RFA’s Dinneen says EPA has ‘fundamental misunderstanding’ of renewable fuel rule

Source: Monica Trauzzi, E&E • Posted: Tuesday, July 19, 2016

Last week, the public comment period for U.S. EPA’s proposed 2017 renewable fuel standard volume obligations came to a close. How will the agency reconcile the variety of criticisms of the proposal? During today’s OnPoint, Bob Dinneen, president and CEO of the Renewable Fuels Association, reacts to the proposal and discusses the outlook for any type of RFS reform following this year’s elections and heading into 2017.

Monica Trauzzi: Hello, and welcome to OnPoint, I’m Monica Trauzzi. With me today is Bob Dinneen, president and CEO of the Renewable Fuels Association. Bob, thank you for coming on the show, it’s nice to see you again.

Bob Dinneen: Thanks for having me.

Monica Trauzzi: So Bob, the public comment period for EPA’s proposed 2017 RFS volume targets just came to a close. There are distinct dividing lines, as usual, between what the oil industry is saying and what your folks are saying. You believe the agency has adopted the oil industry’s narrative regarding how much ethanol can be blended into gasoline. This administration, though, it could be argued, has very much been in favor of renewables and moving away from the fossil fuel economy. It would seem like a bit of a disconnect if they were taking the oil industry’s side on this, wouldn’t it?

Bob Dinneen: Well, I agree it’s counterintuitive. There are times when I think the administration is somewhat schizophrenic when it comes to renewable fuels. They are supportive of moving away from petroleum. They’d like to see more second-generation, more cellulosic ethanol. You know, certainly Secretary Vilsack and Secretary Moniz see the benefits of corn ethanol and want to see us maximizing our replacement of petroleum. And I think would like to see the RFS implemented as the statute dictates.

But the fact of the matter is, EPA doesn’t seem to be paying attention to the statute. I think that there’s a fundamental misunderstanding at the agency about what this program is about. Because the RFS was designed to force marketplace change. It was designed to get the oil companies to do things that they otherwise would not do; invest in the infrastructure for higher-level blends, invest in new technologies for advanced biofuels. And what EPA has done by saying, “No, we got to look at marketplace realities,” and allowing the blend wall to dictate how much ethanol can be used in the program, really guts the — it turns the program on its head.

Monica Trauzzi: You used the phrase “fundamental misunderstanding.” Does that come from the top? Are you talking about Gina McCarthy?

Bob Dinneen: Look, I’m talking about EPA in general. And maybe that means folks in the White House too. We’re really frustrated. Look at what they’ve done this year. The statute says 15 billion gallons. They’ve promulgated for undifferentiated renewable fuels or conventional ethanol. And they’ve promulgated a rule that provides 14.8 billion gallons. But you read their own analysis, and it shows that the marketplace can most certainly absorb 15 billion gallons of renewable fuel in the undifferentiated bucket. Their own analysis shows you’re going to have 14.2 billion gallons of 10 percent ethanol. That you would have 300 million gallons of E15 and E85. And you’re going to generate more than 600 million RINs in conventional biodiesel, renewable diesel that falls into the D6 pool, not to get too technical.

Now, I got into politics because I was bad at math, but that’s more than 15 billion gallons. What did EPA do then? They said, “But we’re going to have 200 million gallons of Brazilian ethanol coming in, and so we’re going to set the standard at 14.8.” But the very notion that you’re going to have 200 million gallons of Brazilian product coming in suggest to me that they’re not paying attention to the marketplace realities at all. We’ve imported less than 2 million gallons so far this year from Brazil, and given the world economics for sugar cane, there’s no way on this planet you’re going to see 200 million gallons. So why are they reducing the number? Set the number at the statute. You won’t have the concerns throughout the Midwest. You’ll be showing some fidelity to what Congress wanted to see. And I think it’s an easy call for the agency.

Monica Trauzzi: But are they seeking to strike a balance managing all the concerns of the various players who are at the table?

Bob Dinneen: If the act said, “EPA, go strike a balance between all the stakeholders,” sure. But that’s not what the act did. Congress struck the balance between all of the interests, and Congress said, “We want this program to drive renewable fuels into the marketplace.” API just wants 9.7 percent as renewable fuels. What’s magic about that? I’m sorry, it really makes no sense. That means they just want to protect their stranglehold on the gasoline market. There’s no reason why 9.7 percent is somehow at all logical.

Monica Trauzzi: What were your board members saying at your most recent meeting here in Washington about business prospects and the politics surrounding renewable fuels right now?

Bob Dinneen: Well, many of my board members participated in a public hearing in Kansas City last month. And there were 140 people that participated in that hearing. More than 90 percent of the people that went to EPA and said, “These are our thoughts on this program,” were telling EPA that they need to read the statute again. They need to enforce the statute as Congress intended. And to promulgate a final rule, where the conventional biofuels is 15 billion gallons. There were only 14 speakers, by my count, that were supportive of what EPA has done. So, I mean, our members are pretty frustrated. They’d like EPA to just read the statute and, you know, enforce the 15 billion gallons that you’re supposed to.

Monica Trauzzi: Let’s talk about Congress, because a lot of people think the statute should be changed, reformed, repealed. Most people would say it’s unlikely this year. Would you agree with that?

Bob Dinneen: Absolutely. I mean, there’s not going to be time, there’s not much interest.

Monica Trauzzi: What about next year? I mean, we could be looking at a very different Washington next year based on who is elected to office. So how are you gearing up for that, and do you think that prospects improve heading into 2017?

Bob Dinneen: Look, my members pay me to be paranoid. They pay me to be prepared for all situations. And I agree with you, there may very well be renewed interest next year. The API and the oil companies aren’t going to just give up their fight to regain control over the barrel. But we’ll all be smarter in November, because if the Senate were to switch, it’s a much different dynamic. If the House were to switch, it’s a very different dynamic. Who’s going to be president? I mean, there are so many variables for next year. I think we just have to wait and see.

Monica Trauzzi: And so how are you engaging with Congress right now? Because you know basically nothing’s going to move this year in terms of the RFS. What are you doing, what conversations are you having with members at this point?

Bob Dinneen: Well, just this week we had our members into town. They were all up on the Hill. They were visiting with their own members of Congress, and others, trying to educate them, trying to bring them back to why the RFS is so important and why it has been so successful. Two weeks ago the Energy and Commerce Committee held a hearing on the issues. I testified. I thought it was a great opportunity. I thought it was a fair hearing. And, you know, we pushed back against the oil companies that were saying, “We got to scale this program back,” and I reiterated why this program is so important to our nation’s energy, economic and environmental security. And that message will get out there.

Monica Trauzzi: All right, we’re going to end it there. Thank you for coming on the show. Nice to see you, as always.

Bob Dinneen: Thanks Monica, appreciate it.

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