EPA, oil groups settle lawsuit over RFS deadlines 

Source: Amanda Peterka, E&E reporter • Posted: Sunday, April 12, 2015

In a tentative settlement with oil trade groups, U.S. EPA has agreed to a timeline to propose and finalize renewable fuel mandates this year.

Under the agreement, EPA would propose renewable fuel standard volumes for 2014 and 2015 by June 1 and finalize the standards by Nov. 30. The settlement would resolve the lawsuit filed by the American Petroleum Institute and American Fuel & Petrochemical Manufacturers last month over EPA’s failure to issue standards for 2014 and beyond.

EPA also announced that, while not part of the consent decree, it would issue the 2016 RFS mandates on the same schedule.

“Taken together, the schedule is consistent with our commitment to get the program back on track,” Christopher Grundler, director of EPA’s Office of Transportation and Air Quality, told reporters on a conference call. “All stakeholders want the RFS program back on the statutory timelines. With a final rule that establishes the 2016 standards by Nov. 30 of this year, we will be back on the statutory timeline.”

Congress attached the renewable fuel standard to the Clean Air Act in 2007 as a means of increasing energy independence and reducing carbon dioxide emissions from the transportation sector. The standard established yearly requirements for refiners to blend conventional ethanol and advanced biofuels into petroleum fuel but gave EPA the authority to waive or reduce the levels.

By law, EPA is supposed to finalize the following year’s mandates for conventional ethanol and most advanced biofuels by Nov. 30 of the previous year. The annual target for biodiesel — an advanced biofuel made of soybean oil, used cooking grease and animal fats — is supposed to be finalized 14 months before it goes into effect.

EPA has yet to issue standards, however, for 2014 or 2015. A proposal in late 2013 to scale back the RFS requirements for both conventional ethanol and advanced biofuel met strong opposition from several sectors, and the agency pulled back on it late last year.

API and AFPM filed their lawsuit on March 18 in the U.S. District Court for the District of Columbia, charging that the ongoing delay has “harmed and continues to harm” refiners because they can’t plan ahead to ensure compliance with the standards (Greenwire, March 20).

“EPA has failed year after year to implement the RFS effectively,” API General Counsel Stacy Linden said in a statement today. “The agency still hasn’t finalized the RFS requirements for this year or even last year, leaving companies to guess how much ethanol they were mandated to blend into gasoline.”

Along with agreeing to set the volumes for 2014 and 2015, EPA agreed in the proposed settlement to formally respond to an August 2013 petition from API and AFPM to partially waive the 2014 mandate.

EPA also announced today that it would propose and finalize the RFS mandates for 2016, as well as the 2017 RFS requirement for biodiesel, on the same June and November timeline.

The timeline is consistent with public statements EPA officials have made over the past several months, Grundler said, adding that the agency has already been working on shaping a rule that would cover the three years.

“Missing a deadline is not an option,” he said, “or to quote NASA, ‘failure is not an option’ for us.”

In today’s announcement, the agency gave some detail on how it would handle the requirements for 2014, given that the year has already come and gone. EPA said it would propose volumes for the year that reflect the amount of renewable fuel that was actually used. Grundler declined, however, to give further detail on how EPA would determine how much fuel was used in the marketplace.

Grundler added that the rule would set the tone for future years when it comes to tricky issues like the blend wall, the term for the 10 percent ethanol saturation limit in the market. Higher blends of ethanol have been slow to come into the market, which refiners say limits their ability to comply with the RFS.

“We will continue along that path for subsequent years,” he said. “We’re going to be resolving some of those fundamental issues, like how do we continue to grow volumes above this so-called blend wall.”

The settlement is subject to a 30-day public comment period. According to the decree’s language, EPA could miss the June and November deadlines only if there is written consent from all parties.

The oil trade groups said they were pleased with the terms of the settlement but reiterated broader concerns over the program. Both API and AFPM have called on Congress to repeal the standard on concerns about the blend wall.

“While we are pleased that we were able to negotiate a deadline that requires EPA to issue the overdue RFS rules, we remain concerned with the government’s implementation of this broken program,” AFPM General Counsel Rich Moskowitz said. “EPA’s failure to comply with the statutory deadlines injures refiners and exacerbates the problems associated with this unreasonable government mandate.”

Stephen Brown, vice president of federal government affairs at Tesoro Corp., said the settlement would force EPA to show its cards on the renewable fuel standard.

He expected committees in both the House and Senate to hold hearings on the RFS this summer after EPA releases its proposal, but said it would be unlikely for any RFS legislation to move before the agency issues its final rule.

“I think that this gets the ball rolling. We have got to force this out in the open,” Brown said. “I don’t think Congress can do much of anything right now. It doesn’t have a point of entry to work on this issue until they see what the latest thinking is from the administration.”

Several biofuel trade groups issued statements welcoming the establishment of court-ordered deadlines for EPA to issue the standards.

Brooke Coleman, executive director of the Advanced Ethanol Coalition, said the agreement was a “good signal” that would provide a “reasonable market expectation for resolving the uncertainty around the RFS.”

“Now that we have a better idea of when it will happen,” he said, “we look forward to working with EPA to make sure that the new RFS proposal supports the commercial deployment of advanced biofuels as called for by Congress.”

Biofuel producers, however, said the substance of EPA’s proposal would be more important to the industry than the timing of the rule. Biofuel groups said the agency’s first attempt at the 2014 rule — the proposal to scale back the mandates — would have hurt the development of advanced biofuels and led to less competition in the fuel marketplace.

“Our producers have faced ambiguity for too long, and today is welcome news that they are establishing a level of certainty with this announcement,” said Tom Buis, CEO of the ethanol group Growth Energy. “However, far more important than timing is that the EPA establishes a final rule that moves our industry forward and reflects the bipartisan vision Congress intended for the RFS.”