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.
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.
On September 6, 2013, EPA's Office of the Inspector General (IG) issued a report finding that the Agency does not meet the control standards for monitoring some of the new programs and activities designed to prevent and reduce instances of fraudulently generated RINs under the federal RFS. EPA's one-page report summary is available online and its 23-page full report is available online.
The EPA IG findings come at a vulnerable time for the RFS and its allies. Trade groups representing the oil and gas industry, among others, have called on EPA to modify the RFS in several ways, including to protect against RIN fraud. Those groups, as well as the National Biodiesel Board, worked with EPA to design a new plan to help protect against RIN fraud. EPA issued a proposed rule outlining the plan in February of this year. A copy of the proposed rule as published in the Federal Register is available online. The plan is expected to be completed soon.
On August 28, 2013, the Solid Waste Association of North America (SWANA) and the National Solid Wastes Management Association (NSWMA) sent a letter to U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy urging EPA to (1) issue quickly a final rule clarifying how biogenic carbon emissions will be treated under Prevention of Significant Deterioration (PSD) and Title V permitting requirements and (2) determine that biogenic carbon emissions from municipal solid waste (MSW) should be categorically excluded from the new PSD and Title V greenhouse gas (GHG) reporting requirements. A copy of the letter is available online. In July, the U.S. Court of Appeals for the District of Columbia vacated EPA's rule temporarily exempting bioenergy and other biogenic sources of GHG emissions from the new GHG permitting requirements, which has created uncertainty for the industry going forward. BRAG's report on this decision is available online.
In their joint letter, SWANA and NSWMA argue that emissions from the biogenic portions of MSW should be permanently exempted from the new GHG reporting requirements in part based on EPA's recent calculation of the lifecycle GHG analysis of landfill gas as a renewable fuel feedstock. Under this analysis, EPA "assumed that the biogenic portions of MSW (which produce the biogas) pose no land use-related GHG emissions associated with its production and use as a fuel feedstock." In addition, the groups state subjecting the biogenic emissions to the new reporting requirements could deter renewable fuel production and progress on projects designed to promote the beneficial use of landfill gas and energy.
On August 1, 2013, over 100 groups sent a similar letter to EPA urging the Agency to find that bioenergy and other biogenic sources of GHG emissions are carbon neutral for purposes of new GHG permitting requirements under EPA's Tailoring Rule. More information on this letter is available online.
EPA was scheduled to post a video on its YouTube channel providing an overview of the Agency's plans to regulate GHG emissions from existing power plants. Under President Obama's Climate Action Plan (CAP) announced on June 25, 2013, EPA is directed to propose emissions guidelines for existing power plants by June 1, 2014. EPA's YouTube page is available online.
U.S. House Energy and Commerce Subcommittee on Energy and Power Chair Ed Whitfield (R-KY) has announced that he will hold a hearing on the President's CAP on September 18, 2013. Chair Whitfield, who does not support the CAP, has invited representatives from 13 federal agencies, including EPA, to testify at the hearing. The Subcommittee's press release (available online) states that "we seek to hear from relevant Federal agencies about U.S. climate change policies and the administration's second term climate agenda, and to obtain fuller information regarding the Federal government's past, current, and planned domestic and international activities, climate research programs, initiatives, and new regulatory requirements."
Renewable chemicals are emerging at a fast pace, paving the way for new, innovative, and sustainable biobased products. The renewable chemicals’ market is estimated to reach $83.4 billion by 2018 in applications ranging from transportation and agriculture to textiles and cosmetics. In addition to all the elements great companies need to succeed -- a great product, a great brand, inspiring leadership, and vision -- biobased product companies need to understand how the U.S. Environmental Protection Agency (EPA) occupies a virtual seat at their management table, whether or not they know it.
An article by BRAG in the August 2013 issue of Industrial Biotechnology, available online, lays out the regulatory challenges the Toxic Substances Control Act (TSCA) presents to biobased and renewable chemical products and the rationale behind the formation of BRAG. Through strategic insight into regulatory and legislative issues, collective advocacy on Capitol Hill and before EPA, education and training opportunities, and hands-on guidance from a deep bench of TSCA legal and scientific policy experts, BRAG is removing obstacles to commercialization for its members.
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.