Risk has Arrived for RFS Advanced Pool

On Oct. 4, the U.S. EPA published a Notice of Data Availability soliciting input on lowering the renewable volume obligation (RVO) mandates even further than the proposed 2018 volumes released this summer.
By Michael McAdams | November 09, 2017

 In my most recent Biomass Magazine column, I discussed the risk on the horizon for the advanced biofuel mandate under the Renewable Fuel Standard, and it seems as though this risk has indeed arrived. On Oct. 4, the U.S. EPA published a Notice of Data Availability soliciting input on lowering the renewable volume obligation (RVO) mandates even further than the proposed 2018 volumes released this summer. Let me be clear, NODA spells disaster for our entire industry, and put simply, must be completely defeated.

Not often does something so one-sided come across my desk, even in this line of work. The NODA is littered with footnotes referencing the RVO comments from the American Fuel & Petrochemical Manufacturers and Valero. The document requests comments on how much the advanced pool should be reduced, given changing market conditions and “economic harm” that could potentially occur in the future. The three principal assertions are: the definition of “domestic supply” only applies to what is physically produced in the U.S.; biodiesel supply in the U.S. will shrink due to pending trade cases; and the expiration of the biodiesel blenders credit has further reduced the amount of domestically produced supply, consequentially raising the price of biodiesel, and making it uncompetitive with cheap diesel prices.

First, and most importantly, these arguments ignore the underlying objective of the RFS statute. The RFS sought to increase the availability of environmentally sustainable fuel in the gasoline and diesel pools. There is simply no debate to be had that the RFS seeks to increase the amount of fuels providing GHG reductions, yet the administrator is seeking to drop the mandates lower than the volumes actually blended in the previous year. The EPA administrator has repeatedly asserted—in his congressional confirmation hearings, and since he took office—that he will implement laws as they are written. Whether or not Administrator Pruitt approves of the RFS program, he is obligated to implement it as written, consistent with congressional intent.

The principle target of EPA’s NODA is the biomass-based diesel pool. The document requests comments on the impact of the absence of the blenders credit for 2017, the effect of the Argentinian and Indonesian countervailing duties case, and the potential increase in the cost of biodiesel as a result of these two factors.   

Second, regarding the impact of the tax credit, we have continued to see solid production of biodiesel throughout 2017. In fact, as of Sept. 1, the industry has already generated more than 2.4 million RINs, and is on track to produce more RINs and gallons than either the 2017 or ‘18 RVO requirements.

Third, as for the antidumping case, the markets are already adjusting to the possibility of reduced gallons flowing from Argentina and Indonesia. Instead, European gallons are shipping to the U.S. East Coast to offset the reduction. The logistical advantage of delivering those gallons from large, efficient Canadian and European producers continues to provide security of supply for the market. It also helps to hold the consumer’s price down, as discretionary blenders have access to gallons where they need them, allowing them to create RINs for obligated parties.

Under the current system, everyone wins: the producers, the fuel marketers, and, most importantly, consumers. Under EPA’s proposal, the only winners will be the merchant refiners who have not invested to comply with the RFS in the first place. The losers will be the producers and marketers who did make these investments, as well as the environment, since fewer sustainable fuels will end up available on the market.

This is an ill-conceived proposal originated by Pruitt. I hope everyone in the biofuels industry commented on the proposed NODA by Oct. 19, because even a short comment in opposition to the proposal will demonstrate to the White House and EPA that the industry is united in its opposition to this proposal, and that we have come together to protect the basic RFS program and the future of advanced biofuels. Furthermore, I encourage you to write the White House and your members of Congress to let them know your opposition.

Author: Michael McAdams
President, Advanced Biofuels Association