US corn belt senators accuse Government of setting biofuels mandate too low

Source: By Herman Wang, The Barrel Blog • Posted: Tuesday, June 23, 2015

The US Renewable Fuel Standard’s inevitable day in court got a preview airing the week ending June 19th, as Corn Belt senators—echoing complaints from their biofuel industry constituents—accused the Obama administration of illegally setting the 2014, 2015 and 2016 volumes below statutory levels.

At issue is the vague wording in the law on how the Environmental Protection Agency is allowed to adjust the annual biofuels mandate from the levels set by Congress when it created the RFS in 2007.

The statute allows the EPA two reasons for a general waiver to lower the volumes for a particular year: If it determines there is “inadequate domestic renewable fuel supply” or if the mandate would “severely harm the economy or environment.”

The EPA cited the inadequate supply provision in proposing the 2014, 2015 and 2016 volumes, based on the inability of US fueling infrastructure to handle significant quantities of ethanol blends above 10%. With gasoline consumption declining and significant sales of E15 and E85 yet to materialize, the EPA reasoned that the US faced an “inadequate supply” of ethanol to fulfill the mandate.

“When you have a situation where the fuels cannot, in fact, be delivered to consumers on the timeframe that is set out in the statute, we believe it’s a reasonable interpretation for us to reduce the volumes to a level that still will comply with Congress’ intent to drive those fuels,” EPA associate administrator Janet McCabe said at a hearing before a Senate Homeland Security subcommittee.

Not so fast, Corn Belt senators responded.

“Congress expressly rejected” the fueling infrastructure argument when passing the law, said Senator Joni Ernst, an Iowa Republican. Though the oil industry had tried to put in an infrastructure provision in the RFS statute when it was still under consideration, lawmakers ultimately took it out, she noted.

Senator Heidi Heitkamp, a North Dakota Democrat, was even more blunt, calling the EPA’s interpretation “fairly twisted.”

“Let’s not pretend legally that you have a good argument,” she said. “You can’t bootstrap the domestic supply language to fueling infrastructure.”

The RFS proposals, unveiled May 29, would require 15.93 billion gallons of biofuels to be blended with US transportation fuels in 2014, 16.30 billion gallons in 2015 and 17.40 billion gallons in 2016.

The RFS’ statutory requirements in the Clean Air Act call for 18.15 billion gallons of biofuels in 2014, 20.5 billion gallons in 2015 and 22.25 billion gallons in 2016.

McCabe said the law’s inadequate supply clause was vague, giving the EPA leeway.

She may have a point.

The Supreme Court, in the 1984 case Chevron USA v. Natural Resources Defense Council, ruled that if a statute is ambiguous and the intent of Congress is not clear, the federal agency charged with administering that law has the freedom to interpret it as it sees fit.

It’s a precedent likely to be brought up in court by the EPA when biofuels groups file their all-but-certain lawsuit to block the mandate cuts.

Biofuels advocates have not officially said they plan to sue, preferring for now to wait and see if proposed rule is finalized with the cuts still in place. But they have made clear their displeasure with the EPA.

“EPA needs to read the statute and implement a program that Congress put in place, because it was working,” Renewable Fuels Association President Bob Dinneen told reporters last week.

Court battles aside, the future of the RFS is also being waged in Congress, where efforts to reform or repeal the program have surfaced periodically over the last few years.

Senator Bill Cassidy, a Louisiana Republican whose home state hosts several refiners, introduced a bill last week that would repeal the law. Other bills have been introduced that would eliminate the corn ethanol portion of the RFS.

Congress may soon look at the EPA’s waiver authority under the RFS, with both the oil and biofuels industries decrying the regulatory uncertainty that the agency has injected into the program with its delays and inconsistent handling of the mandate.

A November 2013 proposal for a major cut to the biofuels mandate, for instance, was later tabled by the EPA, then, after a year and a half of no action, scrapped in favor of the three-year rule that the agency proposed last month.

Kelsi Bracmort, an analyst with the Congressional Research Service, warned in a May 12 report that the agency’s use of its waiver authority was destabilizing the market for biofuels and for renewable credits, known as RINs.

“Waiver authority, in conjunction with other factors, could weaken confidence in renewable fuels policy,” she wrote. “Many aspects of the RFS and biofuels could be viewed as unsteady…partly because administration decisionsincluding the use of RFS waiver authority—have not been made in a timely manner.”