The US Renewable Fuel Standard and repeal, reform: The Digest’s 5 Minute-Guide

The Great Compromise

So, if and when these parties get together to work out the kinks, what can we expect?

It’s no secret that API and AFPM won’t support anything less than full repeal of the RFS. But, that could work to their disadvantage if Congress is hungry for compromise.

Looking forward, Congress will be quick to latch onto any legislative plan that prevents the blend wall from escalating. The RFS was designed to give the EPA broad control over the mandate levels, and Bob Dinneen continued to emphasize that many problems could be solved within this framework.

Unfortunately, as Rep. Bill Cassidy (R-LA) put it: “Our side doesn’t trust EPA.”

In order to get House Republicans onboard, the biofuel industry may need to make some legislative concessions that would fundamentally alter the number of gallons required by the RFS. Rep. Jerry McNerney, (D-CA) suggested reducing then overall 36-billion gallon requirement to a 20-billion-plus requirement, with built-in flexibility to raise that number if supply exceeds expectation.

Particularly in the cellulosic pool, Congress is eager to reduce the number of mandated gallons to a level that is achievable by 2022. While Dr. Jeremy Martin asserted that “based on our analysis, the 16-billion gallon target for cellulosic biofuels in the RFS is definitely achievable,” other members of the panel were less enthusiastic, saying that that number might not be realistic until closer to 2030.

Additionally, several representatives including Rep. Steve Scalise (R-LA) called for more transparency in the RIN market. There is currently no transparency in the trading process, and the market has attracted non-oil-producing entities to hold RINs as an investment while they accrue value.

In the meantime, Michael McAdams was the only panelist to offer the Committee a direct action to relieve pressure on the cellulosic requirements:

“The Committee should, in a bipartisan way, send a letter to the EPA and call on them to immediately release the 2013 RVO. I think you’ll be surprised and you’ll see a decrease in the cellulosic number from the preproposed rule. And, you should ask [the EPA] whether they can do the 2014 and 2015 framework by November 31st.”

While cellulosic requirements through 2012 were unattainably high (deemed “phantom fuel”), the court decision handed down in favor of API and AFPM essentially prohibited the EPA from “thumbing down on the scale,” or raising the requirements artificially to stimulate production. McAdams predicted that the 2013 RVOs would be reflective of this change, and would be within reach of current producers.

One way or another, we can expect to see the Committee moving on the RFS soon as they conclude their extended inquiry on the policy. For several months, they have been soliciting stakeholder commentary on issues with the RFS through a series of white papers. In June, they hosted a hearing on the RFS from a governmental agency perspective. Yesterday’s hearing will conclude today with a panel on the agricultural interests involved.

With the Farm Bill also heading to Conference Committee, the next few months in Washington will be decisive for the future of the biofuels industry.

In today’s Digest — a Great Compromise?;  The Blend Wall Issue; the RINs situation; is the Blend Wall and RFS-buster?; concerns about E15 ethanol; RFS impact on the food sector; diversifying the fuel supply; the real problems and immediate relief; and “a way forward?” – all by following the page links below.