By Lauren M. Graham, Ph.D.
On April 24, 2017, U.S. Department of Justice (DOJ) attorneys representing the U.S. Environmental Protection Agency (EPA) and the renewable fuels and petroleum industries presented oral arguments before a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit regarding the petition to review the renewable volume obligations (RVO) for 2014-2016. The petition, which was filed on January 8, 2016, by seven biofuel and agricultural groups, challenged EPA’s authority to set volume requirements for biofuel blending below standards put forth in the 2007 Renewable Fuel Standard (RFS) law. During the oral arguments, Samara Spence, a DOJ attorney, argued that insufficient infrastructure prevented EPA from setting a higher advanced biofuel standard in the 2014-2016 final rule. Seth Waxman, an attorney representing Americans for Clean Energy, argued that EPA misunderstood its authority under the statute. According to statements from the federal appeals court judges, scaling back the blending requirements may be viewed as an abuse of EPA’s authority.
In a joint statement in response to the oral arguments, the American Coalition for Ethanol, BIO, Growth Energy, the National Corn Growers Association, the National Sorghum Producers, and the Renewable Fuels Association stated that they are “optimistic that the Court will honor Congress’ intent and remove these and other obstacles EPA has impermissibly erected to cleaner and more sustainable renewable fuels from entering the marketplace.” More information on the petition to review the RFS for 2014, 2015, and 2016 is available in the Biobased and Renewable Products Advocacy Group (BRAG®) blog post “Biofuel, Corn, And Sorghum Farmers Challenge Lowered RFS Volumes.”
By Lauren M. Graham, Ph.D.
On April 24, 2017, Bob Dineen, President and CEO of the Renewable Fuels Association (RFA) sent a letter to EPA Administrator Scott Pruitt requesting that the 2018 Renewable Fuel Standard (RFS) Renewable Volume Obligations (RVO) rulemaking remain on schedule and maintain the conventional renewable fuel requirement at the statutory level of 15 billion gallons. According to the letter, regulatory certainty and sufficient lead time for planning are required to allow regulated parties to adapt and comply with the RFS.
The letter states that ethanol producers are set to produce a record supply of 16 billion gallons of conventional renewable fuel in 2017, which is well above the 15-billion-gallon conventional renewable fuel RVO, and refiners and blenders have increased the inclusion of ethanol in U.S. gasoline. Additionally, data from the Energy Information Administration (EIA) demonstrates that, on average, the ethanol content of gasoline consumed in the U.S. in 2016 was above the purported “blend wall.” Dinneen urged Pruitt to ensure a timely RVO rulemaking process to allow the evolution of the marketplace to continue.
On April 23, 2015, a bi-partisan group of 37 Senators led by Chuck Grassley (R-IA), Amy Klobuchar (D-MN), Dick Durbin (D-IL), John Thune (R-SD), Al Franken (D-MN), and Mark Kirk (R-IL) sent a letter to U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy urging a strong final 2014 Renewable Fuel Standard (RFS). The full list of 37 co-signors and text of the letter is available on Senator Grassley's website.
The Senators urge EPA to reconsider its proposed 2014 renewable volume obligations (RVO), and argue that the proposed reductions to the overall RVOs were made outside the scope of EPA's waiver authority under the RFS law. This messaging is consistent with that of the majority of the biofuels community. The letter was sent as EPA is preparing to issue its final 2014 RFS by June 1, 2015.
On April 21, 2015, the U.S. Department of Energy (DOE) released the initial installment of its Quadrennial Energy Review (QER). This first installment focuses on ways to modernize the U.S. energy infrastructure to increase the country's energy competitiveness and security. In its QER, DOE points out that while U.S. biofuel production has increased significantly over the past decade -- due largely to the federal Renewable Fuel Standard (RFS) --"[c]ontinued growth in ethanol use will depend in part on investment in additional distribution capacity; growth in the use of other biofuels, such as 'drop-in' fuels, will depend on continued investment in research, development, demonstration, and deployment." In its fact sheet accompanying the QER, the DOE states that it, along with the U.S. Department of Defense, should continue efforts to help facilitate the production and use of advanced, drop-in biofuels for use in aviation and large vehicles. Moreover, DOE should provide technical support to help investment in infrastructure to dispense higher-level ethanol blends.
The QER, and its recommendations with respect to infrastructure to support the distribution of ethanol, comes at a time when RFS stakeholders are eagerly awaiting the U.S. Environmental Protection Agency's (EPA) release of its final 2014 RFS renewable volume obligations (RVO), or volume requirements. Several biofuels groups expressed opposition to EPA's proposed 2014 RVOs because the proposed reduced RVOs for corn ethanol were based partly on EPA's determination of currently insufficient distribution infrastructure. The biofuels groups opposed to this analysis argued that infrastructure considerations should not go into EPA's calculation of its annual RFS requirements.
On February 9, 2015, a bi-partisan group of 32 Senators led by
Senators Heidi Heitkamp (D-ND), Roy Blunt (R-MO), Patty Murray (D-WA), and
Chuck Grassley (R-IA) sent a letter
to U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy
regarding 2014 and future biodiesel volume requirements under the federal Renewable
Fuel Standard (RFS). In their letter, the Senators urge EPA to get the
biodiesel renewable volume requirements (RVOs) under the RFS back on schedule.
To this end, the Senators request that EPA set the 2014 biodiesel RVOs at
actual production volumes and move to set the 2015 and 2016 RVOs as soon as
possible. The 2016
RVOs should have been set by December of 2014 under the RFS.
On February 10, 2015, Senator Barbara Boxer (D-CA), Ranking Member
of the U.S. Senate Committee on Environment and Public Works, sent a similar letter
to EPA Administrator McCarthy.
These new letters come at a time when EPA is being criticized
generally for delaying regulatory action on the RFS, and specifically for its
recent approval of the importation of biodiesel made with soybeans from
Argentinian biofuel producers as qualifying for credit under the RFS. See the Biobased
and Renewable Products Advocacy Group's (BRAG®) coverage of this
most recent issue.
Last week, U.S. Department of Agriculture (USDA) Secretary Tom Vilsack spoke at a biofuel industry conference and addressed concerns raised over the likelihood that the final 2014 Renewable Fuel Standard (RFS) rule would include renewable volume obligations (RVO) for total renewable fuel at levels below those included for 2014 under the statute. Generally, total renewable RVOs are comprised of corn-starch ethanol.
Secretary Vilsack projected a positive spin on this likelihood, reportedly telling the audience that the Obama Administration remains committed to working with the biofuels industry to get to 15 billion gallons of ethanol. The RFS would require the use of 15 billion gallons of total renewable fuel by 2022. It is generally predicted that the final 2014 RFS rule will raise the RVO levels for total renewable fuels over those contained in the proposed rule issued last year. RFS supporters in the biofuels industry, however, particularly those representing the corn ethanol industry, remain concerned that the reasoning behind final total renewable fuel RVOs will still be based partly on blend wall concerns argued by obligated parties and opponents to the law.
On April 8, 2014, the Senate Committee on Agriculture, Nutrition and Forestry held a hearing on "Advanced Biofuels: Creating Jobs and Lower Prices at the Pump." The following witnesses testified at the hearing: Mr. Richard Childress, CEO, Richard Childress Racing, LLC; Mr. Jan Koninckx, Global Business Director for Biorefineries, DuPont Industrial Biosciences; Mr. Brooke Coleman, Executive Director, Advanced Ethanol Council; Dr. Sumesh Arora, Vice President, Innovate Mississippi, Director of Strategic Biomass Solutions; and, Ms. Nancy Young, Vice President, Environmental Affairs, Airlines for America. More information about the hearing is available online.
Senate Agriculture Committee Chair Debbie Stabenow (D-MI) held the hearing to highlight positive developments in the advanced biofuels space. Stabenow's home state of Michigan has a heavy biobased manufacturing sector and the Senator has been working hard to garner federal support for the industry. She is opposed to the U.S. Environmental Protection Agency's (EPA) proposed 2014 Renewable Fuel Standard (RFS) rule that would lower the 2014 renewable volume obligations (RVO) for corn ethanol, cellulosic biofuels, and advanced biofuels. At the hearing this week, witnesses warned that lowering the 2014 RVOs for corn ethanol and advanced biofuels will chill investment in U.S. biofuels.
EPA Administrator Gina McCarthy made a recent public statement suggesting that the 2014 RFS rule is expected to be finalized by June.
On March 28, 2014, Representatives Bob Goodlatte (R-VA), Jim Costa (D-CA), Steve Womack (R-AR), and Peter Welch (D-VT) sent a letter to U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy with targeted questions related to the implementation of the Renewable Fuel Standard (RFS). The four Members of Congress all believe the RFS is not working in its current form. Last fall, they introduced H.R. 1462, the "RFS Reform Act," which eliminates corn-based ethanol requirements, limits the amount of ethanol that can be blended into conventional gasoline at ten percent, and requires EPA to set accurately the annual cellulosic renewable volume obligations (RVO) at actual production levels.
In their letter, which followed a recent meeting with Administrator McCarthy, the Representatives reiterated their position that the RFS is not working given current market conditions. They also asked six questions to inquire about EPA's ability and willingness to reduce annual RVOs. A copy of the letter is available online.
Monroe Energy, LLC (Monroe), a refinery and subsidiary of Delta Airlines, has filed another lawsuit challenging EPA's implementation of the federal Renewable Fuel Standard (RFS). In this latest suit, Monroe argues that blenders, not refiners and importers, of fuel should be deemed the obligated parties under the RFS. Monroe does not have blending capacity like some larger refiners.
Monroe asserts that the fact that EPA in its proposed rule to set the 2014 RFS renewable volume obligations (RVO) now proposes to consider the practical ability to blend the amounts of renewable fuels under the law warrants a reconsideration of the obligated parties defined under the final RFS rule issued in 2010. Because Monroe lacks blending capacity, the Company argues that it is forced to spend millions of dollars to comply with its requirements as an obligated party under the law.
EPA received approximately 16,000 comments by the January 28, 2014, deadline for the public to weigh in on the EPA's proposed 2014 Renewable Fuel Standard (RFS) renewable volume obligations (RVO). Industry organizations from all interested stakeholders made submissions.
For the first time, EPA proposed to reduce the statutory RFS RVOs for corn ethanol and advanced biofuels, in addition to cellulosic biofuels. Under the proposal, EPA would use "a combination of" both of its RFS waiver authorities to achieve these reductions. EPA justified its proposed reductions by concentrating on whether there would be sufficient supply of all of the renewable fuels. EPA broadly defined supply to include other factors such as the ability to consume the fuels and distribution capacity.
Representatives of the biofuels industry, including the American Coalition for Ethanol, Advanced Biofuels Association, Biotechnology Industry Organization, Growth Energy, and the Renewable Fuels Association, urged EPA to reconsider the proposed RVOs and warned of negative consequences on biofuels production if it did not. Many comments from the biofuels industry argued that EPA did not have the authority to reduce advanced and total renewable volumes in 2014 as it proposed.
The American Petroleum Institute and American Fuel and Petrochemical Manufacturers filed joint comments in support of EPA's proposal. Among other things, these groups argue that EPA does have the authority to make its proposed reductions to the 2014 RVOs. They warn of significant supply and economic consequences if EPA maintains the statutory RVOs for 2014.
EPA is expected to issue in final the 2014 RFS RVOs this Spring.