Growth Energy’s Buis says EPA failed to strike balance in RFS proposal 

Source: Monica Trauzzi, E&E • Posted: Tuesday, June 9, 2015

Last month, U.S. EPA released its 2014-through-2016 renewable fuel standard proposal. Were there any stakeholders that emerged as clear winners? During today’s OnPoint, Tom Buis, CEO of Growth Energy, explains his concern over the year-to-year blend wall established by the agency. He also talks about the investment uncertainty resulting from a lack of specificity from the agency on 2017 volume obligations.

Click here to watch today’s OnPoint.

Monica Trauzzi: Hello, and welcome to OnPoint. I’m Monica Trauzzi. With me today is Tom Buis, CEO of Growth Energy. Tom, it’s nice to have you here.

Tom Buis: It’s great to be here.

Monica Trauzzi: Tom, last week, EPA released its 2014-through-2016 renewable fuel standard proposal. Did the agency strike the right balance of weighing stakeholder concerns and also considering the market when it released these RVOs?

Tom Buis: Actually, no, they didn’t. They got it better than their first attempt a year and a half ago, which was, believe it or not, worse. Part of the problem is the rationale they’re using to make the adjustment, and they’re basically saying that the RFS, the volume should be set based on how much was consumed or how much is projected to be consumed in any one year. The goals of the RFS when Congress passed it back in 2007, president signed it into law, was very clear. They wanted to create a market to drive innovation and commercialization of renewable fuels. Without that pull demand of the RFS, you’re basically just — what they’ve done is just basically given to oil the keys to the candy store by saying that, OK, you only have to blend as much as you want to blend. You’re not going to be forced to ever adopt higher blends into the marketplace, which was the goal at the very beginning.

Monica Trauzzi: But there’s always been this question about whether the renewable fuels industry can keep up with the demands that are set out in the RFS, and in fact, there have been some challenges and failures to that end.

Tom Buis: But successes as well.

Monica Trauzzi: Successes as well, but isn’t the agency trying to address that and perhaps alleviate future challenges?

Tom Buis: Well, from their perspective, that’s what they’re saying. That’s not our read on it because if you don’t have that pull demand and the market access which the RFS gives to our industry, you’ll never grow the industry. Basically what they’ve done, beginning a year and a half ago and even today, is created more uncertainty. Businesses aren’t going to invest hundreds of millions of dollars into next-generation bio-refineries if there’s not a policy certainty, market certainty; why build something that you don’t have a market for? And that — that’s basically what they’ve said. Is it better than their previous attempt? A little bit, but they still have a long way to go, and we’re hoping that in the comment period, and everyone keeps it in perspective, this is a proposed rule. Just like the last one. The last one went nowhere, and I think in the comment period, we’ll be able to demonstrate again where they got it wrong, what they need to do to correct it.

Monica Trauzzi: Does the proposal favor corn ethanol?

Tom Buis: No, absolutely not. In fact, I would say it favors Brazilian ethanol because they created such a big advance bucket on the list that what you’re going to have is Brazil can’t produce enough, but you’ll have this two-way shipping of ethanol. Brazilian ethanol will be coming to the United States to meet the advance volume requirements, and U.S. ethanol will be going back to Brazil so they’ll have enough for their domestic concerns. And we’ll be paying freight both ways and you’ll be increasing the carbon footprint because those ships, they don’t go down there on solar power. They’re spewing diesel fuel or whatever that 6,000-mile trip each way. So I think they got that one wrong as well.

Monica Trauzzi: So the advanced fuel guys, they still can’t meet the targets on their own?

Tom Buis: Well, the biodiesel component can but they gave such a big volume increase to advanced fuels beyond biodiesel that you’re just going to have that, and ultimately the consumer ends up paying, Monica. It’ll be a higher price shipping this stuff back and forth for the end result being the same molecule — ethanol.

Monica TrauzziGreenwire‘s Amanda Peterka reported [last] week that the blend wall established by EPA is causing concern among a wide range of stakeholders. What’s your view on how they handled the year-to-year blend wall?

Tom Buis: Well, again, I think they caved, basically, and I think we can demonstrate to them that if they will change their methodology and their volumes, that the RFS will succeed. We’re sitting here with overproduction right now in Generation 1 biofuels. We have to export our excess. We have the capital investment in the ground to be able to produce far more than is being consumed, so I don’t buy that argument that our industry didn’t produce. What is needed is that shot in the arm of we’re going to have a marketplace to generate the investment in next-generation biofuels. The second thing it does, and this one’s a really critical component. Based on their rationale, we’re going to do this on the volumes used the year before or projected is it just permanently says to the oil industry you don’t have to offer higher blends to consumers and let them make the choice. And if you don’t have to offer higher blends at the marketplace, how are you ever going to get the volumes up? It’s a Catch-22.

Monica Trauzzi: Are you concerned about the lack of clarity on what happens in 2017 and beyond, and how does that affect investments?

Tom Buis: Oh, absolutely. All of this is about how it affects investment, and a lot of people thought, oh this is all about corn ethanol or biodiesel. It’s really about the future, and if you don’t have a clear future, and granted, the delays hurt as much as anything in creating uncertainty, so they need to get that clarity out there and, again, what they’ve set in this template is we’re going to set ’17 and ’18 and beyond just like we did ’14, ’15 and ’16, based on the prior years. Makes no sense. They just — in essence, they’ve changed the law.

Monica Trauzzi: We’re expecting a hearing in the Senate [this] week on the RFS. What are your expectations for congressional action moving forward on what EPA …

Tom Buis: I don’t think Congress is going to do anything. They’ll have oversight hearings. You know, there was all this talk for the last two or three years. Oh, they’re going to reform or repeal the RFS. It didn’t happen. It’s not going to happen this time, Monica.

Monica Trauzzi: All right. We’ll end it there. Tom, thank you for your time.

Tom Buis: Thank you. Appreciate it.

Monica Trauzzi: And thanks for watching. We’ll see you back here tomorrow.

Tom Buis: Thanks. Good to see you.

Monica Trauzzi: Thank you. That was great. Thank you.