EPA will reconsider 2013 cellulosic target on oil industry concerns

Source: Amanda Peterka, E&E reporter • Posted: Friday, January 24, 2014

U.S. EPA Administrator Gina McCarthy said today that her agency will reconsider its 2013 cellulosic biofuel mandate in light of objections raised by the oil industry.

In a letter to the American Petroleum Institute and American Fuel & Petrochemical Manufacturers, McCarthy said EPA would initiate a formal rulemaking to reconsider the proposal in response to an October petition by the oil industry groups.

“We have determined that your petition demonstrates that the statutory criteria for granting a petition for reconsideration are satisfied,” McCarthy told Bob Greco, API’s director of downstream activities, and Richard Moskowitz, AFPM’s general counsel.

Under the EPA rule finalized in early August, refiners must blend 6 million ethanol-equivalent gallons of cellulosic biofuel made from plant-based materials such as agricultural residue and woody biomass into petroleum fuel or purchase credits to show compliance.

In their petition, the oil industry groups argued that the target was too high, forcing them to blend more cellulosic biofuel than is actually present in the market. They referred to an announcement last August by cellulosic biofuel company KiOR Inc. after EPA finalized its 2013 rule warranted reconsideration of the target.

KiOR began producing cellulosic gasoline and diesel at a facility in Mississippi last year, but the company has consistently failed to meet stated production goals. On Aug. 8, KiOR announced that it had shipped 75,000 gallons of fuel in the second quarter of the year — well below the 300,000 to 500,000 gallons it projected in May.

EPA is relying on KiOR to meet most of the cellulosic biofuel target for 2013.

“We believe that KiOR’s August 8, 2013, announcement of reduced anticipated production in 2013, which your petition noted, justifies reconsideration of the 2013 cellulosic biofuel standard,” McCarthy said.

The oil industry groups also asked EPA to reconsider its targets for other types of renewable fuels. EPA said it would respond to those sections of the petition at a later date.

The groups applauded today’s decision.

“It’s refreshing that EPA has finally agreed to reconsider bad public policy that mandates biofuels that do not exist,” Greco said.

AFPM President Charles Drevna said he believed the “agency’s optimism for cellulosic biofuel appears to have been tempered by reality.”

“EPA used common sense when making this decision, and we believe common sense should also prevail in resetting the 2013 [rule],” Drevna said.

API, AFPM and Monroe Energy LLC, a small refiner owned by Delta Air Lines, are concurrently suing EPA in federal court over the 2013 renewable fuel standard rule.

Last year, a federal court knocked down EPA’s 2012 cellulosic standard on the grounds that it was too aggressive. The agency has since proposed to also void its 2011 target and refund oil companies nearly $5 million for their costs in trying to meet it (Greenwire, Nov. 18, 2013).

Senators want 2014 target revised

As EPA remains embroiled in arguments over its 2013 target, a large number of senators are calling on the agency to also revise its proposed mandate for biofuel use for 2014.

Unlike in 2013, EPA this year has proposed to roll back the mandate for conventional ethanol and overall advanced biofuel production for the first time since the renewable fuel standard was put in place in 2007.

The proposal is a “significant step backward,” 31 senators wrote in a letter yesterday to McCarthy. They called on the agency to revise its proposal to simulate growth in next-generation biofuels and infrastructure.

“Without a revised proposal, the EPA’s rule will bring severe economic consequences, and prevent the growth of the renewable fuel sector,” the senators said.

Sens. Dick Durbin (D-Ill.), Chuck Grassley (R-Iowa), Al Franken (D-Minn.), John Thune (R-S.D.) and Amy Klobuchar (D-Minn.) — farm-state lawmakers — led the effort.

EPA is collecting comments on its 2014 renewable fuel standard rule until Tuesday. So far, 13,996 comments have been submitted.