Economist: No sunset for RFS, waivers impact future authority

Source: By Susanne Retka Schill, Ethanol Producer Magazine • Posted: Wednesday, February 17, 2016

The renewable fuel standard (RFS) does not expire in 2022, but an analysis of the statute reveals major changes could occur. University of Illinois economist Jonathan Coppess examined recent RFS discussions regarding the RFS in campaign coverage in a FarmDoc Daily post, “Following-up on RFS Questions.”

The statute does not contain a sunset or end date provision, writes Coppess, but setting the annual mandates becomes more discretionary for the U.S. EPA. “After 2022, the applicable volumetric mandates for renewable fuels are to be determined by the EPA administrator,” he writes, “and based on analysis of the impact of the production and use of renewable fuels on various matters such as environment factors, U.S. energy security, infrastructure, cost to consumers of using renewable fuels and other factors including job creation and food and commodity prices.” Estimates of expected commercial renewable fuel production are to be included as well.

Two features of the post-2022 provisions speak to the current discussions around the agency’s interpretation of its waiver authority—specifically consumer and infrastructure considerations. “On one hand, Congress included issues related to the ultimate consumer and fueling infrastructure (the blend wall) in EPA’s volumetric determinations. On the other hand, however, those matters are included only for determinations made after 2022 when the statutory levels (and arguably the waiver authority) no longer apply. Additionally, these are among a large set of factors within six categories for EPA to consider and all of the analysis is to be based upon a review of implementation of the RFS during the calendar years leading up to 2022.”

Another feature in the statute affects the impact of waiver decisions already made by the EPA. “If any of the statutory mandated levels are reduced by at least 20 percent for two consecutive years or at least 50 percent in any single year, the EPA administrator is given the authority to write a rule modifying the applicable volumes for all years that follow the final year of the waiver, except that this modification cannot take place prior to 2016,” Coppess writes, citing the statute language.  That already has happened regarding advanced and cellulosic biofuels, but did not occur for other fuels in the modified mandates for 2014-’16, though it came close, he points out.

Crossing that 20 percent threshold in future years could become easier, if EPA’s interpretation of its waiver authority prevails. The ethanol industry has brought suit to challenge that, however. “The fact that EPA’s use of the waiver authority could also set it up to completely modify the statute might well impact a judge’s review of the reasonableness of EPA’s arguments,” Coppess writes, adding the outcome of the litigation is “very much unknown.”

To read his full analysis, including citations to specific statute language, click here.