Citing concerns over livestock in their states, Senators Dianne Feinstein (D-CA) and Tom Coburn (R-OK) have announced plans to introduce legislation to eliminate the corn ethanol volume requirements under the federal RFS. The bill would leave the advanced biofuels requirements in place. Certain stakeholders in the biofuels industry have already come out against the bill. For instance, it is reported that Renewable Fuels Association President and CEO Bob Dinneen has stressed the importance of maintaining the conventional biofuel volume requirements to the continued development of the advanced biofuels industry. Dinneen argues that the growth of the conventional biofuels industry has built up the infrastructure necessary to support advanced biofuels.
On October 30, 2013, the U.S. Court of Appeals for the District of Columbia approved the request by Monroe Energy to expedite review of the current RFS litigation challenging EPA's final rule setting the 2013 renewable volume obligations under the federal RFS (the 2013 RFS rule). In October 2013, Monroe, the American Petroleum Institute (API), and the American Fuel and Petrochemical Manufacturers (AFPM) filed individual cases before the court challenging the 2013 RFS rule. These cases have been consolidated.
In response to Monroe's petition for expedited review, the court issued an order encouraging all parties to work together and propose a mutually agreed upon expedited schedule. The parties, including EPA, submitted a proposed expedited briefing schedule on October 24 and the court approved it on October 30. Under the schedule, all briefs will be submitted by the end of February 2014.
Also on October 24, 2013, the National Biodiesel Board (NBB) filed a petition with the court to intervene in the case on behalf of EPA. NBB asserts that its member companies would be harmed if the 2013 RFS rule were to be changed or weakened.
Biofuels supporters and opponents remain heavily engaged in RFS policy issues. Last week, we reported on a news report that one advanced biofuels trade association, the Advanced Biofuels Association (ABFA), may be working with the American Petroleum Institute (API) on potential legislative language that would provide additional RIN credit for advanced biofuels under the federal RFS program. Since then, ABFA and API have both denied the accuracy of the story. In addition, DuPont announced that it has relinquished its membership in the ABFA and reaffirmed its commitment to advocating that the RFS is working as intended to promote the investment in and development of biofuels and should not be altered in any way through legislation at this point in time.
James C. Greenwood, current President and CEO of the Biotechnology Industry Organization (BIO) and former Member of Congress, sent a letter to the leaders of the House Committee on Energy and Commerce and the Senate Committee on Environment and Public Works asserting that the broad consensus among the biofuels industry, including the advanced biofuels industry, is that now is not the time to legislate on the RFS.
API has continued its opposition to the RFS by announcing that it plans to sue EPA if it fails to issue the final rule setting the 2014 RFS renewable volume obligations (RVO) by November 30, 2013. While the law mandates that EPA issue in final the following year's RVOs by November 30, EPA has consistently missed that deadline. This is the first time API has threatened to sue the Agency if it does not meet the November 30 deadline.
Obligated parties and the organizations that represent them continue efforts to challenge and weaken the federal Renewable Fuel Standard (RFS). Several lawsuits have been filed recently in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court) challenging the final rule issued by the U.S. Environmental Protection Agency (EPA) setting the 2013 RFS requirements. Monroe Energy, a subsidiary of Delta Airlines, the American Fuel and Petrochemical Manufacturers (AFPM), and the American Petroleum Institute (API) have each filed challenges to the EPA's final 2013 RFS rule and its renewable and cellulosic volume requirements.
On October 10, 2013, Monroe Energy filed an emergency motion for expedited consideration of its case challenging EPA's final 2013 RFS rule. The company argues that expedited review is necessary given the June 2014 deadline for compliance with the rule that would require Monroe to spend millions on the purchase of Renewable Identification Numbers (RIN).
On Friday, October 11, 2013, API petitioned EPA to reconsider the renewable volume obligations (RVO) set in the final 2013 RFS rule. Under the RFS, EPA is directed to set the following year's RVOs by November 30. EPA did not finalize the 2013 RVOs until August 2013, nine months after the deadline. API argues that EPA improperly used updated Energy Information Administration (EIA) production estimates and that the cellulosic RVO is too high.
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.
It is being reported that API and the Advanced Biofuels Association (ABFA) are working together on potential legislative language to increase the value of RINs associated with advanced biofuels and to allow them to help make up conventional RINs due to blend wall constraints under the federal RFS. According to news reports, the two groups are working to present this potential language to members of the House Energy and Commerce Committee who are working on developing legislation to modify the RFS.
Several of API's largest members, including Shell and BP, are working on projects to produce advanced biofuels. Reportedly, API and ABFA contend that increasing the value of advanced biofuel RINs and allowing them to help make up conventional RINs due to blend wall constraints would help spur investment in and development of advanced biofuels to help meet the RFS. All other major biofuels trade associations are advocating against any legislative change to the RFS. They argue that, however well-intentioned, opening the RFS up to amendment would make the law vulnerable to repeal, for which the oil industry is heavily lobbying.
In addition, several biofuels groups argue that there are sufficient RFS compliance options and solutions to the blend wall, which they say has been intentionally created by the oil industry that has chosen not to take steps to address it. For instance, these groups argue the oil industry could encourage greater investment in E85 and its distribution. While API is still advocating for RFS repeal, it is reported that the group recognizes that outcome is unlikely in this Congress. Reportedly, this is the reason the group is working with ABFA on the advanced RINs amendment.
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."
On Monday, October 7, 2013, the White House announced that Heather Zichal, Deputy Assistant to President Obama for Energy and Climate Change, will be leaving her post in the coming weeks. Zichal has been advising the President on these issues for the past five years and is considered a friend to the biofuels, renewable chemicals, and biobased products industries. For instance, she has been a strong proponent of maintaining the federal RFS and encouraging investment in biofuels. This year, Zichal helped lead the effort to roll out the President's comprehensive Climate Action Plan to reduce greenhouse gas emissions. There is no word on who will replace Zichal.
Butamax™ Advanced Biofuels LLC, a joint venture between BP PLC and DuPont, announced that it has broken ground on a plant to produce isobutanol, a renewable fuel that EPA has determined can qualify for credit under the federal RFS. Butamax is working to retrofit Highwater Ethanol LLC, an existing ethanol plant located in Lamberton, Minnesota.
The announcement is significant because Butamax has been in ongoing litigation with the other U.S. isobutanol producer, Gevo. Also, isobutanol may be one potential solution to the blend wall.
A copy of Butamax's press release on the groundbreaking is available online.
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."