Renewable fuel and chemical company Aemetis, Inc. announced this week that EPA has approved its Renewable Fuel Standard (RFS) pathway to produce ethanol using grain sorghum and biogas with the Company's existing Combined Heat & Power system to generate D5 Advanced Biofuels Renewable Identification Numbers (RIN). This announcement means that additional fuel will qualify to fulfill the annual renewable volumetric targets under the federal RFS statute. It comes as EPA is preparing its proposed RFS volumes for 2014, which the Agency indicated it would likely reduce from those set in the statute to adjust for supply and the impending ethanol blendwall.
Aemetis' press release on the announcement is available online.
Despite the August Congressional Recess, much regulatory and legislative action continues in Washington, D.C. on the federal Renewable Fuel Standard (RFS). Earlier this month, the leading trade groups representing the oil and gas industry, the American Petroleum Institute (API) and American Fuel & Petrochemical Manufacturers (AFPM), petitioned EPA to lower the 2014 RFS renewable volume obligations (RVO) to below 10 percent of total U.S. gasoline supply. Under the RFS, EPA is directed to set the following year's RVOs by November 30. API and AFPM argue 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."
The Renewable Fuels Association (RFA), one of the leading biofuels trade associations, has already responded to the API/AFPM waiver petition by sending a letter to EPA urging the Agency to deny the waiver request for several reasons. A copy of the letter is available online. Among other things, RFA argues that API and AFPM lack standing to petition EPA to reduce the 2014 RVOs since the associations themselves are not obligated to comply with the RFS. In addition, RFA argues that there are several ways that obligated parties in the oil and gas industry may meet their 2014 RFS RVOs, including an increase in E15 and E85 sales, and carry over Renewable Identification Numbers (RIN) from 2013.
Earlier this month, Senators Chuck Grassley (R-IA) and Amy Klobuchar (D-MN) sent a letter to the Federal Trade Commission and U.S. Department of Justice requesting that they investigate allegations that certain petroleum companies are deliberately blocking the introduction of higher ethanol blends in violation of antitrust laws. A copy of the letter is available online.
As we have reported, a group of four Republican Members of the U.S. House Energy and Commerce Committee are working during the August recess on developing potential legislative reforms to the federal RFS. It has been reported this week that House Majority Leader Eric Cantor (R-VA) is considering potentially attaching an RFS legislative reform package to a "must-pass" bill similar to the one expected this fall to address the "debt ceiling."
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.
As we have reported, EPA has released its final rule setting the RVOs for the federal RFS (more information is available online). The final rule was officially published, and therefore became effective, on August 15, 2013. A copy of the final rule, as published in the Federal Register, is available online.
Last week, a professor from Purdue University, Wallace Tyner, published an article concluding that EPA should reduce the overall and advanced RVOs under the RFS in years 2014-2016 to make the policy "workable." As we have reported, earlier this month, EPA released its final rule setting the 2013 RFS, in which the Agency included language indicating that it will likely reduce the overall and advanced RVOs for 2014 in that upcoming rulemaking. Tyner's article, which can be found online, illustrates that it is not possible to meet the mandated RFS RVOs in 2014-2016 due to constraints imposed by the impending "blend wall." Based on this, Tyner concludes that EPA must reduce both the overall and advanced RVOs for those years to continue to make the RFS a "workable" policy.
This article is significant for several reasons. Purdue is considered a leading pro-biofuels academic voice on biofuels policy and the RFS. In addition, as Tyner points out in the article, the recommended reductions would represent a marked shift in the way EPA implements the RFS. To date, while EPA annually has reduced the cellulosic RVOs, it has maintained the levels for the overall and advanced RVOs contained in the RFS law, allowing those gallons to make up for the reduced cellulosic gallons. Reducing the overall and advanced gallons in future years would represent that those gallons are no longer expected to be able to make up the shortfall in cellulosic biofuels, due in part to restraints caused by the impending "blend wall."
This week, it is reported that shareholders of leading U.S. cellulosic biofuels company, KiOR, sued the company, its Chief Executive Officer, and Chief Financial Officer, alleging that they reported misleading information on production projections, which artificially inflated the stock price paid. Last year, the company completed construction of its biorefinery in Columbus, Mississippi, which has the capacity to produce up to 13 million gallons per year of cellulosic biofuels made from woody biomass. The company stated that it expected to ship its first commercial quantities of the fuel last fall, but did not do so until June 2013. In addition, the quantity shipped reportedly was less than the company projected in public statements.
This lawsuit comes at a time when the oil industry has repeatedly criticized EPA for setting its annual mandated cellulosic RVOs under the federal RFS too high compared to the actual available supply of that fuel. EPA just issued its 2013 cellulosic RVO at 6 million gallons, the majority of which EPA expects to be met by supply from KiOR, based in part on stated expectations of the company.
On August 12, 2013, the U.S. Department of Agriculture (USDA) released its "World Agricultural Supply and Demand Estimates" report in which it projects the U.S. will produce a record 13.76 billion bushels of corn in 2013. The report is available online.
Representatives from ethanol trade groups Growth Energy and the Renewable Fuels Association (RFA) praised the news and argued that it showed the federal Renewable Fuel Standard (RFS) was not contributing to higher food prices and that it "should be the last nail in the coffin of the ridiculous 'food versus fuel' argument." RFA's press release 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.