EPA faces bipartisan barrage questioning legality of RFS proposal

Source: Amanda Peterka, E&E reporter • Posted: Friday, June 19, 2015

Senators on both sides of the aisle today used a hearing on the renewable fuel standard to question the legality of U.S. EPA’s recent proposal to set multiyear targets for the standard, or RFS.

At issue: EPA’s attempt to include in the RFS program the “blend wall,” infrastructure problems that inhibit distribution of gasoline containing more than 10 percent ethanol to consumers.

To account for the blend wall in its proposal setting RFS targets for 2014, 2015 and 2016, EPA used authority that lets it waive, or reduce, annual renewable fuel targets based on “inadequate domestic supply.”

But several senators on the Senate Homeland Security and Government Affairs Subcommittee on Regulatory Affairs and Federal Management objected to the agency’s interpretation at today’s hearing. EPA acting air chief Janet McCabe was the only witness.

“I’m not unsympathetic to the challenges that you have in implementing this,” Sen. Heidi Heitkamp (D-N.D.), the subcommittee’s ranking member, told McCabe. “But let’s not pretend legally that you have a very good legal argument here for the waivers that you’ve done.”

EPA’s annual rulemaking process setting refiners’ targets has been long beset by delays. By law, EPA is supposed to finalize most RFS targets by Nov. 30 of the preceding year. The agency in May released the three-year proposal as a means of getting the program back on track.

EPA’s proposal calls for increasing levels of biofuels — it would cause refiners to breach the 10 percent ethanol blend wall in 2016 — but falls shy of the numbers Congress wrote into statute in 2007.

The proposal calls for setting 2014 targets at actual production levels, then increasing them year by year. By 2016, refiners would be required to blend 17.4 billion gallons of renewable fuels into gasoline and diesel — compared to the congressional target of 22.25 billion gallons (Greenwire, May 29).

Sen. Joni Ernst (R-Iowa) faulted EPA for using the “inadequate domestic supply” waiver authority to lower the mandates and for not proposing targets that reflect the congressional levels.

The Iowa Republican noted that Congress considered working distribution issues into the RFS when the program was first passed into law but ultimately rejected the language during a joint House-Senate conference committee.

“Despite the clear direction from Congress, EPA has now decided to use available refueling infrastructure as a condition to waive the standard even though Congress expressly rejected that when they set the law,” she said. “Can you explain why the EPA is blatantly overlooking the law?”

Sen. Gary Peters (R-Mich.) also said he was concerned the agency’s proposal “falls outside of what we think is clearly defined waiver authority.” All the senators who raised concerns signed onto a letter earlier this year calling on EPA to hew to the congressional mandates.

Biofuel producers have raised similar concerns about EPA’s use of the “inadequate domestic supply” waiver in the proposal and are likely to sue the agency over the final rule if it retains the methodology. When the RFS was first passed into law, biofuel producers also opposed adding distribution to EPA’s waiver authority, arguing that it would put control of the program in the hands of oil companies.

McCabe defended the agency’s choice to incorporate the blend wall into its decision to lower RFS targets compared to the congressional numbers. She called the proposal an “ambitious” yet responsible approach that still follows Congress’ intent to increase the amount of renewable fuels used in gasoline and diesel.

“We believe that these proposed volumes are achievable and consistent with Congress’ intent to drive renewable fuels up,” she said.

As for the waiver, McCabe said the language in the statute gives EPA leeway because it does not explicitly define domestic supply.

“As is often the case, it’s EPA’s job to reasonably interpret congressional language in implementing the statute,” she said. “The bottom line … is that our interpretation of that term is that Congress intended for these fuels not only to be produced but to be used.”

McCabe also said the proposal reflected slower-than-expected ramp-up of cellulosic biofuel, or biofuel made from plant-based materials such as agricultural residues and switchgrass. In the Midwest, there are three facilities that are producing cellulosic biofuel, including two cellulosic ethanol plants operated by POET-DSM Advanced Biofuels LLC and Abengoa Bioenergy that opened last year.

Beyond 2016

Congress attached the current RFS to the Clean Air Act as a means of requiring refiners to use both corn ethanol and advanced biofuels but with the goal of having non-food advanced biofuels surpass conventional ethanol by the end of the program in 2022.

Subcommittee Chairman James Lankford (R-Okla.) said he was most concerned about how EPA was going to approach the RFS program after the agency finalizes its proposal Nov. 30.

Congress wrote into the program a “reset” provision that lets EPA rejigger the congressional volumes of renewable fuels starting in 2016 if the agency has reduced any of the mandates by at least 20 percent for two consecutive years or by at least 50 percent for a single year.

Lankford urged EPA to make its plans clear for the rest of the program to provide certainty for the market.

“There’s a tremendous amount of capital investment, whether it’s in Iowa doing capital investment on plants or wherever it may be, everyone’s looking at a 10-year window of capital planning,” he said. “What is going to happen in 2022 is incredibly significant right now.”

He demanded that McCabe provide a timeline within a month for how EPA planned to approach the reset provision in conjunction with setting the 2017 volume targets next year.

McCabe said that resetting all the volumes was a possibility but that the agency had no concrete plans yet.

“Our highest priority is getting the 2014, 2015 and 2016 volumes out,” McCabe said. “That doesn’t mean we don’t already have our staff looking at the possibility of resetting volumes.”

Lankford — who has called for full repeal of the RFS — acknowledged that EPA faced many challenges beyond its control in putting the program in place.

“If there’s anything that’s clear in the law, it’s clear that corn-based ethanol is a decreasing percentage of what’s used in the days ahead,” he said. “Corn continues to decrease, and cellulosic continues to increase. … You have a big challenge that we’re not producing near the amount” of cellulosic fuel.

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