On Wednesday, November 13, 2013, EPA Administrator Gina McCarthy testified as the sole witness before the House Committee on Science, Space, and Technology on "Strengthening Transparency and Accountability within the Environmental Protection Agency."
While the hearing was held as part of the Committee's annual oversight of EPA, it provided Committee Chair Lamar Smith (R-TX) an opportunity to question McCarthy on several concerns he reportedly had with EPA and appropriate transparency at the Agency. These included reports of EPA officials' use of outside e-mail addresses to conduct business, and questions following EPA's "insufficient" response to a subpoena last summer requesting information about the Agency's confidential health studies that form the basis for EPA regulation of greenhouse gas (GHG) emissions.
Assessments of EPA's performance during the hearing fell along party lines. Committee Democrats led by Ranking Member Eddie Bernice Johnson (D-TX) have publicly criticized Chair Smith for his criticisms of the Agency.
Administrator McCarthy's nomination was held up for several months due to concerns by the Senate Committee on Environment and Public Works Ranking Member David Vitter (D-LA) over sufficient transparency at EPA. It was allowed to go through after Administrator McCarthy pledged to bolster transparency at EPA under her leadership.
On Thursday, November 14, 2013, the House Committee on Energy and Commerce's Subcommittee on Energy and Power, chaired by Representative Ed Whitfield (R-KY), held a hearing to discuss EPA’s proposed greenhouse gas standards for new power plants and draft legislation authored by Chairman Whitfield and Senator Joe Manchin. The hearing included three panels of ten witnesses, including Senator Joe Manchin (D-WV) and EPA Acting Administrator for Air and Radiation Janet McCabe, to discuss a potential legislative proposal by Subcommittee Chair Whitfield and Senator Manchin that would effectively prohibit EPA from promulgating or enforcing its recently released proposed rule to regulate GHG emissions from new power plants and make regulation of GHGs from existing plants contingent on Congressional approval.
Several states and business groups, including the U.S. Chamber of Commerce, support the Whitfield-Manchin proposal. Information on the hearing, including a list of witnesses and the draft legislation, may be found online.
On October 30, 2013, Representatives Bob Goodlatte (R-VA), Jim Costa (D-CA), Peter Welch (R-VT), and Steve Womack (R-AR) sent a letter signed by 169 Members of Congress to U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy urging EPA to use its authority to reduce the 2014 statutory renewable volume obligations (RVO) for all types of biofuels, including conventional corn starch ethanol under the federal Renewable Fuel Standard (RFS). A copy of the letter is available online.
The arguments made in the letter echo those put forth by the oil and gas industry and assert that the 2014 RVO reductions are needed to protect against corn price volatility and the E10 ethanol blend wall.
The letter comes at a crucial time in RFS advocacy. The oil and gas industry is leading the effort to repeal or weaken the RFS through regulatory, legal, and legislative channels, while the biofuels industry is fighting to maintain the policy, arguing that it is the fundamental driver of investment in the industry and that it provides EPA sufficient regulatory flexibility to make all necessary adjustments in its implementation. Further, the biofuels industry notes that no reductions in the conventional RVOs are needed as the RFS has minimal impact on corn prices and there are sufficient mechanisms for 2014 compliance. In addition, many in the biofuels industry argue that the concerns about the E10 blend wall are misplaced, as it exists because the oil and gas industry has refused to make or encourage the necessary investments to enable additional ethanol to be blended into the fuel supply.
A copy of Growth Energy's press release and the Renewable Fuels Association's (RFA) statement on the letter are available online and 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.
Last week, part of EPA's much anticipated 2014 proposed RFS rule, or at least a draft of the rule, was leaked and widely disseminated. If the text of the leaked proposed rule is representative of the actual proposed rule, the oil and gas industry would likely view it more favorably than would the biofuels industry. In the leaked version of the proposal, EPA would use its authority under the RFS to adjust downward the cellulosic, advanced, and overall renewable fuel volume requirements for 2014. It would require obligated parties to blend or use 15.21 billion gallons of renewable fuel in 2014, as opposed to the 18.15 which is required under the 2007 statute.
In the past few months, AFPM and API filed a joint petition, and Valero Energy Corporation filed a petition, requesting that EPA grant a partial waiver of the 2014 statutory RFS requirements. Generally, AFPM and API argued that because the 2014 RFS requirements would require obligated parties to blend more E10 than they are permitted to under the law, they would necessarily restrict the U.S. fuel supply, which would harm consumers. To avoid this harm, AFPM and API requested that EPA waive the 2014 RFS requirements to no more than 9.7 percent of the U.S. fuel supply. Valero's letter pointed out that due to the blend wall, RIN prices are higher than they should be, which reportedly is causing economic harm to affected parties, including consumers.
The Renewable Fuels Association (RFA) and the Biotechnology Industry Organization (BIO) sent separate letters to EPA urging EPA to deny the AFPM and API joint petition. They both assert that there are several options obligated parties have to meet their 2014 RFS requirements, including the greater use of E85, E15, and drop-in fuels.
Both U.S. Department of Agriculture (USDA) Secretary Tom Vilsack and EPA Administrator Gina McCarthy have issued statements denouncing the leak and reiterating that the final version of the 2014 RFS proposed rule is still being deliberated.
On the first day of its new term on October 15, the U.S. Supreme Court announced that it would grant review of parts of EPA's greenhouse gas (GHG) regulations. The Court will review part of the June 2012 decision issued by the U.S. Court of Appeals for the District of Columbia Circuit, which upheld EPA's GHG program. It will review whether EPA's GHG regulations for motor vehicles should have triggered Prevention of Significant Deterioration permitting for stationary sources. The case and its outcome could impact the current efforts of the Obama Administration to develop and finalize new GHG regulations for new and existing stationary sources. It is reported that the Court is likely to hear arguments in the first few months of the new year.
On Tuesday, October 8, 2013, the American Petroleum Institute (API) filed a lawsuit with the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court) challenging the U.S. Environmental Protection Agency's (EPA) final rule setting the 2013 renewable volume obligations (RVO) under the federal Renewable Fuel Standard (RFS). While the petition for review lacks details about the lawsuit as such petitions are for notice purposes only, it is reported that API's main arguments against the rule will be that it was issued too late to be effective and that the 2013 cellulosic RVO set at six million gallons is higher than cellulosic gallons available on the market.
Under the RFS, EPA must issue the following year's RVOs by November 30. EPA did not release its final 2013 RFS rule setting all of this year's RVOs until August 6, 2013. Earlier this year, the D.C. Circuit Court directed EPA to set the cellulosic gallon requirement to levels of actual production expected based on company and other information. The court stated that EPA could not set the volumes at the maximum level of production possible to drive production.
API has been advocating for the full repeal of the RFS on legislative, regulatory, and legal levels. It also challenged EPA's 2011 and 2012 final RFS rules in court. In August 2013, API, along with the American Fuel & Petrochemical Manufacturers (AFPM), petitioned EPA to grant a partial waiver of the yet-to-be-proposed 2014 RFS RVOs.
Several biofuel trade groups have responded to this latest legal challenge. Growth Energy and the Renewable Fuels Association (RFA) denounced the lawsuit. In its press release, available online, RFA called it a "lawsuit in search of a problem."
The U.S. government is shut down until the U.S. Senate and House of Representatives approve the same version of legislation to fund it and the President then signs it into law. House Republicans have been trying to tie funding the government with defunding certain parts of the Affordable Care Act (ACA), which went into effect on October 1. The Senate has rejected every funding bill sent to it by the House because each has contained provisions to marginalize the ACA. The Senate has also rejected a piecemeal approach to funding the government. This has created a very high stakes game of ping pong between the two chambers of Congress.
Aside from the impact on the entire economy, the government shutdown directly impacts all regulatory and legislative efforts affecting the biofuels and renewable chemicals industries, including work on the Toxic Substances Control Act (TSCA) and the Renewable Fuel Standard (RFS). It will almost certainly delay upcoming expected rulemakings, including the U.S. Environmental Protection Agency's (EPA) proposed rule setting the 2014 renewable volume obligations (RVO) under the RFS. It is reported that nearly 95 percent of EPA's staff has been furloughed during the shutdown, leaving only 17 employees working in EPA's Office of Air and Radiation and three working in the Office of Water.
The shutdown also postpones hearings and other legislative efforts impacting industry, including the hearing scheduled October 3, 2013, before the Senate Agriculture, Nutrition and Forestry Committee on "Advanced Biofuels: Creating Jobs and Lower Prices at the Pump."
All legislative and regulatory efforts on the federal RFS are at a standstill until the government re-opens. RFS legislative and regulatory efforts, however, were strong in the days before the government shutdown.
Last week, the Biotechnology Industry Organization (BIO) sent a letter to EPA Administrator Gina McCarthy urging EPA to deny the joint petition by the American Petroleum Institute and American Fuel & Petrochemical Manufacturers requesting EPA grant a partial waiver of the 2014 RVOs under the RFS. Petitioners had argued 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."
In its letter, BIO argued that petitioners may not make the waiver request because the RVO requirements do not apply to them as trade associations and, in any case, the joint petition is premature since EPA has not even yet released its proposed 2014 RVOs. In addition, BIO argued that the projected harm by the petitioners due to the blend wall is the result of "ongoing dilatory tactics of the very parties seeking the waivers" and that there exist ample options for obligated parties to comply with the 2014 RVOs. The Renewable Fuels Association (RFA) sent a similar letter to EPA opposing the joint petition.
Also last week, the heads of six biofuel trade associations met with Republican staff of the House Energy and Commerce Committee about Committee Chair Fred Upton's (R-MI) efforts to reform the federal RFS law. The six associations represented were: BIO; the National Biodiesel Board; Growth Energy; RFA; the Advanced Ethanol Council; and the National Corn Growers Association. The associations were unified in their message to staff that the RFS should remain intact as-is, with no changes. The associations argue that the consistency and stability of the RFS law drives investment in biofuels, especially advanced and cellulosic biofuels, and it contains sufficient administrative flexibility to enable EPA to make appropriate adjustments to its implementation, including any necessary lowering of annual RVO requirements for obligated parties. It is reported that the biofuels groups were told not to expect any legislative proposal to be released before EPA issues its proposed rule to set the 2014 RVOs.
In addition, last week, 20 conservative leaning business groups sent a letter to Congress urging the repeal of the RFS. Also, Americans for Tax Reform, a conservative anti-tax group led by Grover Norquist, began a letter writing campaign to Congress advocating for RFS repeal.
Finally, biofuels supporter Senator Chuck Grassley (R-IA) sent a letter to EPA asking what measures EPA is taking to investigate claims of RFS Renewable Identification Number (RIN) market manipulation and speculation.
If the Continuing Resolution (CR) currently funding the government is allowed to expire on September 30, it could prove devastating to the U.S. Environmental Protection Agency (EPA). Unlike other federal agencies, EPA cannot claim exceptions for many of its employees. In the event the CR expires, as EPA Administrator Gina McCarthy asserted in public remarks this week, EPA "would effectively shut down." It would only have skeletal staff and would surely impact Renewable Fuel Standard (RFS) and Toxic Substances Control Act (TSCA) work, among others.
This fear about current EPA funding comes at a time when the Republican Members of the Senate Committee on Environment and Public Works sent a letter this week to Committee Chair Barbara Boxer (D-CA) urging her to move ahead with a hearing on EPA's Fiscal Year (FY) 2014 budget request. EPA requested $8.2 billion for FY 2014, which is 3.5 percent less than 2012 enacted funding levels for the Agency.