RFS rollback would put policy on ‘manageable’ track — EPA transportation chief

Source: Amanda Peterka, E&E reporter • Posted: Friday, February 21, 2014

ORLANDO, Fla. — A proposal to reduce the renewable fuel mandate that many saw as a step backward for federal biofuels policy was in fact an attempt to define a “manageable trajectory” going forward, U.S. EPA’s transportation head said yesterday.

Christopher Grundler told an ethanol industry audience here that EPA aimed to address practical realities in the marketplace — not undermine the biofuels industry. The agency and the Obama administration remain fully committed to the industry, he said.

“Biofuels has got to be part of that solution set” for reducing emissions in the transportation sector, EPA’s Office of Transportation and Air Quality director said. “In my opinion, it’s way, way too early to declare failure here.”

EPA’s proposal, though, calls for a 16 percent cut in ethanol and advanced biofuel usage this year compared with the level set out in the 2007 Energy Independence and Security Act. The agency would mandate 13 billion gallons of conventional ethanol — 1.4 billion gallons below what the act requires — and 2 billion gallons of advanced biofuels made from feedstocks other than cornstarch, a reduction of 1.75 billion gallons from the act’s goal.

The agency cited concerns with an “inadequate domestic supply” of biofuels, the limit to the amount of ethanol that can be used in today’s fueling infrastructure and low confidence that the nation can produce a substantial amount of next-generation biofuels this year (E&ENews PM, Nov. 15, 2013).

The rule, which was leaked in draft form ahead of the official November proposal, has been EPA’s most controversial renewable fuel decision to date.

A December public hearing on the proposed rule drew a record number of attendees and testifiers, many of whom told personal stories both in support of and in opposition to the proposal. One college student drove more than 800 miles from Michigan to Washington, D.C., to testify in support of biofuels.

A team of about a dozen EPA employees is currently wading through more than 140,000 written public comments, 6,000 of which are unique, Grundler said. Hundreds of the comments were more than 100 pages in length.

Oil industry representatives, livestock producers and food manufacturers have generally opposed the proposal, arguing that the agency came up short.

“While the agency took a step in the right direction, we still have concerns that the proposal doesn’t go far enough to protect consumers,” the American Petroleum Institute says.

Biofuels producers and farmers, on the other hand, submitted thousands of comments in opposition because they felt it missed the mark in the opposite direction. They say EPA has no legal basis for proposing such deep reductions.

“They’re mad as hell,” National Corn Growers Association Vice President for Public Policy Jon Doggett said this week about the extent of the commenting.

While finding a middle ground will be a weighty task, EPA is aiming to finalize the rule by midnight June 20.

Grundler told ethanol industry representatives in Orlando at the Renewable Fuels Association’s annual conference that the rule could change to take into account updated information and all the public comments.

“What I think are central points for the policy going forward is: How do we put this on a manageable trajectory?” he said. “What does it look like, what is it reasonable for us to assume is that growth pattern? And how can we be more predictable about this so we don’t go through this argument year after year?”

In a discussion with reporters after his speech, Grundler defined a “manageable trajectory” as one that shows steady growth in the overall biofuels space and remains neutral among the various types of renewable fuels.

“It does the country, the society, the economy, no good if these fuels aren’t used,” Grundler told reporters. “We’re not going to be reducing emissions if they’re not used.”

Grundler also told reporters that the agency has attempted to be conservative in its estimates of cellulosic biofuel production, or the generation of advanced biofuels from plant-based materials like agricultural residue and switch grass. EPA has consistently overshot with its estimations of production and lost a federal court case over its 2012 number. In the 2014 proposal, the agency pegged cellulosic production at 17 million gallons.

“I’m not happy that the EPA has been wrong every year about this,” Grundler said. “We are looking at what processes we’re using to estimate future cellulosic production. And it’s hard. There’s a considerable amount of uncertainty.”

EPA in general believes that the policy must address “practical realities” in the ethanol marketplace today, including the 10 percent blend wall, or the technically feasible ethanol saturation point in the marketplace.

What EPA is not proposing to do, the transportation chief said, is be a price-setting agency for Renewable Identification Numbers, or the credits associated with gallons of biofuels that refiners buy and sell to meet their annual obligations. Skyrocketing RIN prices last year prompted an outcry by refiners that the country had hit the blend wall and that the renewable fuel standard had become unworkable.

Documents show that the White House was concerned about high RIN prices during an interagency review of EPA’s proposal (Greenwire, Jan. 6). The price for RINs dropped when a draft of the proposal was leaked and refiners learned they might have to blend less ethanol into gasoline this year.

Grundler said he has tried “very, very hard” to avoid predicting RIN prices and the effect they have on retail gasoline prices. Grundler, a Michigander who has led EPA’s transportation office for only about 17 months, also took full credit for the proposal despite the lengthy and rigorous review process.

“I want to own this proposal. This was EPA’s proposal. This was EPA’s decision,” he said. “We were addressing what we consider practical realities in the marketplace. We saw no way to get from A to B.”