On March 6, 2014, South Dakota Governor Dennis Daugaard (R) announced that the state will begin incorporating E15 fuel into its state fleet during a test period over the next six months. Currently, E10 is available and used in the state's flex-fuel and other vehicles, but the Governor wants to encourage the greater use of ethanol in his state. Ethanol is a $3.8 billion industry in South Dakota. Greater use of E15 is one potential solution to the E10 ethanol "blend wall." The U.S. Environmental Protection Agency has proposed reducing the 2014 renewable volume obligations for corn-starch ethanol due to blend wall concerns. A copy of the press release on the announcement released by Governor Daugaard's office is available online.
On February 25, 2014, EPA sent its final rule to "Establish a Voluntary Quality Assurance Program for Verifying the Validity of Renewable Identification Numbers Under the RFS2 Program" to the U.S. Office of Management and Budget (OMB) for final review. EPA is expected to take action to release the final rule as soon as OMB completes its review.
As proposed, the rule would be retroactive to January 2013. It is the result of efforts to help restore investor confidence in the Renewable Identification Number (RIN) market and address the argument of some Renewable Fuel Standard (RFS) opponents that RIN fraud indicates a flaw in the RFS policy. Since 2010, there have been five major cases in which millions in fake biodiesel RIN credits have been generated. Under the current system, refiners (not renewable fuel producers) who purchase the credits to meet their annual RFS requirements are responsible for replacing the fraudulent credits and are vulnerable to steep penalties for failure to do so.
Under EPA's proposed RFS Quality Assurance Program (QAP), a voluntary third party quality assurance program would be established that could be used to verify that RINs have been validly generated. The proposal would provide a recognized means for independent third parties to audit the production of renewable fuel and the generation of RINs. It would include among other provisions: minimum requirements for QAPs, including such things as verification of type of feedstocks, verification that volumes produced are consistent with amount of feedstocks processed, and verification that RINs generated are appropriately categorized and match the volumes produced; qualifications for independent third-party auditors; requirements for audits of renewable fuel production facilities, including minimum frequency, site visits, review of records, and reporting; and, conditions under which a regulated party would have an affirmative defense against liability for civil violations for transferring or using invalid RINs. In addition, it would provide two options that would be available for the verification of RINs through a QAP.
Generally, the refining and biodiesel industries are supportive of the proposal. The ethanol industry is generally concerned that it would create unnecessary financial burdens on its producers. Given the market, the proposed voluntary QAP has reportedly already become almost a requirement for all renewable fuel producers, even though the fraudulent cases all involve only biodiesel.
The Director of the U.S. Environmental Protection Agency's (EPA) Office of Transportation and Air Quality, Christopher Grundler, made public comments recently stating that he expects EPA to issue the final rule setting the 2014 Renewable Fuel Standard (RFS) volumes by midnight on June 20, 2014. The final rule is much anticipated among industry stakeholders. The biofuels industry generally has urged EPA to revisit the proposed reductions to the advanced and corn ethanol 2014 RFS volumes, while RFS opponents, including generally the oil and gas and livestock industries, have been supportive of EPA's proposed 2014 RFS reductions. The Biobased and Renewable Products Advocacy Group (BRAG™) recently reported on the comments EPA has received on its proposed 2014 RFS rule. A copy of that report is available online.
EPA Administrator Gina McCarthy is expected to discuss the upcoming RFS rule during a visit to North Dakota on February 28, 2014.
The Department of Energy's (DOE) Bioenergy Technologies Office will host the second of two workshops on algae biofuels strategy on March 26-27, 2014, in Charleston, South Carolina. A copy of the agenda is available online.
The workshop will focus on the research and development still needed to achieve affordable, scalable, and sustainable algae-based biofuels. It will cover topics including barriers to commercialization for algae biofuels and appropriate metrics for success. It comes five years after DOE organized the National Algal Biofuels Technology Roadmap workshop. The workshop is intended to help DOE in its strategic development, evaluating the National Algal Biofuels Technology Roadmap, and planning a breakout session at the Office's annual Bioenergy Conference in 2014.
Participants may register online.
On February 11, 2014, Representative Dave Loebsack (D-IA) introduced H.R. 4051, the Renewable Fuel Utilization, Expansion, and Leadership (Re-FUEL) Act. The bill currently has no co-sponsors. The bill is designed to help fuel retailers with investments in renewable and alternative fuel infrastructure to provide consumers with the increased ability to choose alternative fuels at the pump. It would create a competitive grant program through the U.S. Department of Agriculture (USDA) to invest in renewable and alternative fuel infrastructure. Grants would be awarded to develop new or to retrofit existing infrastructure, including pumps for biofuels and hydrogen, tanks, piping, and electric vehicle chargers. Applicants would be required to provide a 30 percent non-federal match and the maximum grant to each entity per year would be $100,000. A copy of the bill is available online.
Representative Loebsack is a vocal supporter of the federal Renewable Fuel Standard (RFS) and has joined some of his colleagues to urge EPA to reconsider the Agency's current proposal to reduce the volumes of corn-starch ethanol and advanced biofuels under the law in 2014. Expanding the available distribution infrastructure as proposed in H.R. 4051 would help increase the availability and use of fuels with higher ethanol blends, including E85. This increased availability would help address the blend wall concerns cited as the driving factor for the proposed RFS volume reductions.
President Obama is expected to sign H.R. 2642, the Agriculture Act of 2014 (the new five-year Farm Bill), into law on Friday at Michigan State University in East Lansing, Michigan. He is scheduled to speak there about the importance of the legislation.
The Farm Bill is critically significant to the biofuels and renewable chemicals and products industries because the new Farm Bill continues and expands on the majority of the energy programs covered under the 2008 Farm Bill and provides $881 million in mandatory funding to carry them out. For instance, the new Farm Bill continues the Biobased Markets and Biorefinery Assistance programs, as well as the Biomass Crop Assistance Program, which helps encourage and facilitate the growth of purpose grown energy crops to be used for energy production. It modifies the existing Biorefinery Assistance Program to create the Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance Program and extend funding eligibility to producers of renewable chemicals and biobased products. The mandatory funding under this program and expanded eligibility marks a big victory for the biofuels and renewable chemicals and products industries.
The U.S. House of Representatives approved H.R. 2642 by a bi-partisan vote of 251-166 on January 29, 2014. The Senate followed suit on February 4, 2014, by a bi-partisan vote of 68-32.
Monroe Energy, LLC (Monroe), a refinery and subsidiary of Delta Airlines, has filed another lawsuit challenging EPA's implementation of the federal Renewable Fuel Standard (RFS). In this latest suit, Monroe argues that blenders, not refiners and importers, of fuel should be deemed the obligated parties under the RFS. Monroe does not have blending capacity like some larger refiners.
Monroe asserts that the fact that EPA in its proposed rule to set the 2014 RFS renewable volume obligations (RVO) now proposes to consider the practical ability to blend the amounts of renewable fuels under the law warrants a reconsideration of the obligated parties defined under the final RFS rule issued in 2010. Because Monroe lacks blending capacity, the Company argues that it is forced to spend millions of dollars to comply with its requirements as an obligated party under the law.
On February 4, 2014, EPA filed a 113 page brief in the U.S. Court of Appeals for the District of Columbia. In its brief, EPA attempts to defend its final rule setting the 2013 RFS in the face of challenges to it by Monroe, the American Petroleum Institute, and American Fuel and Petrochemical Manufacturers. EPA argues that it was reasonable to maintain the total renewable and advanced biofuel levels under the RFS statute for 2013 because it determined that sufficient compliance options would be available to obligated parties to comply with the requirements that year. The court has not yet set a date for oral arguments.
On Monday, the 41 member bicameral Farm Bill Conference Committee announced that it had reached agreement on a compromise Farm Bill, the Agriculture Act of 2014. A copy of the legislation is available online. The Conference Committee was led by House Agriculture Committee Chair Frank Lucas (R-OK), Ranking Member Collin Peterson (D-MN), Senate Agriculture, Nutrition and Forestry Committee Chair Debbie Stabenow (D-MI), and Ranking Member Thad Cochran (R-MS). A copy of the Senate Agriculture Committee press release on the compromise legislation is available online.
The bill includes $881 million in mandatory funding for renewable energy programs over the next ten years, and extends eligibility to renewable chemicals for the first time. It continues the majority of the energy programs covered under the 2008 Farm Bill, including the Biobased Markets and Biorefinery Assistance Programs, and the Biomass Crop Assistance Program to help encourage and facilitate the growth of purpose grown energy crops to be used for energy production. The legislation will modify the existing Biorefinery Assistance Program to create the Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance Program that would expand funding eligibility to producers of renewable chemicals and biobased products. This mandatory funding and expanded eligibility marks a big victory for the biofuels and renewable chemicals and products industries.
The House of Representatives passed this compromise Farm Bill on Wednesday, January 29, 2014. The Senate is expected to take it up for consideration and potentially vote on it as early as the end of this week. The President is expected to sign it.
On January 24, 2014, seven Democratic Members of Congress from Iowa, Minnesota, and Illinois sent a letter to President Obama requesting a meeting with the White House to discuss the proposed reductions to the 2014 RVOs. The same group of Congressmen met recently with EPA Administrator Gina McCarthy to urge EPA to reconsider the proposed reduction. In the January 24, 2014, letter, the Congressmen stress the potentially negative impact of the proposed reductions on the economies in the Midwest and the continued development of biofuels. A press release containing the text of the letter issued by one of the seven Members requesting the meeting, Representative Tim Walz (D-MN), is available online.