Oil interests sue government over biodiesel mandate

Source: CHRISTOPHER DOERING, Des Moines Register, Gannett Washington Bureau • Posted: Thursday, November 29, 2012

The ethanol industry fights back, arguing the suit is an ‘example of the fox guarding the chicken coop.’

WASHINGTON — The oil industry launched its latest attack against the U.S. government’s efforts to require the use of renewable fuels, suing the Environmental Protection Agency for increasing the amount of biodiesel required for use in the nation’s trucks next year to a level it described as “overzealous” and “unworkable.”

The American Petroleum Institute, which represents energy giants such as ExxonMobil and ConocoPhillips, said the proposal by the EPA to boost the blend total for biodiesel by 28 percent in 2013 could raise the costs of making the fuel and should be reduced. The lawsuit was filed Monday in the U.S. Court of Appeals for the District of Columbia Circuit.

The EPA announced in September it increased the amount of biodiesel required for use next year to 1.28 billion gallons from 1 billion gallons. Iowa is the country’s largest producer with 13 facilities that have the capacity to produce 320 million gallons annually.

“EPA did not need to increase the amount above the 1 billion” required by law, said Bob Greco, a director with API, who said the increase in the mandate would outweigh any benefits it generates. “EPA’s overzealous 2013 biodiesel mandate is unworkable,” he said

A spokesperson with the EPA did not return requests seeking comment on the lawsuit.

The Renewable Fuel Standard, updated in 2007, required biodiesel to be included in U.S. diesel fuel markets beginning in 2010. The level was set at 800 million gallons in 2011, the first full year compliance was required, before it was increased to 1 billion gallons in 2012. For 2013 and beyond, the EPA is required to determine how much biodiesel must be blended annually.

“This is a classic example of the fox guarding the chicken coop,” said Tom Buis, chief executive of Growth Energy, a group that represents the ethanol industry. “Special interests will stop at nothing to discredit the success of renewable fuels created right here at home to ensure their lock on the fuels market goes unchecked.”

API’s Greco noted the industry’s ability to meet the government’s higher requirement is further complicated by scams plaguing “renewable identification numbers” — a special serial number given to batches of biofuels before they are sold to refiners and gasoline importers looking to comply with the federal mandate.

The EPA uncovered more than 140 million invalid RINs generated by three biodiesel companies, representing between 5 and 12 percent of the biodiesel market.

The EPA tracks RINs using its Moderated Tracking System. However, once biofuel producers are approved to generate RINs, there is no process in place to check that they are generating the volume of fuel they claim to be.

To correct the fraud problem facing RINs, the EPA released a proposal earlier this year to ensure the identification numbers that are generated are authentic.

The latest attempt by the oil and gas industry to roll back the Renewable Fuel Standard came as no surprise to the biofuels industry.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the API has a “thin” track record in chipping away at the law, having lost each time it has challenged it in court, the White House and Congress.

“You go back and look at every step, from when Congress was debating the law, to when the EPA was implementing the law, to every new annual implementation, they have challenged all of these. They have never supported it. They’ve always said the sky is falling,” Shaw said. “It’s not that the law isn’t working that bothers API, it’s the fact that the law is working that bothers API.”

Earlier this month, the EPA rejected a request from several states, livestock groups, API and others to waive the Renewable Fuel Standard, which requires billions of gallons of biofuels, mainly ethanol, to be blended into the country’s motor fuel supply.

In the face of the worst drought to hit the United States in 50 years, they argued the requirement was increasing feed costs for livestock and would lead to higher meat and dairy prices for consumers at the grocery store.

Separately, API on Tuesday called on Congress to scrap the Renewable Fuel Standard and start over. The oil and gas industry trade group said the program is riddled with “shortcomings” and is not working as intended when it was put in place by Congress in 2005.