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Industry expresses optimism as RFS comment period closes

By Erin Voegele | January 28, 2014

The public comment period on the U.S. EPA’s proposed rule to set 2014 volume requirements under the renewable fuel standard (RFS) closes on Jan. 28 at 11:59 p.m. Already, more than 15,500 comments have been filed on the proposal.

The EPA first released the proposed rule on Nov. 15. The 60-day public comment period officially opened Nov. 29. While the EPA has reduced the cellulosic requirement of the RFS in prior years’ rulemaking, the 2014 proposal marks the first time the agency has proposed reducing the overall renewable fuel requirement. Within the proposed rule, the EPA cited the E10 blend wall as its reason for reducing the renewable fuel volume requirement from its statutory level of 18.15 billion gallons to a proposed range of 15-15.52 billion gallons. If finalized, the 2014 requirement would be below the 16.55 renewable fuel requirement set in the 2013 RFS.

The proposal also reduced the volume requirement for advanced biofuel from the statutory level of 3.75 billion gallons to 2-2.51 billion gallons. In addition, the cellulosic requirement was lowered from the statutory level of 1.75 billion gallons to range of 8-30 million gallons.

Since the proposed rule was made public, the biofuel industry and other stakeholder groups have launched an impressive campaign to support a strong RFS. A large part of that effort aimed to encourage industry professionals and members of the general public to submit comments to the EPA calling for the reinstatement of statutory renewable fuel volume levels.

Tom Buis, CEO of Growth Energy, told Ethanol Producer Magazine that he thinks the effort to get those stakeholders to comment has been successful. In addition to plant workers and corn farmers, he stressed that there are a lot of people in the U.S. that have their livelihoods directly linked to the production of biofuels.

Buis said it takes education and outreach efforts to get those stakeholders to engage. So far, he said the number of those stakeholders who are engaging in the process looks encouraging.

Regarding the success of these efforts, Buis said he thinks the biofuel industry has done a great job of demonstrating the errors in judgment made in the original proposal. “We think that we have provided the intellectual basis and documentation of why it should be changed, and I know the folks at the EPA and the administration have all been very forthcoming in wanting to hear and read the comments that are coming from our industry,” he said.

When asked if he thinks the biofuel industry’s effort to encourage public comments has been successful, Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial & Environmental Section, said, “The numbers tell the story.”

According to Erickson, The Fuels America coalition alone helped more than 11,500 supporters of the RFS submit comments asking the EPA to reconsider its proposal and maintain the renewable volume obligations under the law. As of the afternoon of Jan. 28, the EPA has received more than 15,500 comments. Erickson said that indicates that a huge percentage of those comments will be supportive of the renewable fuels industry.

With regard to the EPA’s reasoning for reducing the RFS volumes, Erickson said the EPA and Obama administration ought to recognize that they’ve misinterpreted the general waiver authority in their proposal. “BIO feels strongly that a court would not uphold their interpretation, because of past administrative rulemakings and legal precedents. Given that, a revision of the proposal in the final rule is necessary,” Erickson continued. “Moreover, a reduction to the volume obligations in 2014 will block growth of and investment in new advanced biofuels. The advanced biofuel industry has demonstrated adequate production capacity in 2013 to meet the statutory volume obligations in 2014. So, a reduction in the advanced biofuel volumes appears to frustrate the original intent of the program – just as it is demonstrating success.  EPA should make serious revisions to the proposed rule instead of risking the jobs, investment, technological progress and environmental benefits that the RFS has supported.”

Erickson stressed that he expects EPA to revise the rule, but also noted that the extent to which they revise it depends on how strong a case the stakeholders make.

Regarding the EPA’s Jan. 23 announcement that it will reconsider the 2013 RFS cellulosic standard, Erickson said the agency should be careful to keep that reconsideration from impacting the 2014 rulemaking process.  “There are ongoing lawsuits by the oil refining industry regarding the 2013 cellulosic biofuel standard, and these should also be addressed separately from the petitions that led to EPA’s agreement to reconsider the standard. EPA must remain cognizant that there are more than 800,000 cellulosic RINs generated during 2013 and that they could be valid for use in 2014,” he said.

Erickson added that it would be odd for the Obama administration to say it are committed to reducing greenhouse gas (GHG) emissions, but support a revised RFS that effectively increases carbon dioxide emissions.

“We have been modeling the greenhouse gas impacts of EPA’s proposed rule for 2014 and future years, since the agency indicated it intends to carry forward the new methodology for future years,” Erickson said. “If left intact, the change to the rule – when compared to 2013 – produces millions of metric tons of additional carbon dioxide equivalent emissions, particularly in 2014, 2015 and 2016 as gasoline and diesel use climb. The change is equivalent to putting millions of additional cars on the road every year.”

“We’ve seen administration economists argue that the cost of reducing greenhouse gas emissions through the program outweighs the benefit,” Erickson continued. “But these economists have mistaken the plain fact that the costs of compliance are balanced across the oil refining industry through the use of RINs. In other words, RINs do not represent the cost of compliance, because they are traded among the obligated parties in a zero-sum system. So, the benefits are far outweighing the costs.”

In his comments to the EPA, Bob Dinneen, president and CEO of the Renewable Fuels Association, stressed that his organization is opposed to the proposal to reduce the 2014 renewable volume obligation (RVO) for renewable fuel from its statutory level.

Dinneen also addressed the impact of the EPA’s proposal on renewable identification numbers (RINs). “Had the Agency proposed keeping in place the RVO for renewable fuel at the statutory level of 14.4 billion gallons, the RFS program’s [RIN] market mechanism would have continued to function exactly as intended to ensure that required volumes of renewable fuels are produced and consumed,” he said. “But by proposing an RVO for renewable fuel that is below the ‘blend wall,’ the proposed rule completely eviscerates the RIN market. In this way, the most significant factor contributing to the so-called ‘blend wall’ in 2014 is EPA’s proposal itself. The baffling approach to establishing annual RVOs set forth by EPA results in a circuitous, self-fulfilling prophecy that ultimately defeats the purpose of the RFS.”

Dinneen also noted that the EPA lacks legal authority to use the blend wall as a determinant for setting the RVO for renewable fuel. “The Clean Air Act does not permit the Agency to take into account ‘factors that affect consumption’ in determining whether to grant a general waiver based on an ‘inadequate domestic supply’ of renewable fuel. Instead, EPA may grant a waiver based on an ‘inadequate domestic supply’ of ‘renewable fuel’ only where it finds that the renewable fuel industry lacks the capability to produce the required volumes of renewable fuel, and where there are insufficient carryover RINs available for obligated parties to meet the statutory RVO. The Agency has not made that showing here,” he continued.

The American Coalition for Ethanol also addressed the fact that Congress did not provide the EPA with authority to adjust the RFS based on the blend wall. “Oil companies have done virtually nothing to meet their obligation to sell greater volumes of renewable fuels under the RFS, and EPA is inexplicably preparing to reward their belligerence by undermining the RFS.  It’s like the Internal Revenue Service lowering someone’s taxes because they’ve refused to pay,” said ACE in its comments.

ACE also provided an explanation of how the RIN market works in its comments, noting that RIN prices help provide incentive for fuel marketers to offer E85, E15 and other ethanol blends to their customers. ACE cited the experience of Bruce Vollan, a petroleum marketer from South Dakota. According to ACE, Vollan’s ethanol sales were already 6 percent above the E10 blend wall when RIN prices rose in 2013. Last year, Vollan’s Midway Service station reported overall monthly ethanol volumes of as high as 27 percent, with a sales level of 16 percent ethanol during the lowest month. ACE goes on to note that when Vollan sells RINs, he uses the majority of those proceeds to reduce his ethanol costs. The lower-priced ethanol brings down the price at the pump, with higher ethanol blends offering the greatest savings. Those lower-priced ethanol blends drive overall sales.

In a press release, ACE Executive Vice President Brian Jennings also noted his appreciation of ACE members who submitted personal and unique comments to the EPA explaining how reducing the RFS would hurt their family, farm or business. “We thank our members for being so engaged during the comment period and look forward to working with them to help EPA come to their senses before a final rule is published later this year,” Jennings said.

In its comments, Growth Energy said that the EPA’s proposal threatens to undermine the RFS by halting future progress and rolling back gains made to date. The group noted that the reduced RVO proposal would cause billions of dollars of harm to farmers, biofuel producers and rural America. It would also undermined investor confidence and investment in next-generation biofuels and increase GHG emission.

Growth Energy also addressed EPA’s lack of authority to reduce the RFS due to the blend wall and stressed that the statutory RFS volumes for 2014 can easily be met without the proposed waiver. The organization also noted the maintaining the statutory volumes will not cause gas prices to rise.

The Advanced Biofuels Association also submitted comments to the EPA, noting that businesses that rely in part on the commitment of the federal government under the RFS have spent $14.72 billion dollars over the past six years in pursuit of the policy goals of the RFS.

Whether intended or not, the ABFA said that the EPA’s proposed rule has sent a chilling signal to financial markets about the continued desire of the Obama Administration to support and grow an advanced and cellulosic biofuels industry in the U.S.

In addition, the ABFA stressed that the EPA’s policy reversal falls disproportionately on advanced biofuels and undermines the ability of advanced and cellulosic producers to deliver upon the vision offered by Congress when it established the RFS program.

The ABFA’s comments also stress that the proposed 40 percent cut to the advanced biofuel requirement sends a signal that the government is backtracking form its interest and support of the advanced biofuels industry. Reducing the advanced biofuel pool also contradicts the administration’s stated goals to reduce climate change emissions.

Regarding the lack of statutory EPA authority to reduce the mandate of conventional ethanol based on gasoline demand, the ABFA noted the move is likely to result in legal challenges. “This most likely will wind up in federal court further leaving the country and the advanced and cellulosic industry in suspended animation concerning the overall direction of the RFS. This lack of clarity and uncertainty will stifle the ability of many smaller companies from being able to acquire financing to build out the advanced biofuel sector envisioned in the 2007 law,” said the ABFA in its comments.

Mike Bryan, BBI International’s board chairman, also provided a comment to the EPA. In his letter, Bryan stressed that the RFS has played a pivotal role in reducing oil imports, improving air quality and strengthening the economic health of rural America.

“Without question, the RFS is providing meaningful benefits to the American public each and every day, and is among the most successful energy policies this nation has ever adopted. Thousands of American farmers have invested their hard-earned savings in ethanol plants across the country, helping build the economic foundation of their communities as well as the nation. The importance of a strong, reliable RFS cannot be overstated to the agricultural community of America,” Bryan wrote.

Bryan added that the RFS has helped foster unprecedented investments in agriculture and bioenergy since its inception. “As a result of the forward-looking nature of the RFS, our business is poised to invest even more in new and innovative communications products to better educate and inform the public to the importance of biofuels. Waiving the 2014 RVOs, as proposed, would jeopardize our past and future investments, and put at risk the enormous benefits that the recent agricultural and bioenergy renaissance has brought to rural communities and the entire nation,” he wrote.

A group of veterans has also been actively been advocating for a strong RFS. VoteVets.org and Rep. Bruce Braley, D-Iowa, delivered more than 110,000 petition signatures to EPA Administrator Gina McCarthy on Jan. 28, calling for the agency to protect the RFS. According to VoteVets.org, the petition was delivered in a meeting with EPA senior staff.

“The 110,000 people that voiced their opinion on the critical importance of the renewable fuel standard deserve to be heard,” Braley said. “The RFS improves our economy and contributes to our energy independence—and the EPA needs to understand that Americans don’t support their misguided attempt to alter a law that’s working so well.”

“This issue is clear cut,” said Jon Soltz, Iraq War Veteran, and chairman of VoteVets.org.  “The less dependent on oil we are, the lower the prices become worldwide.  Our enemies often benefit from the rising prices of oil – even those we do not buy oil from – and use those dollars against us and our troops.  This is an issue of protecting our men and women in uniform, and the EPA must do its part to ensure America’s dependence on oil is decreased, not increased.  Ethanol is a key part of making that happen.  Now is the time for the EPA to stand up to big oil, and stand up for our troops.”

Additional information on the proposed rule and copies of submitted public comments can be found on the Regulations.gov website under Docket ID: EPA-HQ-OAR-2013-0479.

 

 

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