Biofuel industry files comments on EPA proposal to reduce RVOs

Source: By Erin Voegele, Ethanol Producer Magazine • Posted: Tuesday, October 24, 2017

The 15-day comment period on the U.S. EPA’s notice of data availability (NODA) that proposes reductions in 2018 and 2019 Renewable Fuel Standard renewable volume obligations (RVOs) closed Oct. 19. More than 5,000 comments were filed on the proposal.

In its comments, the Renewable Fuels Association argued that there is “absolutely no legal or statutory basis for EPA to exercise its general authority waiver in any of the ways contemplated in the notice to further reduce 2018 RVOs.”

The NODA asked for comment on whether EPA should reinterpret “inadequate domestic supply” to mean that only domestically produced renewable fuels would be considered when determining available supply. “Re-defining ‘domestic supply’ to exclude imports would presumably reduce the amount of renewable fuel available to obligated parties to meet the RFS, thereby justifying the use of a general waiver,” said the RFA in its comments. “Not only would such a re-interpretation defy common sense and the accepted meaning of ‘supply,’ but it would also run counter to both the statutory history of the RFS and the recent U.S. Court of Appeals decision affirming that imported biofuels are part of the domestic supply.”

Severe economic or environmental harm is also a statutory basis for granting a general waiver. “Far from harming the economy or environment, the RFS is providing substantial economic and environmental benefits to American consumers,” the RFA said. “It is absurd to suggest that the RFS and ethanol are somehow harming the economy when ethanol is priced below gasoline and remains the lowest-cost source of octane available on the market (on Oct. 19, 2017, nearby ethanol futures prices were trading at $0.25 per gallon, or 15 percent, below nearby gasoline blendstock futures).”

In its comments, the RFA also addressed reports that EPA is considering allowing renewable identification numbers (RINs) to be attached to exported fuel. “Obviously, exported gallons of renewable fuel, by definition, are not available ‘to be consumed in the U.S.,’” said the RFA. “Thus, allowing exports to count toward RFS compliance would completely undermine the intent of the RFS, artificially increase the supply of RINs, and create a disincentive to invest in the domestic renewable fuel technologies and infrastructure the RFS was designed to encourage.”

“The additional cuts to the 2018 RVOs suggested by the notice and the reported proposals to eliminate exporter RVOs both are clearly aimed at boosting RIN stocks, lowering RIN prices, and easing compliance for obligated parties,” said Bob Dinneen, president and CEO of the RFA. “However, the most straightforward method for growing RIN supplies is to further expand renewable fuel production and domestic consumption. Indeed, the fastest way for EPA to expand RIN supplies, lower compliance costs and grow the biofuels industry would be for EPA to allow year-round use of higher octane, lower cost fuels like E15.”

In its comments, the American Coalition for Ethanol argued that existing precedent regarding the “severe economic harm” criteria and definition of “inadequate domestic supply” in the general waiver authority compel EPA to reject pleas from oil refiners to waive RFS volumes as proposed. ACE also stressed that stripping RINs from imported renewable fuel and assigning RINs to exported renewable fuel not only violates the law, but could precipitate a trade war. ACE also noted that a strong rural economy depends on increasing renewable fuel volumes and that Reid vapor pressure (RVP) regulatory relief would help address RIN price volatility. In addition, ACE said the EPA needs to update the lifecycle greenhouse gas (GHG) modeling of corn ethanol and should formally reject petitions to move the RFS point-of-obligation downstream.

“While the law doesn’t require EPA to consider reductions to RFS volumes, the Agency is required to comply with the D.C. Court of Appeals ruling in Americans for Clean Energy et al v. EPA to restore the 500-million-gallon shortfall to the 2016 RVO,” said Brian Jennings, executive vice president of ACE. “We would like to engage EPA on how it intends to comply with this order and on how to provide RVP regulatory relief to gas station owners and consumers by allowing the year-round sale of E15.”

Growth Energy and the Biotechnology Innovation Organization filed joint comments in response to the NODA. “The biofuel reductions in the NODA would pave a path that would reverse the progress of the Renewable Fuel Standard and undercut the benefits our nation is currently gaining from the RFS—job creation, rural development, energy security, significant environmental benefits, and consumer cost savings,” said Emily Skor, CEO of Growth Energy.

“As we’ve seen in recent days, those who represent our rural communities and farmers know the significant benefits this program has and continues to provide, so we stand with them in support of strong and robust renewable fuel volumes that continue to move the program forward, not backward,” Skor continued. “We’re encouraged to know the White House is clearly paying close attention to this issue and hope that will indeed lead to the EPA abandoning these unjustified biofuel reductions and attempts to tie RINs to exports.”

“EPA’s proposal would chill investment at a time when more cellulosic and advanced biofuel capacity is poised to come online, as evidenced by the recent approval of a new cellulosic ethanol facility,” Brent Erickson, executive vice president, Biotechnology Innovation Organization (BIO), said. “The agency should commit to setting 2018 standards that support continued growth of biofuel production and use.”

In their comments, Growth Energy and BIO also argued that promotion of U.S. energy independence does not justify a waiver of the RFS volumes. They indicated that the definition of domestic supply under the RFS for consideration of the agency’s waiver authority has always included foreign-produced fuel that is available to U.S. importers. In addition, Growth Energy and BIO stressed that EPA may not consider RIN costs when assessing its general waiver authority, said the agency has no authority to carry through with reductions in advanced biofuel and total renewable fuel, and noted there is no basis for a waiver of the 2018 volume based on severe harm.