2017 RFS proposal falls short of statutory levels

By Spencer Chase

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, May 18, 2016 - The Environmental Protection Agency's proposed 2017 renewable volume obligations are out, kicking off a process the agency hopes to finalize by the end of November.

The RVOs fall under the Renewable Fuel Standard, which was authorized in its current form in 2007. Under the 2007 Energy Independence and Security Act (EISA), the RVO, the amount of renewable fuels required to be blended with conventional fuels was to be set at 24 billion gallons with the potential for 15 billion of those gallons coming from corn ethanol. Today's proposal comes in under those figures, at 18.8 billion gallons with the potential for 14.8 billion gallons of corn ethanol.

Much of the proposal's 5.2 billion-gallon shortfall from the statutory figure comes from struggles in the cellulosic biofuel industry. Under the EISA, the 2017 cellulosic blending requirement was supposed to be 5.5 billion gallons, but Wednesday's announcement set that threshold at 312 million gallons. That industry has been slow to grow, renewable fuel advocates will argue, because of confusion over the future of the RFS beginning with the 2014 RVOs.

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The announcement represents an increase of about 700 million gallons from the 2016 RVO, EPA says. Aside from the 14.8 billion gallon potential for corn ethanol, the 2017 RVO sets the total advanced biofuel target at 4 billion gallons.

Renewable fuels advocates were less than thrilled with the proposal, having hoped that EPA would at least have set RVOs at statutory requirements. Bob Dinneen, president and CEO of the Renewable Fuels Association, said EPA failed to meet its stated goal of getting the program “back on track.”

“The agency continues to cater to the oil industry by relying upon an illegal interpretation of its waiver authority and concern over a blend wall that the oil industry itself is creating,” Dinneen said in a statement. RFA is party to a lawsuit with seven other groups challenging EPA's use of an infrastructure waiver in last year's multiyear RVO.

RFA's allies in the lawsuit include Growth Energy, the National Corn Growers Association, the Biotechnology Innovation Organization, Americans for Clean Energy, the American Coalition for Ethanol, and the National Sorghum Producers. They contend that the EPA is citing nonexistent statutory authority to use infrastructure concerns to set RVOs below the blend wall, or a perceived cap on the amount of renewable fuels the marketplace can absorb. A ruling is expected in early 2017.

Chip Bowling, NCGA president, pointed out that EPA is moving “in a better direction,” but said he was “disappointed” with figures that came in under statutory levels.

“Any reduction in the statutory amount takes America backward,” Bowling said in a release. “NCGA will continue fighting to hold the government accountable for its promises. We call on the EPA to follow the law, and raise the ethanol volume to statute.”

Brian Jennings, executive vice president with Americans for Clean Energy, said EPA should have used Energy Information Administration data to set the volumes higher than called for in the proposal.

“EPA has claimed they can't require oil companies to add more ethanol to a shrinking gasoline pool because of the so-called E10 blend wall,” Jennings said. “Under that logic, EPA's ethanol blending volumes for 2017 should increase to statutory levels because gasoline use is on a steady rise and will set a new record this year.”

Brent Erickson, executive vice president of BIO's Industrial and Environmental Section, pointed to the litigation challenging EPA's interpretation of the infrastructure waiver. He said he is concerned that the agency is doing it again.

“As BIO has explained in past comments to the agency, EPA cannot rely on such an interpretation of the statute to expand its authority and rewrite the rules governing the congressionally established volume requirements,” Erickson said. “We are concerned that EPA is repeating this and other errors from EPA's untimely final rule for the 2014, 2015 and 2016 RFS volumes, issued late last year.”

The proposal also includes the biomass-based diesel figures for 2018 at 2.1 billion gallons. Anne Steckel, National Biodiesel Board's vice president of federal affairs, said she “appreciated” the timeliness of the announcement - 11 days earlier than last year - but wishes EPA would have set more ambitious volumes.

“This proposal significantly understates the amount of biodiesel this industry can sustainably deliver to the market,” Steckel said. “We have plenty of feedstock and production capacity to exceed 2.5 billion gallons today, and can certainly do so in 2018.”

If renewable fuel and ethanol interest can agree on anything, it's that both sides of the debate are disappointed in today's announcement, albeit for very different reasons. The American Petroleum Institute was calling for a mandate that capped at 9.7 percent of gasoline demand, or about 13.6 billion gallons. API's Frank Macchiarola said the figures show that the RFS is in need of a legislative overhaul, something that would infuriate the ethanol industry.

“Consumers' interest should come ahead of ethanol interests,” said Macchiarola.

Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, offered similar sentiments. In a statement, he said the proposed levels “go beyond marketplace realities.” He, too, called for repeal or significant reform of the RFS.


The Environmental Working Group, long and vocal opponents of corn ethanol, also put out a statement looking negatively at the announcement.

"The Administration's decision continues a wrong-headed policy that promotes a fuel that is bad for the environment," EWG Research Analyst Emily Cassidy said. 


Senate Environment and Public Works Committee Chair Jim Inhofe, R-Okla., used the occasion to restate his distain for the RFS. He said the EPA is disregarding “market realities related to demand for gasoline and the availability of cellulosic biofuel. As I've said before,” he added, “the RFS is a flawed program that creates nothing but uncertainty and unnecessary volatility for our refiners.”


Sen. Heidi Heitkamp, D-N.D., said the EPA should “meet its legal obligations and set ambitious standards going forward.”

“Especially at a time of low commodity prices, it is unacceptable for EPA to create even more uncertainty for our corn, soybean, and canola growers who depend on the biofuels industry as a reliable market for their crops,” she said.


Iowa Republican Senator Chuck Grassley agreed, saying that the legislative history of the EISA should have prevented EPA from citing infrastructure concerns in the RFS.

"I worry that the EPA continues to rely too much on arguments from Big Oil that distribution infrastructure is lacking," Grassley said. "Congress explicitly rejected distribution infrastructure as a reason to justify lower blending targets. The EPA needs to pay attention to that fact." 


Public comment will be accepted on the proposal until July 11. A public hearing on the proposal will be held in Kansas City, Missouri, on June 9. EPA officials have said they want to finalize this year's RVO by the end of November, the statutory date set in the EISA. 

Public comment will be accepted on the proposal until July 11. A public hearing on the plan will be held in Kansas City, Missouri, on June 9. EPA officials have publicly stated a desire to finalize this year's RVOs by the end of November, the statutory date set in the EISA.

 

(This story was updated at 4:10 p.m. and 5:10 p.m. to include comment from renewable fuel advocates, the petroleum industry and lawmakers.)

 

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