By Lynn L. Bergeson
On December 19, 2019, the U.S. Environmental Protection Agency (EPA) Administrator, Andrew Wheeler, signed the final rule on the Renewable Fuel Standard (RFS) program, setting the renewable fuel percentages for 2020. Titled Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based Diesel Volume for 2021 and Other Changes, the final rule establishes the annual percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that apply to gasoline and diesel transportation fuel produced or imported in 2020. The rule also establishes the applicable volume of biomass-based diesel for 2021. The final volume requirements can be accessed here. Thus far, industry stakeholders seem displeased with the standard calculations to account for volumes of fuels projected to be exempted from the renewable volume obligations (RVOs). The waiver limits biofuel producers were hoping for are not reflected in the final rule. While the final rule has not yet been published in the Federal Register (FR), it will become effective 60 days after the FR publication. Bergeson & Campbell, P.C. will continue to monitor and provide further details once the final rule is published.
By Lynn L. Bergeson
On November 14, 2019, Senator Tom Udall (D-NM) and Representative Peter Welch (D-VT) introduced legislation seeking to reform the Renewable Fuel Standard (RFS) under the Clean Air Act (CAA). The Growing Renewable Energy through Existing and New Environmentally Responsible (GREENER) Fuels Act is intended to mitigate the “harmful environmental impacts of the corn ethanol mandate,” according to a press release issued by the lawmakers. The bill would phase out the corn ethanol mandate and immediately reduce the amount of ethanol in fuel by as much as 1 billion gallons by capping the amount of ethanol that can be blended into conventional gasoline at 9.7 percent. The legislation also seeks to help farmers return cornfields to pasture and wildlife habitat through a 10 cents per renewable identification number (RIN) fee to fund a new Private Land Protection and Restoration Fund in the U.S. Treasury. The fund will help pay for Department of Interior (DOI) programs that pay for easements on private lands to keep them out of agricultural production; keep the lands in conservation uses like grass, forest, stream buffers, or pollinator habitat; and help farmers transition land currently in crop production into other uses. The GREENER Fuels Act also would extend the cellulosic and advanced next-generation biofuel mandate until 2 billion gallons of annual production is achieved or 2037, whichever is sooner, and alters the way the mandate is implemented to produce liquid transportation fuels that dramatically reduce greenhouse gas emissions.
By Lynn L. Bergeson
On November 4, 2019, 60 organizations unified in an effort to urge U.S. President Donald Trump to reconsider EPA’s proposed amendments to the Renewable Fuel Standard (RFS) program. Signed by organizations such as the Biotechnology Innovation Organization (BIO), a Biobased and Renewable Products Advocacy Group (BRAG®) member, the letter to the President indicates flaws within the aforementioned proposal released on October 15, 2019. Arguing that the proposed amendments would not accurately account for small refiner exemptions (SRE), the letter authors state that “[t]he flawed proposal swaps out a critical component of the SRE remedy sought by farmers and the biofuels industry,” failing to achieve its mission to incentivize farm economies. Given the proposal to recover gallons of biofuel exemptions based on the U.S. Department of Energy’s (DOE) recommendations, the proposed amendment would lead to a “bureaucratically uncertain path that recovers only one fraction of those gallons lost to SREs and could result in RFS backsliding in 2020.” Therefore, the letter concludes by urging President Trump to consider SRE accountability based on a rolling average of the actual volumes exempted by EPA during the three compliance years. Similar concerns and requests have been expressed by many industry stakeholders via docket comments as well as during last week’s public hearing held by EPA. The comment period ends on November 29, 2019, and doubts continue as industry expects EPA’s final rulemaking.
By Lynn L. Bergeson and Ligia Duarte Botelho, M.A.
On October 28, 2019, the U.S. Environmental Protection Agency (EPA) published in the Federal Register a supplemental proposal on adjustments to the percentage standards for 2020 that result from the amended definitions of two terms used to calculate the percentage standards under the Renewable Fuel Standard (RFS). Signed and pre-published on October 15, 2019, by EPA Administrator Andrew Wheeler, the notice of the proposed rule is no surprise. The proposed supplemental proposal, if approved, will establish the cellulosic biofuel, advanced biofuel, and total renewable fuel volumes for 2020 and the biomass-based diesel volume for 2021. Although the rule does not change the volumes for 2020 and 2021 proposed in July 2019, it proposes and seeks comment on adjustments to the way that annual renewable fuel percentages are calculated. Annual renewable fuel percentage standards are used to calculate the number of gallons each obligated party is required to blend into their fuel or to obtain otherwise renewable identification numbers (RIN) to demonstrate compliance. Specifically, EPA is seeking comment on projecting the volume of gasoline and diesel that will be exempt in 2020 due to small refinery exemptions based on a three-year average of the relief recommended by DOE, including where DOE had recommended partial exemptions. EPA intends to grant partial exemptions in appropriate circumstances when adjudicating 2020 exemption petitions. EPA proposes to use this value to adjust the way it calculates renewable fuel percentages.
Comments must be received on or prior to November 29, 2019.
On October 30, 2019, EPA held a public hearing on the proposed rule in Ypsilanti, Michigan, where affected stakeholders had a chance to provide testimony. One of the testimonies given was from Renewable Fuels Association (RFA) President and Chief Executive Officer (CEO) Geoff Cooper. Cooper told EPA that “this proposal fails to reflect the letter and spirit of the president’s commitment to restore integrity to the RFS, fails to assure that the statutorily-required 15-billion-gallon level for conventional biofuels will be met, and fails to restore stability in the marketplace by definitively ending the practice of allowing small refinery exemptions from eroding RFS biofuel demand.” Outlining the weaknesses of EPA’s proposal, Cooper highlighted that not only has EPA seldom followed DOE’s recommendations in deciding small refinery exemption (SRE) petitions, but also that it will not succeed. According to Cooper, because EPA bases averages of what DOE recommends and not of the waivers actually granted, and the former is significantly less than the latter, the proposed rule is not promising. Cooper’s full written testimony can be accessed here.
By Lynn L. Bergeson
On October 22, 2019, Frank Pallone, Jr. (D-NJ), Energy and Commerce (E&C) Committee Chair, and Paul Tonko (D-NY), Environment and Climate Change Subcommittee (ECCS), announced that a legislative hearing will be held on October 29, 2019, at 10:30 a.m. (EDT) on Capitol Hill. Titled “Protecting the RFS: The Trump Administration’s Abuse of Secret Waivers,” the hearing will focus on the EPA’s mismanagement of the Renewable Fuel Standard (RFS) Program under the Trump Administration. The Subcommittee has not yet released the witness list for the legislative hearing; it has, however, stated that the purpose of the meeting is to examine H.R. 3006, the RFS Integrity Act of 2019, introduced by Representative Collin Peterson (D-MN). Further information for the hearing, including the Committee Memorandum, legislation, witness list, testimony, and a live webcast will be posted online as soon as it becomes available.
By Lynn L. Bergeson
On October 15, 2019, EPA Administrator, Andrew Wheeler, signed a supplemental notice of the proposed rule on the Renewable Fuel Standard (RFS) that proposes to establish the cellulosic biofuel, advanced biofuel, and total renewable fuel volumes for 2020 and the biomass-based diesel volume for 2021. Although the rule does not change the volumes for 2020 and 2021 proposed in July 2019, it proposes and seeks comment on adjustments to the way that annual renewable fuel percentages are calculated. Annual renewable fuel percentage standards are used to calculate the number of gallons each obligated party is required to blend into their fuel or to otherwise obtain renewable identification numbers (RIN) to demonstrate compliance. Specifically, EPA is seeking comment on projecting the volume of gasoline and diesel that will be exempt in 2020 due to small refinery exemptions based on a three-year average of the relief recommended by the U.S. Department of Energy (DOE), including where DOE had recommended partial exemptions. EPA intends to grant partial exemptions in appropriate circumstances when adjudicating 2020 exemption petitions. EPA proposes to use this value to adjust the way it calculates renewable fuel percentages.
According to the prepublication notice, comments must be received on or prior to November 29, 2019. EPA will hold a public hearing in Ypsilanti, Michigan, on October 30, 2019, starting at 9:00 a.m. (EDT).
By Lynn L. Bergeson
In response to EPA supplemental proposal outlined above, on October 15, 2019, U.S. Senator James Lankford (R-OK) issued a statement expressing his disappointment with EPA’s RFS mandates. Senator Lankford’s statement reads in part:
The RFS has been a problem since day one, and the proposed increase to the mandate only further complicates a broken federal requirement to blend biofuels into gasoline. This proposal continues allowing exemptions for small refineries but spreads their biofuels-blending obligation out to other refiners in the market. Despite the possibility that small refiners will get waivers from the Standard, the cost of compliance will likely go up for everyone else trying to provide fuel to American consumers—a cost that will surely be passed down to the consumer. As I have said many times, if the market demands higher biofuel blends, our producers can supply it, but we should not require biofuels to be blended, since it will ultimately increase gas prices for Oklahomans. Higher gas prices mean higher prices for many things our families need, like groceries. Higher gas prices especially affect those on a fixed income.
Critical of EPA’s management of the RFS program, Senator Lankford has called for a repeal of RFS a number of times in both the House and Senate. Senator Lankford continues to speak out about having a market-driven energy policy.
By Lynn L. Bergeson
On October 4, 2019, U.S. Environmental Protection Agency (EPA) Administrator, Andrew Wheeler, and U.S. Department of Agriculture (USDA) Secretary, Sonny Perdue, announced President Trump’s negotiated agreement on the Renewable Fuel Standard (RFS). Under the agreement, EPA and USDA will undertake the following actions:
- In a forthcoming supplemental notice building off the recently proposed 2020 Renewable Volume Standards and the Biomass-Based Diesel Volume for 2021, EPA will propose and request public comment on expanding biofuel requirements beginning in 2020.
- EPA will seek comment on actions to ensure that more than 15 billion gallons of conventional ethanol be blended into the nation’s fuel supply beginning in 2020, and that the volume obligation for biomass-based diesel is met. This will include accounting for relief expected to be provided for small refineries.
- EPA intends to take final action on this front later this year.
- In the most recent compliance year, EPA granted 31 small refinery exemptions.
- Building on the President’s earlier decision to allow year-round sales of E15, EPA will initiate a rulemaking process to streamline labeling and remove other barriers to the sale of E15.
- EPA will continue to evaluate options for [renewable identification number] RIN market transparency and reform.
- USDA will seek opportunities through the budget process to consider infrastructure projects to facilitate higher biofuel blends.
- The Administration will continue to work to address ethanol and biodiesel trade issues.
EPA Administrator Wheeler commended Trump’s leadership in this matter, stating that this agreement continues to promote domestic ethanol and biodiesel production in support of U.S. farmers. In addition, the agreement, according to USDA Secretary Perdue, found a way to pursue policy that promotes economic growth and energy security. A number of other elected officials also applauded Trump’s agreement.
By Lynn L. Bergeson
On August 30, 2019, the National Chicken Council submitted a letter to the U.S. Environmental Protection Agency (EPA) expressing concerns with the proposed required volume obligations (RVO) for 2020 combined with the recent waiver that will increase the use of ethanol-15 (E15) under the Renewable Fuel Standard (RFS). Representing companies that produce and process over 95 percent of the chicken in the United States, the National Chicken Council’s concerns are related to its broiler production, which comprises the largest single user of corn not operating under RFS. In its letter, the National Chicken Council claims that under RFS since 2007, broiler producers have faced $68.5 billion in higher feed costs for the production of broiler meat. Calling for greater efforts to create a more sustainable approach under RFS, Mike Brown’s, National Chicken Council President, concluding statements express the view that both the proposed RVOs for 2020 and the waiver allowing for E15 sales year-round are overly aggressive. These measures, according to the letter, are also overly reliant on corn-based ethanol, stating that it is likely to cause disruptions to the feed supply in the U.S.
By Lynn L. Bergeson
On August 21, 2019, Iowa Democratic Representative Cindy Axne asked the U.S. Environmental Protection Agency’s (EPA) Inspector General (IG) to investigate how EPA decided to grant the exemptions from the Renewable Fuel Standard (RFS) requested by oil refiners. EPA approved 31 petitions for waivers from the 2018 requirements. Lawmakers are not pleased at what appears to be EPA favoring the oil industry. Hence, Representative Axne’s call for an IG investigation into how EPA decided to expand the number of waivers it issued since President Trump came into office. Representative Axne held a press conference on August 21, 2019, at Southwest Iowa Renewable Energy, an ethanol producer in Iowa. This is the same plant where Trump touted his action expanding sales of 15 percent ethanol.
According to Reuters, Trump is seeking to mollify corn farmers who are incensed over the exemptions. He personally approved EPA’s decision to go ahead with the waivers, but in a cabinet meeting, Trump told his staff to figure out a way to pacify the farmers. Alarmingly, and according to a refinery industry source, the President also asked EPA Administrator Andrew Wheeler if he could take the exemptions back; he was told he could not.
Citing data from the Energy Information Administration (EIA), EPA stated the United States had been setting records for both ethanol production and exports. “There is zero evidence that EPA’s Congressionally mandated small refinery exemption program, which provides regulatory relief to small refineries around the country, has had any negative impact on domestic corn ethanol producers,” EPA said in a statement. Nonetheless, POET, the largest U.S. ethanol producer, has idled an Indiana plant due to the waivers. “Our industry invested billions of dollars based on the belief that oil could not restrict access to the market and EPA would stand behind the intent of the Renewable Fuel Standard,” POET CEO Jeff Broin said in a statement. “Unfortunately, the oil industry is manipulating the EPA and is now using the RFS to destroy demand for biofuels.”