EPA requesting that the Agency reduce the overall 2014 statutory RVOs to 9.7 percent of the U.S. transportation fuel supply due to what they argue are their blend wall concerns. The joint waiver petition is available online. This week, Valero Energy Corporation, the world's largest independent refiner, also sent in a petition requesting that EPA waive the 2014 RVOs. Valero cited the burdensome and high costs of Renewable Identification Numbers (RIN) needed for RFS compliance.
Several members of the biofuels industry have stated publicly that they believe there are several options that could, at least in part, address the impending so-called blend wall. The Renewable Fuels Association made this point in its letter to EPA urging the Agency to deny the waiver petition. RFA's letter 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.