EPA maintains RFS point of obligation

By Erin Voegele | November 27, 2017

On Nov. 22, the U.S. EPA announced its denial of several petitions requesting the agency initiate rulemaking to change the point of obligation under the Renewable Fuel Standard. EPA Administrator Scott Pruitt previously indicated the agency would deny the petitions in an Oct. 19 letter he wrote to a group of senators.

In 2016, several groups petitioned the EPA, asking that the agency shift the point of obligation from refiners and importers. A notice released by the EPA notes that the petitioners differed somewhat in their suggestions for alternatives. Some requested the agency shift the point of obligation to parties that blend renewable fuel into transportation fuel. Others suggested it be shifted to parties that hold title to gasoline and diesel immediately prior to sales at the terminal, or to blenders and distributors. All petitioners argued that shifting the point of obligation would align compliance responsibilities with the parties best positioned to make decisions on how much renewable fuel is blended into the U.S. fuel supply. The EPA noted that some petitioners also claimed that changing the point of obligation would result in an increase in the production, distribution and use of renewable fuels in the U.S., and would reduce fuel costs for consumers.

The EPA published a proposed denial of requests to initiate a rulemaking process to change the point of obligation on Nov. 10, 2016. A comment period was opened, and later extended through Feb. 22. According to the EPA, more than 18,000 comments were filed on the proposal.

Explaining the decision to deny the requests, the EPA said its “conclusion reflects consideration of the alleged benefits that petitioners and some commenters have suggested would ensue from a change in the point of obligation, as well as negative impacts that the EPA believes would result from such a change.”

“In our judgement, it does not appear that the record before the agency indicates that a change in the point of obligation would result in net overall benefits to the program,” the EPA wrote. “In addition, however, we believe that changing the point of obligation at this time would be very disruptive to the program, and likely the fuels marketplace as well, undermining long settled expectations and the program stability and certainty that are critical to both short- and long-term success of the program. Thus, even if there were some marginal net benefits to changing the point of obligation, we believe that the disruptive effects of a change at this time would still warrant denial.”

The EPA also said that it does not believe petitioners have demonstrated that changing the point of obligation would likely result in increased use of renewable fuels. In addition, the agency noted that changing the point of obligation would not be expected to address challenges associated with commercializing cellulosic biofuel technologies and the marketplace dynamics that inhibit the increase of fuels containing higher levels of ethanol, which are two of the primary issues that limited the rate of growth in the supply of renewable fuels today.

According to the agency, it believes that chancing the point of obligation would make the RFS program more complex, which could negatively impact its effectiveness. The agency also said it has not been persuaded that merchant refiners are disadvantaged under the current regulations in comparison to integrated refiners in terms of costs of compliance, nor that other stakeholders, such as unobligated blenders, are receiving windfall profits. Finally, the EPA noted that it does not interpret the Clean Air Act as authorizing it to place the point of obligation on distributors position holders who are neither refiners nor blenders.

Growth Energy has spoken out in support of EPA’s decision. “We commend the EPA for laying to rest a year of attempts from a small group of oil refiners who have been using every trick in the book to change the established rules for tracking compliance with the Renewable Fuel Standard,” said Emily Skor, CEO of Growth Energy.

“This one-sided handout would have added regulatory red tape, created havoc in the marketplace, and denied consumers access to more affordable fuels with higher blends of biofuels like E15,” Skor continued. “Growth Energy has led the charge to oppose this effort from the very beginning, and we are grateful to our allies in Congress and to Administrator Pruitt for working with us to protect over 12 years of investment under the RFS.

“The RFS is America’s single most successful energy policy and continually works to save consumers money, protect the environment, drive rural growth, and secure U.S. independence,” she said.

The American Coalition for Ethanol called the EPA’s announcement a win for retailers and consumers. "Moving the RFS point of obligation to downstream marketers would place enormous burdens on station owners and consumers, so we are grateful EPA is rejecting pleas to change the rules for a handful of greedy refiners who want to escape their responsibilities under the law,” said Brian Jennings, CEO of ACE.

“The RFS credit trading framework (RINs) has proven to be a powerful incentive that has allowed some of the most respected independent retailers in the country to offer cleaner, higher octane fuels such as E15 to their customers at lower prices,” Jennings said. “RINs do exactly the opposite of what critics claim, and the proof is higher ethanol-blended fuels at lower prices at the pump in real-world stations across the U.S. A RIN credit is a reward for RFS compliance. Companies complying with the RFS or blending more ethanol than required are able to use the additional RINs to discount prices of ethanol-blended fuels. Convenience store leaders like Sheetz, QuikTrip, RaceTrac and Casey's are moving the domestic clean fuel market forward and the RFS rewards them for their innovation. It would be wrong to take away that incentive and give it to those few refiners who have made no effort to improve the fuels in our country.”

Poet has also spoken out in support of the EPA’s action. “By maintaining the point of obligation for the Renewable Fuel Standard, the EPA is allowing the system to continue to work as designed,” said Jeff Broin, CEO of Poet. “Under the RFS, infrastructure for biofuel-blended fuel is expanding, with opportunities for additional consumer-driven growth. The RFS works, evident from the numerous benefits it allows Americans to enjoy today: cleaner air, fewer carcinogens in gasoline, lower fuel costs and increased energy independence. President Trump has vowed to preserve the RFS. I applaud the President and EPA for standing up to special interest groups within the oil industry who seek to undermine American-made biofuels.”

The Advanced Biofuels Business Council also commended the EPA for its decision. “EPA made the right decision years ago when they put the RFS point of obligation on refiners and importers, “ said Brooke Coleman, executive director of ABBC. “The push to change the point of obligation by a handful of refiners was never about helping renewable fuels or the consumer. The refiners complaining about point of obligation are willfully not complying with the law while claiming they are victims. Many of their competitors have figured out how to simultaneously blend more renewable fuels and pad their bottom lines. We very much appreciate EPA clearing the air on this important issue. It’s a good decision for consumers, the environment and the economy.”

The Biotechnology Innovation Organization stressed that changing the point of obligation would have negatively impacted the development of advanced biofuels. “Changing the rules midstream would have hampered the RFS program’s goal of accelerating commercialization of advanced and cellulosic biofuels,” said Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section. “Changing the point of obligation would have increased program complexity, imposed new compliance costs and risks on a significant range of new entities, and undermined investor confidence in the broader renewable fuels industry just as cellulosic and other advanced biofuels are coming online. We fully supported EPA’s proposal to deny this rule change and we applaud them now for keeping the program on track. The agency correctly determined that there is no justification for changing the RFS point of obligation.”

Additional information is available on the EPA’s website