Renewable fuel associations express mixed reactions to final rule

By Sue Retka-Schill and Holly Jessen | November 30, 2015

Positive aspects were found in the U.S. EPA’s final rule establishing the renewable volume obligations (RVO) for compliance with the renewable fuel standard (RFS), but the overall tone from industry associations responding immediately after the EPA announcement was negative.

Growth Energy co-chairs Jeff Broin and Tom Buis emphasized the progress made in piercing the blend wall. The initial proposal two years ago went backwards, Buis pointed out, and the revised proposal in May was an improvement, but still below a 10 percent blend. The final rule will push that over 10 percent.

But while pleased that the blend wall was pierced, Broin said the methodology is still troubling. “We remain concerned that the final rule continues to rely on the ‘distribution waiver’ that redefines supply as demand and was rejected by Congress when the RFS was enacted into law. Of particular concern is that by using such a waiver, the oil industry is being rewarded for its unwillingness to follow the law and invest in infrastructure to move toward cleaner, renewable fuel, which sets a dangerous precedent for the future of the program.” 

The Renewable Fuels Association was more direct in expressing its displeasure. “EPA’s decision today turns our nation’s most successful energy policy on its head,” Renewable Fuels Association president and CEO Bob Dinneen said in a statement. The agency increased the blending requirements for 2016 across the board, to a total of 18.1 billion gallons, including 14.5 billion gallons of undifferentiated biofuels or corn ethanol and 230 million gallons of cellulosic ethanol.

The RFA criticized the numbers being lowered from the 15 billion specified in the law. “Data shows that EPA, in its initial RFS proposal, understated the likely market for E85 and non-ethanol conventional biofuels in 2016 by at least 440 million gallons. The data suggests there will be at least 14.7 billion gallons of undifferentiated renewable fuel blended next year. With approximately 2 billion surplus RIN credits already available for refiners to use for compliance in 2016, and with another 900 million RINs potentially becoming available from 2015 over-compliance, the EPA’s decision to lower the 2016 RVO below the statutorily imposed level of 15 billion gallons is simply unnecessary.”

Brian Jennings, the executive vice president of the American Coalition for Ethanol, called the methodology for setting blending targets for 2015 and 2016 legally questionable.  “When Congress enacted the renewable fuel standard it voted to side with those of us who said ‘yes we can’ reduce greenhouse gas emissions from motor fuel, ‘yes we can’ allow consumer access to E15 and flex fuels, and ‘yes we can’ spark innovative ways to produce cleaner fuels,” said Jennings.  “While we appreciate that the administration made incremental improvements compared to the proposed RFS rule, unfortunately, today they are choosing to side with those who say ‘no, we can’t.  Regrettably, EPA’s final RFS rule protects the old way of doing business by obstructing consumer access to cleaner fuels, stifling competition in the marketplace, and undermining innovation.”

The National Corn Growers Association said while it was pleased to see the EPA revise its proposed volumes, “the fact remains that any reduction in the statutory amount will have a negative impact on our economy, our energy security, and the environment. It is unfortunate that Big Oil’s campaign of misinformation continues to carry weight in the court of public opinion, and in this decision,” NCGA president Chip Bowling said in a statement. “In light of the EPA’s decision, we are evaluating our options. We will fight to protect the rights of farmers and consumers and hold the EPA accountable.”

The Urban Air Initiative called it not disappointing but not surprising. The industry needs to establish markets for ethanol and recognize that the highest value of ethanol is that it is clean, high-octane fuel that can reduce toxic compounds in gasoline and harmful emissions. Instead, UAI president Dave VanderGriend said EPA’s action should be a message to the ethanol industry that it needs to secure its own future and recognize that ethanol’s highest value is as a clean fuel that can provide high octane to reduce the toxic compounds in gasoline while reducing a range of harmful emissions. "This is simply one program,” VanderGriend said. “We can move well beyond that and we will not let EPA and its faulty, inaccurate models define our value and limit our growth.”

The Iowa Renewable Fuels Association executive director Monte Shaw called the announcement a “gut punch” for consumers and farmers. “Given EPA’s stated rationale for these numbers, one of the most successful energy policies in our nation’s history has been put squarely in the stranglehold of the petroleum industry,” Shaw said. “As a result, consumers will see higher prices at the pump and Iowa farmers will likely continue to see commodity prices below the cost of production.”

Todd Sneller, Nebraska Ethanol Board administrator and Clean Fuels Development Coalition chairman, said the rule “essentially caps biofuels at 10 percent of the market,”

“The RFS was, and remains, a foundation to provide a solid base for biofuels to continue to develop,” Sneller said. “All this means is EPA will limit the amount of biofuels they intend to manage under this particular program. Ethanol's high octane and cleaner-burning properties make it an extremely valuable fuel and we expect increasing demand for those reasons.”

The National Biodiesel Board was pleased with the increase in the biodiesel volumes in the RVO. “It is a good rule,” said NBB CEO Joe Jobe in a statement. “It may not be all we had hoped for, but it will go a long way toward getting the U.S. biodiesel industry growing again and reducing our dangerous dependence on fossil fuels.”  Under the new RFS rule, biomass-based diesel volumes would grow to 1.9 billion gallons in 2016 and 2 billion gallons in 2017. The biomass-based diesel category—a diesel subset of the overall advanced biofuel category—is made up mostly of biodiesel but also includes renewable diesel, another diesel alternative made from the same feedstocks using a different technology. “The new standards reflect modest but meaningful growth over recent years when the U.S. market has hovered around 1.8 billion gallons annually,” the NBB statement noted. Biodiesel is produced in nearly every state, and has made up the vast majority of advanced biofuel production under the RFS. Advanced biofuels must demonstrate a 50 percent greenhouse gas reduction.

Michael McAdams, speaking for the Advanced Biofuels Association said the group “applauds EPA’s support of next-generation biofuels. Today’s final rule is a step in the right direction that recognizes the importance of growing supplies of advanced and cellulosic biofuels to help provide more sustainable fuels for our future to combat climate issues.” McAdams reiterated the organization’s belief that legislative reform is needed. To strengthen the RFS and expedite the production of advanced biofuels. “. Outdated definitions, cellulosic waivers, as well as overall program uncertainty have created significant barriers to entry for the advanced and cellulosic industry.”

The Biotechnology Industry Organization called the final rule “an unnecessary, unlawful about face for a program that was successfully driving development of cleaner biofuel technologies and reduction of U.S. greenhouse gas emissions. The rule undermines the goals of the statute, and it will continue to undercut investment in advanced and cellulosic biofuels and increase greenhouse gas emissions in the transportation fuel sector.” Brent Erickson, executive vice president of BIO’s Industrial and Environmental Section, called it a severe blow to consumers and the biofuels industry and said the EPA’s actions violate the law. By delaying the EPA created uncertainty and shook investor confidence, resulting in an estimated $13.7 billion investment shortfall in the advanced biofuel sector and this final rule exacerbates the problem.

“As EPA has acknowledged, its delay allowed obligated parties to act as though the law did not exist,” Erickson said. “The delay increased U.S. carbon emissions by millions of tons over the past two years, compared to what could have been achieved with required use of biofuels. As the United States enters negotiations with the rest of the world to limit greenhouse gas emissions, EPA is putting in place an RFS rule that will sacrifice achievable reductions of emissions in the transportation sector.”

Brooke Coleman, excecutive editor of the Advanced Biofuels Business Council, said while the final rule would require oil companies to blend higher amounts of renewable fuel than originally proposed, which could have a positive effect, "it fails to remedy critical RFS waiver issues that are undercutting investment in the low carbon, advanced biofuels. First, the final rule continues to rely on a new reading of the statute to allow for 'distribution waivers,' which now permits EPA to waive the RFS from year-to-year if the oil industry refuses to make arrangements to distribute renewable fuel and comply with the law. Second, the final rule does not make clear how or on what timeline the agency expects to address waivers in the cellulosic biofuel pool, which currently allow the oil industry to avoid buying cellulosic biofuel in favor of cellulosic waiver credits (CWCs) at the end of each compliance year. Both issues should and can be resolved in 2016."