On September 24, 2014, Southwest Airlines (Southwest) signed an agreement with Red Rocks Biofuels LLC (RRB) to purchase renewable jet fuel to use in their Bay Area Operations. The agreement "covers the purchase of approximately three million gallons [of low carbon renewable jet fuel] per year." The biofuel produced by RRB is produced using woody biomass feedstock and the first delivery to Southwest is expected to occur in 2016. More information is available online.
On August 20, 2014, DOE's National Renewable Energy Laboratory (NREL) announced a new NREL study demonstrating a potentially more economical way to use lignin to make renewable fuels and products. NREL states in the study that "[o]verall, this work demonstrates that the use of aromatic catabolic pathways enables an approach to valorize lignin by overcoming its inherent heterogeneity to produce fuels, chemicals, and materials."
A copy of the announcement is available online. A copy of the full study is available online.
On August 12, 2014, Virent announced that it has received fuel registration from EPA for its BioForm® gasoline in blends up to 45 percent. According to the company's press release, this registration means that the BioForm® gasoline may now be used in on-highway motor vehicles. The EPA testing work for the registration was funded by Virent's partner Royal Dutch Shell.
Virent's CEO Lee Edwards remarked in the company's press release on the announcement that "[s]ecuring EPA registration of our BioForm® Gasoline is further confirmation of Virent's high quality drop-in fuel and is another step towards commercializing our technology to produce renewable fuels and chemicals from biobased feedstocks."
A copy of Virent's press release is available online.
On June 26, 2014, the Congressional Budget Office (CBO) issued a 38-page report on the federal Renewable Fuel Standard (RFS), "The Renewable Fuel Standard: Issues for 2014 and Beyond." The report examines potential compliance with the RFS through 2017 under three scenarios and evaluates the effects on food and fuel prices under each one. A copy of CBO's summary of the report is available online. A copy of the full report is available online.
The report evaluated the impact on food and fuel prices under the following three RFS scenarios through 2017: compliance with the RFS requirements for advanced, biodiesel, and corn ethanol (not cellulosic); compliance with the RFS volume requirements consistent with EPA's proposed 2014 RFS requirements; and repeal of the RFS requirements. While CBO found that food prices would be similar whether the RFS is continued or repealed, it found varying potential effects on fuel prices. For instance, CBO concluded that continuing RFS statutory requirements through 2017 would lead to increased price of all types of transportation fuels, except E85.
Advocates on both sides of the RFS debate are already using the report. Some opponents have already argued that the report's findings further support reforming or repealing the RFS. Some RFS supporters have dismissed the report's conclusions as contrary to those of other respected economists who have studied the RFS and come to different conclusions. The report comes as RFS stakeholders are eagerly awaiting EPA's release of its final 2014 RFS rule.
On May 29, 2014, the Environmental Working Group (EWG) released a report entitled "Ethanol's Broken Promise: Using Less Corn Ethanol Reduces Greenhouse Gas Emissions." A copy of the report is available online.
The report concludes that "[t]he Environmental Protection Agency's pending proposal to cut the amount of corn ethanol that must be blended into gasoline in 2014 by 1.39 billion gallons would lower U.S. greenhouse gas emissions by the equivalent of 3 million tons of carbon dioxide (CO2e) – as much as taking 580,000 cars off the road for a year." The report finds that the corn ethanol volume requirements in the Renewable Fuel Standard (RFS) have led to increased greenhouse gas emissions as more uncultivated land is cleared to grow biofuels feedstocks.
Key biofuels trade groups have made public statements challenging the report's findings. For instance, the Renewable Fuels Association (RFA) issued a press release disputing the flawed EWG report. In the release, RFA President Bob Dinneen states that "[t]he Department of Energy's GREET model clearly shows that corn ethanol reduces GHG emissions by 34 percent compared to gasoline, including hypothetical land use change emissions. Additionally, a Life Cycle Associates study found that corn ethanol reduces GHG emissions by 37-40 percent when compared to tight oil from fracking and tar sands." RFA's press release is available online.
The report comes at a time when EPA is expected to release its final 2014 RFS rule soon, perhaps in June. The biofuels industry generally has urged EPA to revisit the proposed reductions to the advanced and corn ethanol 2014 RFS volumes, while RFS opponents, including generally the oil and gas and livestock industries, have been supportive of EPA's proposed 2014 RFS reductions.
On April 22, 2014, the U.S. Environmental Protection Agency (EPA) signed off on a Direct Final Rule requiring petroleum refiners and importers to blend 810,185 gallons of cellulosic fuels into the fuel supply in 2013 in response to petitions for reconsideration of the Final Rule from the American Petroleum Institute (API) and the American Fuel & Petrochemical Manufacturers (AFPM). The pre-publication version of the Direct Final Rule is available online. Petitioners successfully argued that cellulosic fuel production was well below EPA's projections. Previously, EPA had mandated that the petroleum industry blend six million gallons of cellulosic fuels into the fuel supply under the Renewable Fuel Standard (RFS) for 2013. EPA granted the motion for reconsideration because one of the two companies that EPA expected to produce cellulosic biofuel in 2013 announced shortly after EPA signed the final rule that it intended to produce significantly lower volumes of cellulosic biofuel in 2013 that it had reported to EPA. The rule will be effective 60 days after it is published in the Federal Register.
Oral argument was heard on April 7, 2014, on a joint motion filed in the U.S. Court of Appeals for the D.C. Circuit by EPA, API, and AFPM to sever certain issues and hold them in abeyance pending administrative reconsideration. Monroe Energy LLC et al. v. EPA, D.C. Cir., No. 13-1265. According to the Respondent-Intervenors Biotechnology Industry Organization (BIO), Growth Energy, and Renewable Fuels Association (RFA) in their April 16, 2014, response opposing EPA's motion, severing the case serves no purpose. EPA requested that the API and AFPM petitions be pulled out of the case and held in abeyance arguing that these petitions challenged EPA's decision to use revised fuel production and consumption estimates in the 2013 final RFS and to add a small refinery exemption. They argued that these matters should be held in abeyance while EPA addresses other aspects of the 2013 RFS. The renewable fuel groups countered that no purpose would be served as the case has already been argued and it is too late to sever these issues.
The U.S. Environmental Protection Agency (EPA) has announced that it will take approximately the next six months to evaluate and improve the petition process for new fuel pathways under the federal Renewable Fuel Standard (RFS). Every producer that wants their renewable fuel to qualify under the RFS must have its fuel pathway, including feedstock and technology process, approved by EPA. EPA intends to make the process more efficient and transparent, and thereby reduce the amount of time it takes to make determinations on new fuel pathway petitions. The Agency also intends to develop and issue improved guidance for petitioners, and to have a more automated review process for petitions using previously approved feedstocks and well known production process technologies.
EPA suggests that parties intending to submit new fuel pathway petitions wait to do so until after the Agency issues its new guidance. EPA will continue to review petitions currently under review, but will prioritize them based on the following criteria:
* Ability to contribute to the cellulosic biofuel mandate.
* Potential for reducing greenhouse gas emissions on a per gallon basis, for example by using feedstocks that likely do not have significant indirect land use change emissions (such as non-food feedstocks).
* Ability to contribute to near-term increases in renewable fuel use. This criterion would include, for example, consideration of the ability of the intended biofuel product to be readily incorporated into the existing fuel distribution network.
This review comes after years of criticism that the petition process for new fuel pathway approvals under the RFS takes too long and impedes progress of projects that could produce fuels that meet the annual RFS volumetric requirements. Some companies have been waiting for over two years for EPA's determination on their petitions.
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.
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."