Industry faults ‘methodology’ behind EPA’s proposed mandate

Source: Amanda Peterka, E&E reporter • Posted: Friday, May 16, 2014

U.S. EPA must address the “methodological problem” with its November proposal that would scale back refiners’ renewable fuel requirements, advanced biofuels companies today told President Obama.

In proposing to lower this year’s mandates for ethanol and advanced biofuels use, EPA relied on a new interpretation of “supply” that flies in the face of the law and legislative history, the companies wrote. Advanced biofuel producers stand to lose investment if the methodology remains in place in the final rule, even if EPA raises its targets for biofuel use, the letter says.”The administration’s new methodology would actually scuttle U.S. investment in advanced, low-carbon biofuels,” the companies wrote.

The letter was signed by major players in advanced biofuels — including Abengoa Bioenergy, DuPont and POET-DSM Advanced Biofuels — along with several smaller companies in various stages of scaling up advanced biofuel technology. The Advanced Ethanol Council and Biotechnology Industry Organization led the effort.

The 2007 statute that created the current renewable fuel standard (RFS) gave EPA the authority to lower annual biofuel mandates if the agency determines that they will result in severe economic harm or if there is an “inadequate domestic supply” of fuels to meet the mandates.

EPA relied on the latter to propose a cut of 16 percent in ethanol and advanced biofuel usage this year compared with the level set out in the 2007 Energy Independence and Security Act (E&ENews PM, Nov. 15, 2013). The agency is expected to send a final version of the rule to the White House for review.

The agency interpreted supply to mean the amount of biofuels that reach the consumer, as opposed to the amount of fuels available for refiners to use. EPA said that the array of infrastructure impediments known as the blend wall was barring renewable fuels from entering the market.

“The EPA is interpreting supply as supply to the consumer because we think the purpose of the RFS is to reduce GHG emissions, and those GHG emissions get reduced when they’re used,” Christopher Grundler, director of EPA’s Office of Transportation and Air Quality, said at a recent appearance at an ethanol industry conference.

Since the proposal was first released in a leaked form, biofuel backers have urged EPA to raise the targets for all categories of biofuels. They have said that the definition of “supply” used by the agency would not hold up in court.

The companies today reiterated those concerns and said that increasing the numbers without also addressing the methodological concern would not provide relief for next-generation fuel producers.

“This interpretation has the practical effect of handing the future trajectory of the RFS to the oil industry by virtue of the fact that the oil industry itself controls the distribution of fuel to consumers,” the companies wrote. “Simply put, the proposal converts obligated parties under the Clean Air Act into non-obligated parties.”

Separately, dozens of Iowa renewable fuel and agriculture advocates today wrote to Vice President Joe Biden in response to a Reuters article this week that detailed a meeting between Biden and Rep. Robert Brady (R-Pa.). Acting on behalf of an alternative asset management firm that had purchased two oil refineries in his district, the congressman urged the administration to reduce renewable fuel standard targets.

“This has already become a full-blown campaign issue in Iowa in 2014, and it will be a major issue for every candidate who visits Iowa in 2016,” the letter to Biden says. “This is a crucial juncture for America’s renewable fuel industry, and we cannot allow the oil industry to dominate the debate or bully our political leaders into backtracking to greater foreign oil dependence.”