Congress Could Reform Renewable Fuels Law in 2015 Following EPA Delays

Source: By Andrew Childers and Ari Natter, Bloomberg BNA   |    • Posted: Wednesday, January 14, 2015

Jan. 12 (BNA) — Lawmakers frustrated with the Environmental Protection Agency’s ongoing delays in issuing the annual renewable fuel standard have vowed to alter the law in 2015, but analysts are mixed about how successful those efforts will be.

The EPA failed to finalize its renewable fuel standard rule for 2014, and the standards for 2015 are already overdue. The EPA plans to issue rules for 2014, 2015 and 2016 this year, but some members of Congress, including supporters of renewable fuels, have suggested the agency’s failure to properly administer the program means the law could be in jeopardy.

“I’m profoundly disappointed with what the White House has done with that,” Byron Dorgan, a former senator from North Dakota who helped author the provision, told Bloomberg BNA. “This was a success story, and they’ve got it wasting in the wind.”
The EPA has announced that it plans to issue three years’ worth of standards in 2015 to get that program back on schedule, but the agency has been unable to say when those rules might come.

“Our goal is to get this program back on track in terms of the schedule we’re expected to follow so we can provide certainty for industry as they make decisions,” Janet McCabe, EPA acting assistant administrator for air and radiation, told Bloomberg BNA.

The Obama administration has been “hung out to dry by not making a decision,” added Dorgan, who now serves as a senior adviser at the law firm Arent Fox LLP. “The RFS is a huge success story in my judgement.”

Among the lawmakers who have vowed to take aim at the standard in the 114th Congress is Rep. Fred Upton (R-Mich.), the chairman of the House Energy and Commerce Committee (143 DEN A-14, 7/25/14).

An effort led by Upton and other senior Republicans on the committee in the 113th Congress failed after oil companies pushed to have the standard repealed and ethanol producers said they don’t want any changes. Upton is optimistic, however, that litigation filed against the EPA will motivate both sides to come to the bargaining table, according to a Republican committee aide.

“EPA’s inability to decide is starting to give everybody on both sides of the conversation a case of willies,” Mike McKenna, a Republican lobbyist and president of MWR Strategies, told Bloomberg BNA.

Talk, Not Action on RFS in 2015

Still McKenna said that while he expects Congress to hold hearings on the issue, further action is more likely to happen in 2016.

“We are going to talk about RFS,” McKenna said. “We are not ready to do something on the RFS.”

The Senate Environment and Public Works Committee is likely to hold hearings on the law, too, but Sen. Jim Inhofe (R-Okla.), the committee’s new chairman, told Bloomberg BNA that reforming the requirement is “not high on my to-do list.”

Efforts to reform the law will be opposed by biofuels producers who already object to an EPA proposal that they say will artificially cap the amount of ethanol that can be blended into the gasoline supply, thwarting the intent of the renewable fuel standard.

Meanwhile, petroleum groups, which have been pushing to repeal the law, said they also will seize the opportunity to reform the renewable fuel standard in 2015 if that option looks likely. The American Petroleum Institute plans to lobby incoming members of Congress to reopen the fuels law.

“It’s always encouraging with the new class of freshmen in Congress to get them fired up on the issue,” Patrick Kelly, senior policy adviser for downstream and industry operations at the American Petroleum Institute, told Bloomberg BNA. “It’s certainly something we’re going to be pushing at API as an organization. We will be encouraging them to act on RFS.”

No Deadline for Rules

The EPA announced in November 2014 that it wouldn’t finalize the 2014 renewable fuel standard by the end of the year.

The rule was already a year overdue, and the agency hasn’t yet proposed standards for 2015, which by statute should have been finalized by Nov. 30, 2014. Instead the agency said it plans to issue standards for 2014, 2015 and 2016 in 2015 in an effort to get that program back on schedule.

“The important thing is to get it right and get back on track, and if they get this thing done correctly and group it with ‘15 and ’16, that’s a good thing because it does get us back on schedule,” Tom Buis, chief executive officer of Growth Energy, told Bloomberg BNA.

However, during a hearing of a House Oversight and Government Reform Committee’s Subcommittee on Energy Policy, Health Care and Entitlements in December, McCabe couldn’t say when the EPA might issue the overdue renewable fuel blending requirements (238 DEN A-7, 12/11/14).

“That’s a lot to get done in a single calendar year because we haven’t proposed 2015 or 2016 yet,” McCabe told Bloomberg BNA.

Kelly said McCabe’s inability to set even a general timeline for issuing three years’ worth of renewable fuel standard rules in 2015 doesn’t give the petroleum industry much confidence.

“If they don’t have a plan, I guess that candor should probably be appreciated,” Kelly said. “They at least need to identify some sort of plan to get them back on track.”

Calls for Reform Growing

At that December hearing, Rep. Jackie Speier (D-Calif.), the subcommittee’s ranking Democrat and a renewable fuels proponent, suggested the EPA’s continual failure to get the rule out by the statutory deadline could build momentum for Congress to repeal or reform the law.

The leadership of the House Energy and Commerce Committee has already indicated its willingness to reform the law, and Rep. Bob Goodlatte (R-Va.), who has previously introduced bills to eliminate or drastically curtail the renewable fuel program, intends to introduce similar bills this year as well, an aide said.

“There’s no doubt there will be attempts to repeal the RFS in the case of Goodlatte, but we’ll just have to wait and see,” Buis said.

If the EPA successfully issues its overdue rule for 2014 while providing both renewable fuels producers and the petroleum industry with some certainty for 2015 and 2016, that should dampen calls to reform the law, Buis said.

Waiver Interpretation Opposed

The EPA’s 2014 standards were opposed by biofuels producers because the agency for the first time proposed using its authority under Section 211 of the Clean Air Act to reduce the overall blending mandate for the year below what is required by statute.

The agency had proposed (RIN 2060–AR76) that petroleum refiners and importers blend 15.21 billion gallons of renewable fuels into their products in 2014 (78 Fed. Reg. 71,732). That is less than the 18.15 billion gallons required by the Energy Independence and Security Act (Pub. L. No. 110-140) because the agency didn’t believe the fuel sector could absorb any additional ethanol.

“I think the controversy surrounding that methodology they used contributed to the delay,” Buis said. “I think EPA and the administration was surprised at the backlash they received over it and all the comments that basically, in my opinion, demonstrated how they got it wrong.”

The Clean Air Act allows the EPA to waive down the blending requirement if implementing it as set out in the statute would cause significant economic harm or in instances where there is inadequate domestic supply to meet the requirements.

The EPA has interpreted inadequate domestic supply to include refiners’ ability to blend more ethanol into gasoline. Renewable fuels producers argue that the EPA is misinterpreting the law and have fought to prevent the agency from establishing that precedent, which they say will allow the petroleum industry to block introduction of more biofuels into the market by refusing to invest in the infrastructure necessary to handle higher blends such as gasoline containing 15 percent ethanol (E15) or 85 percent ethanol (E85).

The petroleum industry favors the EPA’s use of its waiver authority and will be pressing the agency to continue with that interpretation in upcoming renewable fuel standard rules.

“I think the methodology they established in the 2014 rule should also be their guiding principle for 2015,” Kelly said.

Industry Lawsuits Coming

The American Fuel & Petrochemical Manufacturers has said that it plans to sue the EPA over delays in issuing the final 2014 rule. That group as well as the American Petroleum Institute also have threatened lawsuits over the EPA’s failure to issue the 2015 standards on time (231 DEN A-5, 12/2/14).