EPA bumps up US Renewable Fuel Standard volumes for 2015-2016, in final ruling

November 30, 2015 |

EPA-RFS-120115-cover-smIn Washington, the U.S. Environmental Protection Agency announced final volume requirements under the Renewable Fuel Standard program today for the years 2014, 2015 and 2016, and final volume requirements for biomass-based diesel for 2014 to 2017. This rule finalizes higher volumes of renewable fuel than the levels EPA proposed in June, boosting renewable production and providing support for robust, achievable growth of the biofuels industry.

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“The biofuel industry is an incredible American success story, and the RFS program has been an important driver of that success—cutting carbon pollution, reducing our dependence on foreign oil, and sparking rural economic development,” said Janet McCabe, the acting assistant administrator for EPA’s Office of Air and Radiation. “With today’s final rule, and as Congress intended, EPA is establishing volumes that go beyond historic levels and grow the amount of biofuel in the market over time. Our standards provide for ambitious, achievable growth.”

The final 2016 standard for cellulosic biofuel — the fuel with the lowest carbon emissions — is nearly 200 million gallons, or 7 times more, than the market produced in 2014. The final 2016 standard for advanced biofuel is nearly 1 billion gallons, or 35 percent, higher than the actual 2014 volumes; the total renewable standard requires growth from 2014 to 2016 of more than 1.8 billion gallons of biofuel, which is 11 percent higher than 2014 actual volumes. Biodiesel standards grow steadily over the next several years, increasing every year to reach 2 billion gallons by 2017.

The RFS, established by Congress, requires EPA to set annual volume requirements for four categories of biofuels. The final rule considered more than 670,000 public comments, and relied on the latest, most accurate data available. EPA finalized 2014 and 2015 standards at levels that reflect the actual amount of domestic biofuel used in those years, and standards for 2016 (and 2017 for biodiesel) that represent significant growth over historical levels.

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Whew!

Well, you might think to yourself, why is the EPA finalizing a mandate for 2014 and 2015 n November 2015. Well, they were two years late on the 2014 mandate and a year late for 2015. But they are on time for 2016. Let’s celebrate.

What’s next?

Likely, someone is going to sue the EPA. Possibly a coalition of biofuels trade groups, who will focus on getting court rulling that the EPA does not have the authority to create a distribution waiver by redefining a waiver authority basded on shortfalls in the “supply of renewable fuels” to mean “supply of renewable fuels OR gas pumps to deliver fuels to consumers.”

What the numbers mean

First of all, the EPA increased the volumes from the spring 2015 proposal, after receivging 670,000 comments. However, much of that stems from correcting an accounting error in the original proposal, and because rising gasoline consumptino increases the available pool for E10 ethanol blends.

Bottom line, the EPA has embraced an implied “distribiution waiver”, something that was proposed in the House version of the original EISA Act, not included by the Senate, and eliminated in the final bill. Congress feared at the time that the oil & gas industry would use its effective monopoly of infrastructure to strangle growth of biofuels past an E10 saturation point, which essentially happened. Critics say the EPA and Obama Administration have caved in to Big Oil on this one.

Reaction from Stakeholders

Chip Bowling, president, National Corn Growers Association

“America’s corn farmers are proud to grow a cleaner burning, renewable fuel source for America and the world. In July, we asked the Environmental Protection Agency to restore the 2014-16 corn ethanol renewable volume obligation to comply with the Renewable Fuel Standard as passed by Congress and signed into law.

“While we are pleased to see the EPA take a step forward and revise its original proposal, the fact remains that any reduction in the statutory amount will have a negative impact on our economy, our energy security, and the environment. It is unfortunate that Big Oil’s campaign of misinformation continues to carry weight in the court of public opinion, and in this decision. The Renewable Fuel Standard has been one of America’s most successful energy policies ever. Because of it, our economy is stronger, we are more energy independent, and our air is cleaner. We should be strengthening our commitment to renewable fuels, not backing down.

“In light of the EPA’s decision, we are evaluating our options. We will fight to protect the rights of farmers and consumers and hold the EPA accountable.”

Joe Jobe, CEO, National Biodiesel Board

“This decision means we will displace billions of gallons of petroleum diesel in the coming years with clean-burning biodiesel. That means less pollution, more American jobs, and more competition that is sorely lacking in the fuels market,” said NBB CEO Joe Jobe. “It is a good rule. It may not be all we had hoped for but it will go a long way toward getting the U.S. biodiesel industry growing again and reducing our dangerous dependence on fossil fuels.”

“I want to thank President Obama, Administrator McCarthy and Secretary Vilsack for supporting growth in the program and for their commitment to biodiesel,” Jobe added. “We have seen three years of damaging delays, but the Administration took a strong step forward today that should put biodiesel and the RFS on a more stable course in the years to come.”

“We will continue working with the Administration toward stronger standards moving forward that drive innovation and productivity. We certainly think the biodiesel and overall Advanced Biofuel standards could and should have been higher. The production capacity is there, and we have surplus fats and oils that can be put to good use.”

Brent Erickson, Executive Vice President of BIO’s Industrial & Environmental Section

“Today’s rule is a severe blow to American consumers and the biofuels industry. To date, BIO member companies have invested billions of dollars to develop first-of-a-kind advanced and cellulosic biofuel production facilities. EPA’s two-year delay in finalizing the rule created untenable uncertainty and shook investor confidence in the RFS program. BIO estimates that investment in the advanced biofuel sector has experienced a $13.7 billion shortfall due to EPA’s delays and proposed changes. Unfortunately, this final rule exacerbates the problem.

“As EPA has acknowledged, its delay allowed obligated parties to act as though the law did not exist. The delay increased U.S. carbon emissions by millions of tons over the past two years, compared to what could have been achieved with required use of biofuels. As the United States enters negotiations with the rest of the world to limit greenhouse gas emissions, EPA is putting in place an RFS rule that will sacrifice achievable reductions of emissions in the transportation sector.

“Moreover, EPA has violated the law. As BIO explained in its formal comments on the proposed rule, EPA has misconstrued Congressional intent, and its attempt to change the plain meaning of the RFS law regarding waivers is a needless and impermissible departure from EPA’s successful implementation of the RFS program through 2013. EPA’s action will undoubtedly trigger Court challenges that prolong and aggravate uncertainty about this program. BIO, its members and allied groups are now considering their available legal options to remedy EPA’s violation of the Clean Air Act.

“EPA’s decision increases carbon emissions from the transportation sector above achievable levels. This backsliding on transportation emissions – which account for 30 percent of all U.S. carbon emissions – unnecessarily and regrettably undermines America’s credibility at the Paris Climate Change Conference, which starts next week.”

Tom Buis, chairman, Growth Energy

“Growth Energy and its members are pleased to see that the President and the Environmental Protection Agency have recognized the need to move the renewable fuel industry past the so-called blend wall for the sake of America’s climate, energy security and rural economy. While this rule still relies on a flawed methodology that sets renewable fuel volumes below the statutory levels enacted by Congress, it is an important improvement from the proposed rule, and moves us closer to getting America’s most effective climate policy back on track and providing certainty for biofuels in the marketplace.

“Specifically, we are pleased that the RVOs have been finalized after such a long delay and that the levels have increased from the original proposal. This final rule makes it possible to drive the growth of higher ethanol blends through the so-called blend wall, giving consumers choices at the pump, such as low-cost E15. Additionally, the numbers for 2016 represent a final rule closer to the statutory levels established by Congress, avoid the “reset” and indicate a more certain future for renewable fuels.

“However, we remain concerned that the final rule continues to rely on the “distribution waiver” that redefines supply as demand and was rejected by Congress when the RFS was enacted into law. Of particular concern is that by using such a waiver, the oil industry is being rewarded for its unwillingness to follow the law and invest in infrastructure to move toward cleaner, renewable fuel, which sets a dangerous precedent for the future of the program. The uncertainty this waiver will create risks sending investment in the next generation of renewable fuel overseas just as this new, homegrown industry is taking off.

“We appreciate Administrator McCarthy’s stated commitment to return to statutory levels, and our industry is committed to working with her to ensure the final rule announced today is the first step toward fulfilling that commitment.”

RFA President and CEO Bob Dinneen 

“EPA’s decision today turns our nation’s most successful energy policy on its head. When EPA released its proposed RFS rule in May, the agency claimed it was attempting to get the program back on track. Today’s decision, however, fails to do that. It will deepen uncertainty in the marketplace and thus chill investment in second-generation biofuels. Unlike Big Oil, the ethanol industry does not receive billions in tax subsidies and the RFS is our only means of accessing a marketplace that is overwhelmingly and unfairly dominated by the petroleum industry. 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.

“There is simply no reason for EPA to adopt API’s blend wall narrative. Data shows that EPA, in its initial RFS proposal, understated the likely market for E85 and non-ethanol conventional biofuels in 2016 by at least 440 million gallons. The data suggests there will be at least 14.7 billion gallons of undifferentiated renewable fuel blended next year. With approximately 2 billion surplus RIN credits already available for refiners to use for compliance in 2016, and with another 900 million RINs potentially becoming available from 2015 over-compliance, the EPA’s decision to lower the 2016 RVO below the statutorily imposed level of 15 billion gallons is simply unnecessary.

“What makes today’s decision even more perplexing is that it continues to reflect the administration’s conflicting views regarding ethanol. The Department of Agriculture continues to fight for ethanol, working hard to secure necessary infrastructure, promoting exports, correcting food versus fuel myths, investing in new technologies and new feedstocks and advocating for ethanol’s positive climate change benefits. The Department of Energy, too, works hard to complete biofuel research on higher ethanol blends and infrastructure that is moving this industry forward. Why is EPA so out of step?

“Today’s decision by EPA furthers that conflict and, sadly, significantly undercuts President Obama’s credibility as he prepares to take the world stage to address climate change at the COP21 talks in Paris. RFA recently commissioned a study which concluded that biofuels consumed under the RFS have reduced U.S. greenhouse gas (GHG) emissions by 354 million metric tons of carbon dioxide-equivalent since 2008. For context, that is the equivalent of avoiding carbon dioxide emissions from 74 million passenger cars. How can the president speak credibly about the need to address climate change on a global stage when his EPA is failing to fully implement the most potent and proven weapon to combat climate change in his own backyard?”

“This final rule directly contravenes the statute and places the potential growth for biofuels like ethanol in the hands of the oil companies. It will have the unfortunate consequence of increasing Big Oil’s ability to thwart consumer choice at the pump without even a scintilla of fear that EPA will enforce the statute. With no consequences for Big Oil’s bad behavior, consumers will be denied greater access to the lowest cost liquid transportation fuel and number one source of octane on the planet.”

POET CEO Jeff Broin 

“The EPA volumes announced today are a move in the right direction, and they correctly call the oil industry’s bluff about our ability to surpass 10 percent ethanol use in the U.S.

“However, these numbers fall well short of our capability to provide clean, domestic ethanol to America’s drivers. Additionally, the EPA’s method for arriving at these numbers is contrary to the intent of the Renewable Fuel Standard.

“I look forward to breaking the so-called ‘blend wall’ next year and proving this country’s ability to replace more imported oil with biofuels produced within our borders. In the future, we need to see a stronger and more consistent commitment to renewable fuel from Washington if we are ever going to realize the true potential of renewable fuels, including the development of cellulosic ethanol.”

Brooke Coleman, Executive Director, Advanced Biofuels Business Council 

“What we’re seeing in the RFS final rule, volumetrically at least, is continued growth in renewable fuel blending. That counts for something, predominantly in markets already inclined to offer consumers more renewable fuels. But it is frustrating that the Administration missed this opportunity to fix two waiver issues that are undercutting U.S. investment in low carbon, advanced biofuels. Waivers are absolutely critical to U.S. investment, because they define for investors when the field of play can be altered. It is confounding that the Obama Administration would side with the oil industry against Democratic members of Congress and the advanced biofuels industry in reinterpreting its waiver authority to allow for “distribution waivers,” which would permit EPA to waive the RFS if the oil industry refuses to make arrangements to distribute renewable fuel and comply with the law.

“The entire purpose of the RFS is to prohibit oil companies from using their market power to block the distribution of renewable fuels. We do not expect this reinterpretation to stand up in court; but regardless, it is the exact type of policy bait and switch that chills investor confidence in the United States. And while initial discussions with EPA have been productive, we must also move quickly to address waiver issues in the cellulosic pool, which currently allow the oil industry to buy year-end waivers to avoid buying cellulosic gallons. The Obama Administration has supported advanced biofuel development, and certainly the programs administered by the U.S. Department of Agriculture are an important part of that picture, but letting the oil industry off the hook with industry-friendly waivers is not consistent with the Administration’s position on innovation, clean energy development and climate change – especially against the backdrop of the President’s message in Paris. What’s at stake when it comes to the RFS is not whether the advanced and cellulosic biofuels industry will succeed commercially; but rather, whether it happens here in the United States. The Council will continue to work with the Administration and stakeholders to get the RFS back on track. We are not there yet with this rule, but we are confident that we can continue to improve the program in 2016.”

Mike McAdams, President, Advanced Biofuels Associstion

“The Advanced Biofuels Association applauds EPA’s support of next-generation biofuels. Today’s final rule is a step in the right direction that recognizes the importance of growing supplies of advanced and cellulosic biofuels to help provide more sustainable fuels for our future to combat climate issues. Only advanced biofuels reduce greenhouse gas emissions by more than 50% compared to today’s gasolines and diesels.

While we appreciate EPA’s efforts, we continue to believe that legislative reform is required to address ongoing hurdles facing next-generation biofuels. Congress needs to strengthen the RFS to help focus and expedite the production of advanced biofuels. Outdated definitions, cellulosic waivers, as well as overall program uncertainty have created significant barriers to entry for the advanced and cellulosic industry. That’s why ABFA will continue to work with Congress and the Administration to reform and strengthen the RFS so it can deliver on the promise of next-generation renewable fuels.”

Brian Jennings, Executive Vice President of the American Coalition for Ethanol 

“When Congress enacted the Renewable Fuel Standard it voted to side with those of us who said ‘yes we can’ reduce greenhouse gas emissions from motor fuel, ‘yes we can’ allow consumer access to E15 and flex fuels, and ‘yes we can’ spark innovative ways to produce cleaner fuels,” said Jennings.  “While we appreciate that the Administration made incremental improvements compared to the proposed RFS rule, unfortunately, today they are choosing to side with those who say ‘no, we can’t’.  Regrettably, EPA’s final RFS rule protects the old way of doing business by obstructing consumer access to cleaner fuels, stifling competition in the marketplace, and undermining innovation.  Given all the President hopes to accomplish at the international climate talks which begin in Paris today, it is inconsistent for the Administration to unravel the most effective policy at their disposal to support low carbon fuels.”

Despite the fact that the Clean Air Act calls for ethanol use to exceed ten percent of gasoline consumption, EPA’s final rule sets blending targets for 2015 and 2016 which fall short of statutory requirements and instead draw on the legally questionable E10 “blend wall” methodology put forward by oil companies who don’t want ethanol to comprise more than ten percent of fuel use in the U.S. Congress did not authorize EPA to adjust volumes based on the E10 blend wall.

“Thanks to the RFS, ACE members have made significant biofuel production advancements and we know that further innovation is just around the corner.  ACE is strongly committed to ensuring consumers have access to higher blends of ethanol and we will explore all options at our disposal to achieve that goal with this Administration and the next.”

American Energy Alliance President Thomas Pyle

“EPA bureaucrats continue to prove they are incapable of managing the RFS. The agency consistently misses deadlines and sets unrealistic levels for cellulosic ethanol, which is expensive and not commercially viable. This gross mismanagement is just one more reason to scrap the entire mandate, and why anything short of full repeal would just make the RFS worse.

“The RFS was ill-conceived from the get-go. The mandate distorts markets, raises gasoline prices, and benefits a limited few at the expense of all Americans. Partial repeal would only make the mandate worse by moving it closer to a California-style Low Carbon Fuel Standard, causing Americans to pay more at the pump. Full repeal is the only option for those concerned about the interests of all Americans, and not just the self-interests of the biofuel industry and its lobbyists.”

The Urban Air Initiative President Dave VanderGriend

“EPA has made it clear it has no intention of opening the market for ethanol and other biofuels. We have been challenging EPA for years to take actions that would protect public health, lessen our dependence on petroleum, and reduce CO2 and other harmful emissions. The EPA has rejected us at every turn.”

“This is simply one program. We can move well beyond that and we will not let EPA and its faulty, inaccurate models define our value and limit our growth. EPAs action should be a message to the ethanol industry that it needs to secure its own future and recognize that ethanol’s highest value is as a clean fuel that can provide high octane to reduce the toxic compounds in gasoline while reducing a range of harmful emissions.

UAI has identified a number of steps to provide access to the market, all of which will improve fuel quality and protect public health.  Specifically, UAI has called for EPA to:

  • Lift the Vapor Pressure Restriction on Higher Blends since RVP actually goes down as ethanol volumes go up above E10;
  • Enforce Section 202 (l) of the Clean Air Act to limit aromatics and open the market for ethanol as a source of clean octane;
  • Reinstate fuel economy credits (CAFE) and prorate them for mid-level blends;
  • Make 87 AKI gasoline the minimum octane for all states;
  • Revise modeling for both the life cycle analysis of biofuels and the emissions profile, notably the MOVES Model.

“The RFS has done its job up to this point in building a bridge but from here on we need to seize our future and look forward, not backward.”

Brazilian Sugarcane Growers Association

“UNICA is heartened by EPA’s recognition the RFS requirements for advanced biofuel can and should increase. Today’s decision appears to leave the door open for continued American access to sugarcane ethanol from Brazil, one of the cleanest and most commercially ready advanced biofuels available today.”

“EPA has taken another step toward a cleaner, healthier environment, and Brazilian sugarcane producers stand ready to make even higher volumes of advanced biofuel available to America. According to the latest estimates, Brazil is on track to produce nearly six percent more sugarcane ethanol this year compared to 2014 – an additional 450,000 gallons. Under the right market conditions, Brazil has the capacity to produce up to two billion additional gallons of this advanced biofuel for export according to installed capacity figures.”

“America and Brazil have built a thriving global biofuels market, creating economic growth and environmental benefits, through good policy implementation. UNICA applauds today’s decision by EPA to maintain that growth by encouraging production of clean, low-carbon fuels.”

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