No ‘Eleventh Hour’ White House Switch; RFS Cuts Likely

Source: By OPIS • Posted: Thursday, October 16, 2014

The U.S. biofuels industry should “stop hoping for an eleventh-hour about-face
by the Obama administration” and accept that the final 2014 Renewable Fuel
Standard (RFS2) will likely include cuts, a biofuels industry source told OPIS.
Instead, the industry should be focused on shoring up congressional support for
the next legislative session.

EPA proposed nearly across-the-board cuts in its 2014 RFS proposal, citing
concerns with the so-called ethanol blendwall, the point at which 10% blends are
maxed, among its reasons. Most observers believe EPA will increase some of the
RFS targets, but not as high as statutorily envisioned for the year.

On Aug. 22, EPA sent the final RFS targets to the Office of Management and
Budget (OMB) for interagency review. Many observers believed that a final rule
which increased some or all of the biofuel targets would be released near the
November midterm elections to help vulnerable Senate Democrat candidates win and
therefore maintain the majority in that chamber.

“Despite the best efforts of senior Senate Democrats, it is clear the Obama
administration is not releasing the 2014 RVO [renewable volume obligations]
before the election,” said one biofuels industry source. “And we all know that
inaction equates to one thing — bad news for renewable fuels. That fact,
coupled with recent public comments by senior EPA and OMB staff at the Reuters
Global Climate Change Summit, make it clear the administration is prepared to
gut the RFS by rule,” the source said.

Speaking with Reuters on Tuesday, both Janet McCabe, EPA Acting Assistant
Administrator for the Office of Air and Radiation, and OMB head Shaun Donovan
expressed concern with infrastructure limitations associated with higher ethanol

“With Republicans poised to take control in the Senate, the last line of defense
for the RFS will be a 41-member Senate filibuster,” the biofuels source
continued. “It is time for the biofuels industry to stop hoping for an eleventh
hour about-face by the Obama administration and to start focusing on having
friends in a Republican-led Senate who will hold the line against anti-RFS
legislation. It is time for biofuels supporters to ensure that they have strong
relationships with likely members of a new Republican Senate majority like Cory
Gardner, Mike Rounds, Joni Ernst and Pat Roberts,” the source noted.

A second biofuels industry source agreed. “While the Obama administration claims
that climate change is a top priority, nothing could be further from the
truth….It is clear that biofuels are not a priority for this president. His
failed leadership could have real consequences for the future of the biofuels
industry if we do not wake up and realize that it is time to stop counting on
the White House and time to start building bridges with candidates likely to
find themselves as part of a Republican-led Senate next year,” the source noted.

A third biofuels industry source acknowledged the likelihood that EPA will
likely maintain some of the proposed RFS cuts, but noted that industry support
of the administration continues. “It is clear, at least from public statements,
that the White House still intends to hand the RFS over to Exxon Mobil and the
rest of the oil industry in stark contrast to the president’s rhetoric on
climate and his campaign support for the renewable fuels industry,” the source
said. “While the window is certainly not closed to fix the proposal, there is a
lot of angst in the middle of the country right now about where the White House
still seems to be on the RFS as the election nears. The renewable fuels industry
remains committed to working with the Obama administration to get them on the
right side of this issue before it snowballs,” the source added.

However, a fourth biofuels industry source didn’t see the situation as dire.
”It’s a sensitive topic, especially in Iowa, and the White House knows that
anything short of 14.4 billion gal [for conventional biofuel] or darn near it
will be met with criticism in at least some of the biofuels quarters. As such,
this looks to be pushing it back until after the elections,” the source said.
EPA proposed the 2014 conventional biofuel target at 13.01 billion gal.

However, the source disagreed that the White House is poised to gut the RFS. “If
the administration wanted to “gut the rule, they would have finalized the rule
last week, last month or last quarter. They’re responding to the critics and
clearly trying to figure out how to walk the line and thread the needle. And the
notion that the industry is ‘hoping for an eleventh-hour about-face’ and not
focusing on the Hill is simply not accurate,” the source added.

Meantime, the petroleum industry has been pushing for EPA to maintain its
proposed 2014 RFS cuts, while longer term, Congress work on an RFS repeal or
modification effort.

Charles Drevna, president of the American Fuel & Petrochemical Manufacturers,
told OPIS that “[t]he biofuels industry can’t have it both ways. Two years ago,
the industry told EPA that waivers, sought by states to lower the RVOs because
of drought conditions, wouldn’t have an adverse impact. Yet, now that EPA has
proposed to freeze — not gut — RVOs, the biofuels industry acts as if the sky
is falling. While it’s anyone’s guess as to where EPA will come down on the
final 2014 RVOs, we would remind the biofuels industry that repeal or revision
of the RFS has bipartisan support in both the House and Senate,” he added.