EPA head non-committal on ethanol growth

Source: By Elliott Blackburn, Argus Media • Posted: Thursday, April 29, 2021

US Environmental Protection Agency (EPA) administrator Michael Regan declined to predict ethanol’s future role in US transportation fuels for a Senate committee as the agency works through long-delayed renewable fuel blending mandates requirements.

Regan told the US Senate Environment and Public Works Committee that the agency would preserve the intent of the Renewable Fuel Standard (RFS) while working through a backlog of deadlines and delays that helped prices for credits associated with the program climb to their highest levels in roughly a decade of trade.

Senator Joni Ernst (R-Iowa) pressed Regan during a hearing on the EPA budget on the role of older biofuels in the new administration’s climate plans. The policy frequently touts electric vehicles and advanced liquid fuels, including sustainable aviation fuel, while noting that agriculture will have “a seat at the table.”

“We know that ethanol plays a significant role in providing those resources here and now, today, and will evolve as we start to look at the new future for advanced biofuels and electric vehicles,” Regan said.

“So do you think that corn ethanol will still continue to have a place, and do you see it having a larger role in the future, a smaller role?” Ernst asked.

“I think that is where I am engaging with the [agriculture] community, with Farm Bureau, with chief executives, to best determine where they believe the markets will go,” Regan said.

RFS requires that refiners, importers and other companies each year ensure minimum volumes of renewables blend into the gasoline and diesel they add to the US transportation fuel supply. The mandates include a maximum 15bn USG of ethanol blending requirements each year, a volume the US has yet to hit. Rising production of advanced biofuels, including renewable diesel, could curb the need for ethanol blending to satisfy the annual requirements.

Exemptions to the mandates granted by former president Donald Trump’s administration to small refineries reduced these requirements for years. The 10th US Circuit Court of Appeals ruled that many of those refineries should not be eligible for waivers of the requirements, an interpretation EPA has now adopted. The US Supreme Court heard arguments yesterday on refiners’ appeal in that case.

“The agency is waiting on the ultimate decision of the Supreme Court and will govern ourselves accordingly, and will follow the law as it relates to volumes,” Regan said. “There is a lot of time to make up, but we are focused on ensuring that the intent of the RFS is met and that EPA does its part.”

Lengthy delays on the blending requirements have helped stoke uncertainty propelling costs to comply with the program to record highs. The Trump administration never proposed 2021 minimum volumes that EPA should have finalized by 30 November last year. The agency must this year also set volumes for 2022 and 2023.

EPA is not waiting for the high court decision to move forward with proposing volumes, the agency said.

The small refinery decision could change the credits used by refiners to prove compliance in 2019 and 2020, and ripple through decisions for 2021-2023. EPA already delayed deadlines for those years in part to account for those decisions.

Compliance costs exceeded 18¢/USG today, based on Argus-assessments, the highest level in nearly a decade of trading. Refiners say the program has become one of their highest operating costs; EPA says the costs pass on to consumers.

Those costs concern US independent refiner PBF Energy, a major Delaware employer operating one of the company’s largest facilities in the state, committee chairman Tom Carper (D-Delaware) said.

“They provide employment to about 1,000 people in our state — which is a lot of people in a little state,” Carper said. “It is a matter of concern to us, and at the same time we think it is important that we create renewable fuels.”

By Elliott Blackburn