WASHINGTON, Nov. 30, 2015 – The Environmental Protection Agency on Monday finished one chapter of drama surrounding the Renewable Fuel Standard, only to likely begin another as potential lawsuits loom.
The controversial release set the final renewable volume obligations (RVOs) for 2014, 2015 and 2016. Stakeholders were mainly looking to see what was decided for 2016, the only year that is really being affected. The RVO for 2016 came in at 18.11 billion gallons, with the potential for about 14.5 billion gallons of that coming from corn ethanol and the remaining 3.61 billion gallons from advanced biofuels.
On a call with reporters, Janet McCabe, acting assistant administrator for EPA's Office of Air and Radiation, said the proposals represent “ambitious, achievable growth,” sticking with language she used when the agency first proposed this round of RVOs in May. That line is a nod to EPA’s use of waiver authority to issue RVOs lower than the congressional mandate, especially in areas like cellulosic biofuel, which she said “have not developed as fast as Congress had anticipated.
“We must balance Congress’ clear intent to increase the use of renewable fuels . . . with the real world circumstances that have affected progress toward such goals,” she said, adding that the volumes finalized on Monday “represent significant growth in renewable fuels.”
In May, EPA proposed a 17.4 billion gallon total with 11.4 billion gallons potentially coming from corn ethanol. Monday’s announcement is a jump of about 710 million gallons, but that number is still well short of the 22.25 billion gallons called for in the Energy Independence and Security Act of 2007. If achieved, the 2016 final rule will be about 1.8 billion gallons higher than actual 2014 usage, with much of that increase – almost 1 billion gallons – coming from increases in advanced biofuel targets.
McCabe’s glass-half-full approach toward Monday’s announcement was echoed by Agriculture Secretary Tom Vilsack, who said it was “a positive step forward” for the growth of the RFS, but industry representatives and Capitol Hill offered more of a mixed bag of opinions.
In a statement, National Corn Growers Association President Chip Bowling said NCGA was “pleased” to see the upward revision from the original proposal, but said that there would be a “negative impact” from “any reduction in the statutory amount.”
Joe Jobe, CEO of the National Biodiesel Board, said the EPA’s decision was “a good rule” that “may not be all we had hoped for but it will go a long way toward getting the U.S. biodiesel industry growing again.”
On a call with reporters, Growth Energy co-chair Tom Buis said the announcement means “we are breaking through the so-called blend wall,” a perceived cap on the amount of renewable fuels consumers will buy. He noted that a few years ago, “we were looking at numbers that were actually going backward from what was being proposed,” rather than the increase proposed on Monday.
While there were pieces of optimism tucked in statements of many renewable fuel advocates, there was none in the official remarks from Renewable Fuels Association President and CEO Bob Dinneen. He said the announced RVO “turns our nation’s most successful energy policy on its head.”
“Today’s decision will severely cripple the program’s ability to incentivize infrastructure investments that are crucial to break through the so-called blend wall and create a larger market for all biofuels,” Dinneen said.
The oil industry isn’t too thrilled with the announcement either. Bob Greco, downstream group director with the American Petroleum Institute, said demand for ethanol blends higher than E10, which represents the majority of the gasoline sold in the U.S., shows that the public isn’t demanding higher blends of ethanol, and the EPA is simply forcing it on them.
“EPA is pushing fuels that the consumer doesn’t want,” Greco said. “We shouldn’t have the government attempting regulatory overreach and forcing fuels on the market that the consumer doesn’t want.”
Chet Thompson, president of the American Fuel & Petrochemical Manufacturers, agreed with Greco, saying consumers don’t want to see an announcement that he insinuates is politically motivated.
“Obligated parties should not have the responsibility to force consumers to use products they either don’t want or that are incompatible with their cars, boats, and motor equipment,” Thompson said. “It’s also unclear how EPA can simultaneously recognize the E10 blend wall and yet establish requirements that exceed those constraints. This decision is hard to view as anything other than an attempt by EPA to placate the biofuels lobby.”
Many livestock groups are also opposed to the RFS due to the upward pressure it creates on corn prices, but perhaps none have been more vocal than the National Chicken Council. In a statement, NCC President Mike Brown said the RFS has cost chicken producers alone more than $50 billion in higher feed costs.
"It's ironic that while U.S. ethanol is competitive in the global export market, the ethanol industry continues to rely on expanding the RFS mandates domestically," Brown said. "If anything, today's announcement by EPA should be yet another reminder that the RFS, and its implementation, are broken beyond repair."
The nation’s two largest farm organizations, the American Farm Bureau Federation and the National Farmers Union, also spoke out against the rule. AFBF President Bob Stallman said “we need more biofuels, not less” and said AFBF was “disappointed” with the agency’s decision. NFU President Roger Johnson said the announcement “exacerbates the serious damage already done to the renewable fuels industry and America’s family farmers.”
The mixed reaction to the announcement also spread to Capitol Hill, where 184 lawmakers recently sent a letter to McCarthy asking her not to break the blend wall. In a statement, Senate Agriculture Committee ranking member and Michigan Democrat Debbie Stabenow said she was “pleased that the target levels have been increased from the initial proposal,” but did note that she wants to eventually see EPA reach the statutory figures.
Collin Peterson, Minnesota Democrat and House Ag Committee ranking member, shared her sentiments, saying that Monday’s announcement “isn’t everything we wanted, but is an improvement on the disastrous proposed rule.”
Sen. Chuck Grassley, R-Iowa, said the rule is “a slight improvement but it still sells biofuels short.”
“The EPA just doesn’t appreciate that farmers and biofuels producers can generate enough renewable fuels to meet the goals set by Congress,” he said. “Instead, the EPA took a flawed approach that seems to buy into Big Oil’s rhetoric. The new rule is not only more than two years late, but it also sets back the development of next-generation biofuels.”
Sen. Heidi Heitkamp, a North Dakota Democrat, said the final rule “represents some progress” in the RFS “after years of delays.”
“Unfortunately, these levels still fall far short of what Congress set out,” Heitkamp said. “If EPA doesn’t get serious about encouraging biofuels – as the law requires – the agency’s inaction and unambitious targets will hamper North Dakota job growth and reduce energy security.”
Stabenow, Peterson, Grassley, and Heitkamp all serve on their respective chambers’ committees on agriculture, but the RFS has drawn interest from a wide spectrum of lawmakers. In a statement, Senate Environment and Public Works Committee Chairman Jim Inhofe, R-Okla., said the RFS “as a whole is remarkably flawed” and “was based on a number of assumptions that no longer reflect reality.”
In the House, Energy and Commerce Committee Chairman Fred Upton, R-Mich., said “it is time to finally consider updating this program” due to “dramatically different” circumstances that have changed since the RFS was first passed. He also said that before changes are made, “we need to be mindful of the impact on the agricultural sector . . . and other affected parties.”
Today’s announcement comes after several years of delayed implementation forced API and AFPM to sue EPA and create a timeline for RFS announcements. While this rule is final, all indications are that it may be challenged – by both sides – in court as renewable fuels advocates protest EPA’s use of waiver authority and the oil industry continues its efforts to alter the law.
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