Representatives of the biofuel industry testify at RFS hearing

Source: By Erin Voegele , Ethanol Producer Magazine • Posted: Friday, July 20, 2018

Several members of the biofuels industry testified at the July 18 hearing held by the U.S. EPA regarding its proposed rule to set 2019 blending obligations under the Renewable Fuel Standard. Many expressed hope that the EPA’s new leadership will hold up the Trump administration’s commitment to the RFS and discussed the need to correct impacts caused by the misuse of small refiner hardship waivers.

The hearing, held in Ypsilanti, Michigan, focused on the EPA’s proposed rule to set 2019 renewable volume obligations (RVOs) under the RFS, along with the 2020 RVO for biomass-based diesel. The agency released the proposed rule on June 26. It aims to require 19.88 billion gallons of biofuels to be blended into the U.S. fuel supply in 2019, up from 19.29 billion gallons in 2018. The proposed 19.88 billion gallon RVO for 2019 includes 381 million gallons of cellulosic biofuel, 4.88 billion gallons of advanced biofuel and 2.1 billion gallons of biomass-based diesel. The 2019 RVO for biomass-based diesel was set last year. The proposed 2019 RVOs would allow for up to 15 billion gallons of conventional biofuel to meet the annual blending requirement, most of which is corn ethanol. The rulemaking also proposes to set the 2020 RVO for biomass-based diesel at 2.43 billion gallons, up 330 million gallons when compared to the 2019 and 2018 RVOs of 2.1 billion gallons. A public comment period on the proposal is open through Aug. 17.

Samantha Slater, vice president of public affairs at the Renewable Fuels Association, offered testimony on behalf of her organization. She said that the proposed rule looks good on the surface, as the total RVO increases 3 percent over the 2018 requirement while maintaining the 15-billion-gallon requirement for conventional fuels, such as corn ethanol. “But due to EPA’s failure to stem the tide of small refinery waivers, its refusal to reallocate lost blending volumes, and its brazen repudiation of binding court decisions, the proposed rule is superficial and toothless, and undermines President Trump’s commitment on the RFS,” Slater said, adding that the proposal means nothing until the EPA takes action to reallocate 2.25 billion ethanol-equivalent gallons that were subject to illegal waivers to oil refiners and sets forth a more transparent and rational process that assures small refinery waivers are not abused or granted unnecessarily.

“Administrative cuts to the RFS have resulted in significantly lower RIN prices, reduced corn and ethanol demand, avoided legal obligations for highly profitable businesses, and provided windfall profits for certain oil refiners,” Slater continued. “The final rule should do less to cater to the whims of the oil industry in implementing the nation’s renewable fuel program, and more to create demand for ethanol, lowering prices at the pump for consumers and creating economic opportunities for farmers across the country,” she added.

Ron Lamberty, senior vice president at the American Coalition for Ethanol, delivered testimony on behalf of ACE. His comments focused on the EPA’s overall approach to enforcing the RFS, conventional biofuels, and the effective working of the renewable identification number (RIN) marketplace.

“With the departure of the previous EPA Administrator, I hope EPA will take this opportunity to return to implementing the RFS as intended by Congress,” Lamberty said. “Pruitt’s seemingly sole focus on helping merchant refiners ignore or skirt their longstanding obligations under the RFS has further shaken the rural farm economy while undermining Congress’ goal of increasing renewable fuel use in the United States.”

Lamberty stressed that the EPA’s misuse of its small refiner waiver authority has destroyed approximately 2.25 billion gallons of biofuel demand in 2016 and 2017 alone. “The 2019 proposal does nothing to reallocate the gallons of ethanol lost due to RFS waivers, nor does it restore the 500 million gallons of biofuel demand lost because of EPA’s actions in misapplying the economic harm waiver in the 2016 RVO as determined by the courts that ordered EPA to return those gallons as well,” he said. “This RVO rulemaking is the perfect place for EPA to restore these biofuel volumes under the RFS, allow for E15 and higher blends to be sold year-round, and discard of its refiner win-at-all-costs mentality.”

Chris Bliley, vice president of regulatory affairs at Growth Energy, said that while the EPA’s 2019 proposal represents a solid efforts to leave the 15 billion gallon commitment to conventional biofuels intact and increase the use of cellulosic biofuels, the EPA’s use of small refiner hardship waivers will hollow these goals. “The agency freely admits that it has waived more than 2.2 billion gallons of demand through refinery waivers and has built a RIN bank so large, more than 3 billion RINs, that it contemplates that some of those RINs will simply expire as worthless,” he said. “In fact, these waivers, given all behind a shroud of secrecy, have set the blending levels back to 2013 levels, destroying biofuel and associated farm demand all while refinery profits continue to surge and consumers pay higher and higher prices at the pump.”

“Maybe there are a handful of small refineries that meet the criteria to be exempt, but what is perhaps most troubling, is that rather than reallocate these gallons as the law requires, they are simply being lost with absolutely no effort to meet the levels outlined in the proposal,” Bliley continued. “What kind of signal does that send to farmers who plant their crops based on demand?  What message does that send to biotech company facing a choice of whether to make a multi-million-dollar investment in the United States or in another country?  It speaks volumes.”

Bliley called on the EPA to reduce the number of unfounded refinery waivers and reallocate any lost gallons to oil refiners. He also asked the agency to make E15 and higher ethanol blends available year-round. “American biofuel producers and farmers cannot afford further delay and lost demand,” he said.

David Cox, cofounder and director of operations for the Coalition for Renewable Natural Gas (RNG Coalition), stressed that the RNG industry is poised to meet the 381 million gallon cellulosic RVO proposed by the EPA for 2019. “The proposed volume would be a signal of stability that should allow RNG industry producers and investors to continue developing and growing production of American cellulosic biofuel,” he said.

According to the RNG Coalition, the RNG industry current producers more than 95 percent of the fuel that is used to meet the RFS program’s cellulosic RVOs, with production of RNG increasing from 33 million gallons in 2014 to more than 240 million gallons in 2017. The industry has developed more than 45 new facilities capable of producing cellulosic biofuel since 2011, with an additional 50 projects currently under construction or development.

Donnell Rehagen, CEO of the National Biodiesel Board called on the EPA to set the 2020 volume for biomass-based diesel to at least 2.8 billion gallons to provide the certainty the biodiesel industry needs. “That number better aligns with the goals that Congress set for the RFS program. And it will better fulfill the promise of the RFS program,” he said.

The NBB also noted the EPA must reduce the uncertainty it has caused by issuing retroactive small refiner hardship exemptions. “I appreciate the agency’s recognition that the biodiesel industry has proven year after year that it can deliver increasing volumes,” said Kurt Kovarik, vice president of federal affairs at the NBB. “At the same time, I would like to emphasize that the volumes EPA finalizes will be meaningless, if the agency continues to retroactively reduce them through refinery exemptions.”

Lucy Norton, managing director of the Iowa Renewable Fuels Association, said that while the proposed increases for biodiesel, cellulosic biofuels and advanced biofuels are refreshing, the RFS proposal is being undermined by small-refinery exemptions. “Today, our message is simple: 15 billion gallons must mean 15 billion gallons,” Norton said. “That is what the law says. Yet the moment the ink dries on this rule in the Federal Register, retroactive and questionable small-refinery exemptions, if not addressed, will slash the RFS categories to meaningless levels. The exemptions are a cancer that eats into each and every RFS category. Quite frankly, the rampant use of small refinery exemptions is a cancer that is eating into the credibility of the EPA.

Norton said that despite President Trump’s commitment and direction from the administration to increase RVOs and reallocate gallons lost to small refinery waivers, the EPA went rogue with a demand-destroying proposal at the 11th hour before the proposed rule went public.

“The EPA going rogue makes a mockery of the interagency process and highlights how the EPA under its former leadership was out of step with the Trump Administration and President Trump himself,” Norton said. “Restore the integrity of the RFS and, by doing so, the trust of rural America in this agency and in this Administration.”