Stakeholders baffled, angry as Obama admin punts 2014 RFS

Source: Amanda Peterka, E&E reporter • Posted: Monday, November 24, 2014

The Obama administration today stepped away from a contentious rule that aimed to slash 2014 targets for ethanol and advanced biofuels.

U.S. EPA conceded in an announcement it couldn’t complete the rule during a 90-day review at the Office of Management and Budget and that a final rule wouldn’t be ready this year. The agency will likely withdraw the rule from OMB.

The proposed rule setting the 2014 volume mandates for renewable fuels was unveiled by EPA last November. It called for a 16 percent cut to the total biofuels mandate compared with the level set by Congress when it passed the renewable fuel standard into law in 2007 (E&ENews PM, Nov. 15, 2013).

The proposal sparked a firestorm in rural America, where ethanol has spurred economic growth, and from the advanced biofuels industry, which has counted on RFS commitments to lure investors. Oil industry groups also objected to the rule, arguing that it didn’t go far enough to fix the so-called “blend wall” — the limit to the amount of ethanol that can be used in today’s infrastructure.

“The proposed rule, issued in November 2013, generated a significant number of comments, particularly on the proposal’s ability to ensure continued progress toward achieving the law’s renewable fuel targets,” EPA said today. “Due to the delay in finalizing the standards for 2014, and given the ongoing consideration of the issues presented by the commenters, the agency intends to take action on the 2014 standards rule in 2015.”

EPA said that its goal is to address the 2014, 2015 and 2016 mandates next year so the administration can catch up with the statutory deadlines set by Congress. By law, EPA was supposed to have finalized this year’s RFS mandates by Nov. 30 of last year.

Earlier this year, EPA extended its compliance period for 2013 to until 30 days after the 2014 rule is finalized. The agency said today that it would make adjustments on its electronic biofuels tracking system to ensure that refiners can continue to use credits for ethanol obtained in 2012 to show compliance with the 2013 year.

Today’s announcement surprised biofuel and oil stakeholders. Climate and energy campaigner Lukas Ross of Friends of the Earth, a vocal critic of the ethanol mandate, said the decision “stumped” biofuel watchers.

“Today’s announcement confirms that the renewable fuel standard system is in absolute chaos,” he said.

Petroleum industry groups used the EPA announcement to renew calls to Congress to repeal the standard. The American Petroleum Institute decried the agency’s action as “government at its worst” and said it is time for “consumers, not the federal government” to choose the fuel that goes into gas tanks.

“The rule is already a year overdue and the administration has no intention of finalizing this year’s requirements before the year ends,” API CEO Jack Gerard said in a statement. “It is unacceptable to expect refiners to provide the fuels Americans need with so much regulatory uncertainty.”

In light of the delays, the American Fuel & Petrochemical Manufacturers today notifed EPA that it intends to sue over its failure to promulgate the annual standards this year.

Ethanol producers and corn growers, on the other hand, said that the further delay in the standard was unwelcome news, but they largely commended EPA for punting on what they view as a flawed proposal.

“Today’s announcement is a clear acknowledgement that the EPA’s proposed rule was flawed from the beginning. There was no way the methodology in the proposed rule would ever work, as it went against the very purpose and policy goals of the RFS,” said Tom Buis, CEO of ethanol trade group Growth Energy. “The EPA wisely decided not to finalize the rule so they could fix the flawed methodology.”

Advanced biofuels producers, which said that the RFS has made it more difficult to obtain capital to build expensive biorefineries, also called EPA’s action “the right thing to do” but urged the agency to move quickly on shaping a new policy.

Advanced Biofuels Association President Michael McAdams said his organization is “hopeful that this resets the bar to allow EPA to release 2015 numbers as quickly as possible.”

Among the various biofuel sectors, the National Biodiesel Board, which represents producers of advanced biofuels made from soybean oil, used cooking grease and animal fats, issued the statement most critical of the administration.

The biodiesel industry has severely slowed production this year due to the RFS proposal and the expiration of its $1-a-gallon tax credit at the end of last year.

“This administration says over and over that it supports biodiesel, yet its actions with these repeated delays are undermining the industry,” said Anne Steckel, NBB’s vice president of federal affairs. “Biodiesel producers have laid off workers and idled production. Some have shut down altogether. We know that fuels policy is complex, but there is absolutely no reason that the biodiesel volume hasn’t been announced.”

EPA Administrator Gina McCarthy earlier this week acknowledged the delays in the rule but said she didn’t believe the uncertainty over the rule had affected the renewable fuels industry and affirmed that the administration would continue to support biofuels.

“While I would have preferred to have this rule done earlier, it hasn’t slowed down that industry that I can see, and we’ll continue to have a commitment to moving renewable fuels out and getting that rule done,” she said.