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On March 6, 2014, South Dakota Governor Dennis Daugaard (R) announced that the state will begin incorporating E15 fuel into its state fleet during a test period over the next six months. Currently, E10 is available and used in the state's flex-fuel and other vehicles, but the Governor wants to encourage the greater use of ethanol in his state. Ethanol is a $3.8 billion industry in South Dakota. Greater use of E15 is one potential solution to the E10 ethanol "blend wall." The U.S. Environmental Protection Agency has proposed reducing the 2014 renewable volume obligations for corn-starch ethanol due to blend wall concerns. A copy of the press release on the announcement released by Governor Daugaard's office is available online.

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On February 11, 2014, Representative Dave Loebsack (D-IA) introduced H.R. 4051, the Renewable Fuel Utilization, Expansion, and Leadership (Re-FUEL) Act. The bill currently has no co-sponsors. The bill is designed to help fuel retailers with investments in renewable and alternative fuel infrastructure to provide consumers with the increased ability to choose alternative fuels at the pump. It would create a competitive grant program through the U.S. Department of Agriculture (USDA) to invest in renewable and alternative fuel infrastructure. Grants would be awarded to develop new or to retrofit existing infrastructure, including pumps for biofuels and hydrogen, tanks, piping, and electric vehicle chargers. Applicants would be required to provide a 30 percent non-federal match and the maximum grant to each entity per year would be $100,000. A copy of the bill is available online.

Representative Loebsack is a vocal supporter of the federal Renewable Fuel Standard (RFS) and has joined some of his colleagues to urge EPA to reconsider the Agency's current proposal to reduce the volumes of corn-starch ethanol and advanced biofuels under the law in 2014. Expanding the available distribution infrastructure as proposed in H.R. 4051 would help increase the availability and use of fuels with higher ethanol blends, including E85. This increased availability would help address the blend wall concerns cited as the driving factor for the proposed RFS volume reductions.
 

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On November 15, 2013, U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy signed the long-awaited and much anticipated Notice of Proposed Rulemaking (NPRM) to set the 2014 renewable volume obligations (RVO) under the federal Renewable Fuel Standard (RFS). Included in the NPRM is a proposal to repeal retroactively the 2011 cellulosic RVOs and refund obligated parties nearly $5 million to recover their costs for trying to meet them. Simultaneously, the Agency issued a pre-publication of its request for comment on several petitions it has received from the American Petroleum Institute (API), American Fuel and Petrochemical Manufacturers (AFPM), and individual obligated parties requesting that EPA grant a partial waiver of the 2014 RFS statutory RVOs. Copies of the pre-published NPRM and the pre-published request for comment notice are available online.

The NPRM appears to be similar to the draft of it that was leaked publicly last month. It marks a shift in EPA's implementation of the RFS, as it proposes to reduce the overall and advanced RVOs, in addition to the cellulosic RVOs. EPA cites blend wall concerns for the proposed overall and advanced reductions. The Agency proposes to maintain the 2013 RVOs for biodiesel in both 2014 and 2015 at a level of 1.28 billion gallons. The cellulosic, advanced, and total renewable RVO gallons contained in the RFS statute for 2014 are: 1.75 billion for cellulosic, 3.75 billion for advanced, and 18.15 billion for total renewable fuel (the RVO for corn starch ethanol is this number minus those for advanced, cellulosic and biodiesel). The proposed RVO gallons for 2014 are: 17 million for cellulosic, 2.2 billion for advanced, and 15.21 billion for total renewable.

Advocates on both sides have ramped up their advocacy since the release of the NPRM. The oil industry continues to call for full repeal of the RFS through the legislative process and the biofuels industry has denounced EPA's shift in RFS implementation, stressing the importance of the stability of the RFS to continue investment in biofuels, especially advanced and cellulosic biofuels. In addition, new groups have formed to add to the debate. A veterans group, VoteVets.org, and Americans United for Change have plans for a media campaign to support ethanol and the RFS. The Bipartisan Policy Center is forming an advisory committee of biofuels stakeholders to develop proposals for RFS reform. Just before the release of the NPRM, a group of 32 Senators, including Patty Murray (D-WA), Al Franken (D-MN), Roy Blunt (R-MO), and Chuck Grassley (R-IA), sent a letter to EPA, calling on the Agency to increase the biodiesel RVO for 2014 instead of holding it at this year's levels as was proposed in the leaked draft 2014 RFS proposed rule (and as is maintained in the official NPRM).

A hearing will be held on December 5, 2013, beginning at 9:00 a.m. at the Hyatt Regency in Crystal City located in Arlington, Virginia. A copy of the notice is available online.
 

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On October 30, 2013, Representatives Bob Goodlatte (R-VA), Jim Costa (D-CA), Peter Welch (R-VT), and Steve Womack (R-AR) sent a letter signed by 169 Members of Congress to U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy urging EPA to use its authority to reduce the 2014 statutory renewable volume obligations (RVO) for all types of biofuels, including conventional corn starch ethanol under the federal Renewable Fuel Standard (RFS). A copy of the letter is available online.

The arguments made in the letter echo those put forth by the oil and gas industry and assert that the 2014 RVO reductions are needed to protect against corn price volatility and the E10 ethanol blend wall.

The letter comes at a crucial time in RFS advocacy. The oil and gas industry is leading the effort to repeal or weaken the RFS through regulatory, legal, and legislative channels, while the biofuels industry is fighting to maintain the policy, arguing that it is the fundamental driver of investment in the industry and that it provides EPA sufficient regulatory flexibility to make all necessary adjustments in its implementation. Further, the biofuels industry notes that no reductions in the conventional RVOs are needed as the RFS has minimal impact on corn prices and there are sufficient mechanisms for 2014 compliance. In addition, many in the biofuels industry argue that the concerns about the E10 blend wall are misplaced, as it exists because the oil and gas industry has refused to make or encourage the necessary investments to enable additional ethanol to be blended into the fuel supply.

A copy of Growth Energy's press release and the Renewable Fuels Association's (RFA) statement on the letter are available online and online.
 

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RFA sponsored a study released this month by the Department of Energy's National Renewable Energy Laboratory (NREL). The study is available online. In the study, NREL analyzed various studies on the effects of E15 use in Model Year 2001 and newer cars and found no meaningful difference in the use of E10 and E15 in those vehicles. This is a significant finding because many in the oil and gas industries, among others, have warned of potentially harmful effects of using E15 in cars. EPA has approved E15 for use in Model Year 2001 and newer vehicles. Many in the biofuels industry have argued that, if more widely used, E15 could be one potential way to overcome the E10 blend wall, because it would allow for greater blending of ethanol in the U.S. fuel supply.

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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.
 

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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.
 

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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."
 

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