EPA’s Search for Middle Ground on Biofuels Prompts Outcry on Renewable Fuel Standards

Posted December 7, 2015 at 1:20pm

The Environmental Protection Agency tried to find the middle ground with its final multiyear mandates for commercial use of biofuels, but instead prompted an outcry from supporters and opponents of the federal Renewable Fuel Standard.

EPA officials can expect lawsuits from one group or another after the mandates are published in the Federal Register. They take effect 60 days later. The agency for the first time scales back the overall yearly mandates and sets volumes for several types of renewable fuels below the levels contained in a federal energy law. The final numbers are, however, higher than a draft proposal in May.

In the rule issued on Nov. 30, EPA officials said the agency had done its best to balance congressional intent and the reality of the market demand for transportation fuels.

“Our exercising of those waiver authorities is not an attempt to undermine program growth, as some commenters argue, but rather a recognition of real world constraints that necessitate an adaptive approach to managing the program,” the agency said.

The EPA said it intended to achieve steady and continued growth in biofuel production.

“Trying to force growth at rates that prove infeasible would only undermine the certainty in the RFS program that is needed to sustain long-term growth,” the EPA wrote.

Supporters of corn ethanol, one of the major biofuels covered by the mandates, were divided over the 2016 mandate for conventional ethanol set at 14.5 billion gallons, or 500 million gallons above the May proposal, but below the 15 billion gallons called for in statute (PL 110-140). Conventional ethanol is largely corn ethanol.

The final overall mandates are 16.28 billion gallons for 2014; 16.93 billion gallons for 2015; and 18.11 billion gallons for 2016. The 2016 mandate will boost the volume of biofuels in U.S. fuels to 10.1 percent. The EPA also finalized the 2017 mandate for biodiesel fuel at 2 billion gallons.

Janet McCabe, acting assistant administrator for the EPA’s Office of Air and Radiation, said the final 2014-16 mandates for cellulosic ethanol, advanced biofuels, biodiesel and conventional aligned more closely with lawmakers’ intent for the program.

“When Congress set up the RFS, it contemplated there would be an increasing percentage of renewable fuel in the total transportation fuel pool. That’s what Congress anticipated and that’s what these volumes reflect,” McCabe said. “Over time there will be more and more choice on renewable fuels available to consumers.”

Sen. Charles E. Grassley, a Republican from the corn-growing state of Iowa, said he was disappointed.

“The EPA doesn’t seem to appreciate that the law on the books requires strong biofuels targets and that consumers like the chance to use alternate fuels,” he said in a statement. “Instead, the EPA took a flawed approach that seems to buy into Big Oil’s rhetoric.”

Several days later, Grassley said there were enough RFS supporters in Congress to block efforts by opponents who cite the tardiness of the mandates and the lower levels as evidence of a flawed energy policy that should be repealed or greatly modified.

He said congressional RFS supporters should redouble efforts to educate colleagues about the evolution over 30 years of federal policy on renewable fuels and the creation of the biofuels program.

“We need to do a better job with these new members who come in with an ideology that government should not pick winners and losers,” Grassley said. “We have 30 years of investment and we need to see it through to maturity.”

Grassley might win over a member or two but many lawmakers seem firmly rooted in their positions.

House Energy and Commerce Chairman Fred Upton, R-Mich., called the statute flawed.

“The economic, technological, and environmental assumptions that gave rise to the RFS are dramatically different than the realities we face today, and it is time to finally consider updating this program,” Upton said in a statement.

Upton, whose committee has jurisdiction over biofuels policy, said changes should “be mindful of the impact on the agricultural sector, renewable fuel producers, refiners, automakers, fuel retailers, and other affected parties, and most importantly of all we need to do what is best for American consumers.”

The oil industry, which considers the RFS a costly, impractical mandate on refiners and others who mix biofuels into gasoline, renewed its opposition.

The “EPA’s final rule relies on unrealistic increases in sales of higher ethanol fuel blends despite the fact that most cars cannot use them,” said Jack Gerard, president and chief executive officer of the American Petroleum Institute. “Motorists have largely rejected these fuels.”

DuPont Co., the chemical giant, criticized the EPA’s actions. The company recently opened a $225 million commercial cellulosic ethanol plant in Iowa capable of producing 30 million gallons of fuel when fully operational.

“This approach undermines fundamental principles of the RFS that have served as the foundation for the economic, energy security and environmental successes of the renewable fuel sector in the United State to date,” the company said.

DuPont global biofuels director Jan Koninckx, in an interview prior to the release of the final mandates, said U.S. investors were increasingly uncertain about federal biofuels policy and cool to the idea of putting money into cellulosic ethanol, a fuel made from woody plants and non-food sources.

“We will go on licensing this technology in other parts of the world. That is simply going to be our focus now,” Koninckx said.

In the corn ethanol industry, EPA’s actions drew mixed reactions.

Tom Buis, co-chairman of Growth Energy, said his organization would review the final mandates. He didn’t rule out a legal challenge to EPA’s use of current obstacles to market distribution of biofuels in its rationale for keeping the mandates below the law.

“Did we get 100 percent of what we wanted? No. Did they move the ball forward, did they improve it? They definitely improved from the [May] proposal,” Buis said.

The Renewable Fuels Association, an ethanol industry organization, and the National Farmers Union accused the EPA of straying from the federal energy law governing the RFS program.

“The administration’s decision to issue RFS volume obligations below their statutory requirements exacerbates the serious damage already done to the renewable fuels industry and America’s family farmers,” Roger Johnson, president of the National Farmers Union, said in a statement.

The EPA offered some clarity for refiners and other parties obligated to use biofuels despite the fact that 2014 is over and 2015 is nearly at an end. Refiners will be able to use credits they have generated or bought from others if their actual biofuels use in those two years falls short of the mandate.

API’s Gerard said the 2014-16 overall mandates underscore opponents’ message that Congress scale back the RFS or repeal it.

In May, EPA proposed overall biofuels use of 15.93 billion gallons for 2014; 16.3 billion gallons for 2015; and 17.4 billion gallons for 2016, below the 2007 energy law calling for 20.5 billion gallons in 2015 and 22.25 billion gallons in 2016.

The proposals for conventional or corn ethanol in May called for 13.25 billion gallons in 2014; 13.4 billion gallons in 2015; and 14 billion gallons in 2016. The final mandates are higher: 13.6 billion gallons in 2014; 14.05 billion gallons in 2015; and 14.5 billion gallons in 2016.