EPA stays the course on renewable fuel obligation

Source: Marc Heller, E&E News reporter • Posted: Tuesday, November 28, 2017

U.S. EPA declined last week to change who’s responsible to meet federal renewable fuel mandates, settling an industry dispute as broader questions about biofuel policies await resolution.

Pro-ethanol groups cheered the agency’s decision to keep the mandate’s “point of obligation” on fuel refiners, rather than switching it to fuel blenders as some refiners had requested. Blenders are the more logical responsible party, refiners say, because they do the actual combining of fuel.

One the biggest refiners, Valero Energy Corp., in turn said EPA’s decision merely sets the stage for legal challenges from companies that consider the renewable fuel standard — and EPA’s rationale for maintaining its structure — flawed.

In casting aside refiners’ request, EPA sided with industry groups that said that changing the system would be disruptive and that the RFS as structured is meeting Congress’ goal of boosting alternatives to gas and oil.

EPA also rejected refiners’ complaints that the fuels standard unfairly forces them to pay for high-priced renewable fuel credits, called renewable identification numbers, or RINs.

“We believe that the current structure of the RFS program is working to incentivize the production, distribution, and use of renewable transportation fuels in the United States, while providing obligated parties a number of options for acquiring the RINs they need to comply with the RFS standards,” EPA said in its final decision released Nov. 22.

“We do not believe that petitioners have demonstrated that changing the point of obligation would likely result in increased use of renewable fuels,” EPA said.

Refiners have complained that renewable fuel credits have grown so expensive that companies are in danger of laying off workers or closing plants if the policy isn’t changed. That’s an argument that Carl Icahn, the mega-investor and former Trump administration adviser who’s majority owner of CVR Energy Inc., unsuccessfully made to the administration earlier this year (E&E News PM, Nov. 8).

Valero said EPA’s decision made “numerous misstatements” about implementation of the fuel standard and the dynamics of the fuel market.

“At least EPA acknowledges its ability to address the issue if it so chooses,” Valero said in a statement. “By finalizing its decision, EPA has now opened more opportunities for judicial review.”

Backers of the fuel standard applauded EPA.

“This one-sided handout would have added regulatory red tape, created havoc in the marketplace, and denied consumers access to more affordable fuels with higher blends of biofuels like E15,” Emily Skor, CEO of Growth Energy, said in a statement, referring to fuel that’s 15 percent ethanol, up from the 10 percent ethanol gasoline widely sold now.

While the debate over obligated parties has generated plenty of attention in the industry, it overshadows more important questions such as how EPA and Congress will tweak the RFS over the next few years and whether the agency will encourage renewables by increasing minimum volumes of advanced biofuels, said Paul Winters, spokesman for the Biotechnology Innovation Organization. An announcement on annual renewable fuel volumes is due by the end of this month.

“It’s always been a bit of a distraction, this issue,” Winters said.

The issue has also divided oil industry players. The American Petroleum Institute, which opposes the RFS, had urged EPA nonetheless to leave the point of obligation as is.

Winters said advocates for advanced biofuel and cellulosic ethanol, for instance, are waiting to see whether EPA will back away from recent moves to ratchet back some of the volumes in that part of the business.

Those moves at EPA have been “very concerning,” Winters said. “We still think growth is possible,” he said.