Examining EPA's authority to reduce RFS volume requirements

By Holly Jessen | November 21, 2013

The Renewable Fuels Association held a media teleconference Nov. 21, to address the issue of whether the U.S. EPA has the statutory authority to lower the total renewable fuel standard (RFS) numbers, as reflected in the agency’s current proposed rule for the 2014 renewable volume obligations (RVO). 

The RFA has made it clear it doesn’t believe the EPA can use the so-called blend wall as justification for a more than 3 billion gallon reduction in the overall required volumes of the RFS. The agency does have specific authority to reduce the volumes required for cellulosic ethanol, and has done that previously. However, RFA believes it has overstepped itself by proposing to reduce the total volume numbers. “We don’t believe that the agency can invent authority that it does not have by virtue of the statute,” said Bob Dinneen, president and CEO of the RFA, during the call.

Dinneen went on to say that the EPA was relying on the general waiver authority granted that agency, which has two tests for a waiver or partial waiver of the RFS. The first is severe economic harm, criteria not met in the current situation, with ethanol selling much cheaper than gas and making it possible for consumers to save money at the gas pump. “That’s just not a test that could be met,” he said.

The second test refers to inadequate domestic supply. “It is their tortured reasoning for what is domestic supply that is at the heart of this issue,” he said. “Certainly, there is more than enough supply of grain-based ethanol and probably more than enough supply of other advanced biofuels as well.”

The RFA believes EPA is going beyond its authority by introducing the idea of a blend wall into a waiver provision that is focused on production and supply, not consumption. “That’s where we think that EPA has dramatically overstepped their bounds, overstepped the statute and is making a fundamental mistake,” he said, adding that if this proposal becomes a final rule the RFS is, in effect, being turned over to the oil industry. “Because they are the ones that get to determine then how much infrastructure is used, whether or not they want to provide the market access of our fuel to the consumer,” he said. “History has demonstrated time and time again that they will do everything in their power to prevent that from happening. So that is why Congress specifically did not allow fuel infrastructure into the waiver process.”

Dinneen made it clear, however, that at this point, with just a proposal, there’s no legal issue to litigate. RFA hopes the EPA will re-evaluate its position after the comment period and make changes before the final rule is published. However, if that doesn’t happen, the group will have to evaluate its options. “We do think the legal underpinnings of their existing rationale, their existing reasoning is highly vulnerable to legal challenge,” he said. “But we are a long way from that.”

The second speaker on the call was Jonathan Coppess, a clinical assistant professor of law and policy at the University of Illinois. He said the question of whether the EPA could consider the blend wall, or constraints on biofuel consumption, as part of inadequate domestic supply has come up over and over since the draft proposal was first leaked. Congress does not define inadequate domestic supply in the statute and its unknown at this point what would happen if this case does make it to the courts. “The entire intent of the statute was to increase production, “He said. “Does this interpretation, this expansion or somewhat unique or novel way of interpreting the words ‘domestic supply,’ how does that fit with the intent of the overall statute?”

Coppess referenced a Nov. 6, FarmDoc Daily post, which he wrote after the EPA’s proposed rule was leaked, that analyzed the agency’s authority to reduce the RFS RVO for 2014. “While it is impossible to predict how a court would rule, EPA appears to be making a novel use of its waiver authority,” he wrote at the time. “EPA's interpretation of what constitutes inadequate supply could be viewed as contrary to Congressional intent to increase renewable fuel production because it holds the renewable fuels industry responsible for something beyond its control (the blend wall) at a time when the industry appears capable of producing sufficient quantities to supply the liquid fuel market.”