EPA scraps refinery proposal as it prepares 2019 volumes, House hearing on after 2022

Source: Marc Heller, E&E News reporter • Posted: Monday, June 25, 2018

EPA scrapped a proposal on Friday to shuffle biofuel mandates among refineries, as the administration prepared a new set of renewable fuel volumes for next year.

Officials had been considering whether to require some refineries to take on more biofuel — or the renewable fuel credits attached to it — to make up for more than two dozen waivers the agency has recently granted to small refineries citing economic hardship.

In the end, petroleum industry sources said, EPA lawyers determined they couldn’t put such a requirement on the refineries — meaning the debate over “hardship” waivers in Congress and among industry groups is likely to continue.

Petroleum industry sources say EPA cannot legally reallocate renewable fuel requirements retroactively but that questions remain about planning out such a move in the year ahead, based on an expected number of waivers to be issued.

A much-anticipated announcement today of renewable fuel volumes for next year hadn’t materialized by midafternoon.

Originally, EPA Administrator Scott Pruitt and Agriculture Secretary Sonny Perdue, representing competing viewpoints on the issue, were to travel to Missouri and appear on a farm near Kansas City to offer a unified message on a high-visibility issue in farm country. That trip was canceled.

Hearing today

As EPA prepared to lay out the idea for next year — a final proposal is due in November — a longer view to the program’s future after 2022 became a focus of a House Energy and Commerce Committee hearing.

That’s the year congressionally mandated renewable fuel volumes end, and EPA is left to set volumes on its own. Industry panelists suggested Congress should look at legislative changes to the RFS before that transition takes place.

Revamping the RFS before 2022 would add clarity to the law and give EPA better guidance as it implements the program, said Mike McAdams, president of the Advanced Biofuels Association, a trade group.

Without changes, he said, the RFS is so ambiguous that EPA “doesn’t have the ability to make calls on implementing policy.”

Critics of the RFS, especially in the petroleum industry, urge its repeal. The American Fuel and Petrochemical Manufacturers supports sunsetting the law in exchange for a high-octane standard for vehicles, which would provide a market for ethanol, said the group’s senior vice president, Derrick Morgan.

Subcommittee Chairman John Shimkus (R-Ill.) has worked on that idea as part of a potential RFS rewrite, and he asked panelists to comment on the prospect.

Morgan said fuels should stand “on their own two feet” and that the 2022 reset gives Congress a chance to encourage that. “We need to move toward a free market, and now is a good time to do that,” Morgan said.

But retiring the RFS is a nonstarter with ethanol industry groups, and McAdams said any sunset for the mandate would have to reassure industry players that long-term deals for biofuel projects would remain attractive, giving lenders an incentive. In the electricity business, he said, power purchase agreements are typically for 20 years, for instance.

Shimkus, from an agricultural district, said biodiesel from soybeans, as well as cellulosic ethanol, is a significant job creator back home. And while biodiesel has grown in recent years, it’s still expensive compared to petroleum-based diesel.

Cellulosic ethanol, on the other hand, has fallen well short of goals Congress envisioned when it updated the RFS in 2007. Advanced biofuels overall were supposed to surpass corn-based ethanol by 2022, a goal that’s still far off.

Any reform, Shimkus said, needs to take the full range of biofuels into account. “All of the parts are interrelated; thus, the future of advanced biofuels is tied up with the future of the RFS,” he said.