Now That the Dust Has Settled: What Did the EPA Miss?

Tim

By Timothy J Rudnicki, Esq

Despite EPA’s proclamation that it considered many public comments regarding the proposal to lower the Renewable Volume Obligation numbers, the Agency somehow missed the most important comment:  enforce the law.


Based on the final rule, it seems the EPA also missed a few other critical public policy and environmental factors.  In the 202 page final rule, the EPA reminds us “The fundamental objective of the RFS provisions under the CAA is clear: to increase the use of renewable fuels in the U.S. transportation system every year through at least 2022 in order to reduce greenhouse gases (GHGs) and increase energy security.” 

And the executive summary to the final rule goes on to state “Renewable fuels represent an opportunity for the U.S. to move away from fossil fuels towards a set of lower GHG transportation fuels, and a chance for a still-developing low GHG technology sector to grow.  These lower GHG renewable fuels include corn starch ethanol....”

In short, the EPA affirms that ethanol, whether conventional or advanced, is a lower GHG transportation fuel.  The obvious conclusion which should follow from the EPA restatement of the RFS purpose and the unequivocal statutory volumes is straightforward: (A) enforce the volume numbers to send a message of certainty to biofuel producers so they can continue to grow the sector and (B) push the petroleum industry to give consumers more biofuel options so as to reduce GHG emissions now.

The final volume numbers, without doing a RIN analysis, look like 10% of the actual and projected overall growth for gasoline consumption.  While some debate whether the EPA actually did push through the mythical blendwall, we should not loose sight of the fact the actual consumption capacity for biofuels (E85 for Flex Fuel Vehicles, E10 and E15 for 2001 and newer vehicles) with the current fuel dispensing infrastructure is well above 27 billion gallons.  In other words, the 15 billion gallon number for conventional biofuels is indeed feasible.  For details on the consumption capacity issue, see the EPA reference to the Energy Information Administration in the Federal Register at 33128.

The intent of the RFS is indeed to stimulate and drive change, a move toward greater use of renewable biofuels.  In a Nation that has been dominated by petroleum and consumers’ limited access to biofuels for many decades, the RFS provides some modicum of certainty for those who are responsible for making biofuel production investment decisions and giving consumers greater access to renewable biofuels.

Unfortunately, the EPA missed the obvious.  The Agency failed to comply with and enforce the black letter law and has thereby put off greater systemic change for another day.  Given the clear purpose, intent and demonstrated effectiveness of the RFS thus far, the EPA decision also sends the wrong message to conferees at the Paris Climate Convention as well as investors, the environmental community, those diligently working to tamp down GHG emissions and the petroleum industry.

Digging into the numbers a bit further, we find the RFS set unequivocal volumes for renewable biofuels (conventional and advanced) to be used starting in 2006 and extending out to the year 2022.  The total renewable fuel level set in law for 2014 is 18.15 billion gallons which includes at least 14.4 billion gallons as conventional biofuel. Since 2014 is history and RINs have been generated, EPA set the number at 13.61 billion gallons.

While 2015 is not yet history, according to the EIA the overall consumption of gasoline is up.  The RFS explicitly calls for 20.5 billion gallons of biofuel to be used with at least 15 billion gallons as conventional. Instead, the EPA set the conventional number at 14.05 billion gallons, essentially mirroring 10% of the overall increase in gasoline consumption.  If gasoline consumption were to drop below projections, would the EPA enforce the final rule or find some reason to adjust the number down to once again accommodate the petroleum industry?

Finally, for 2016, the RFS states the number of gallons of renewable fuel to be used is 22.25 billion with at least 15 billion gallons of conventional biofuel. In place of the statutory provision, the EPA used its version of the biofuel future by setting the number at 14.5 billion gallons.

When one considers the history and legislative intent behind the RFS, the EPA’s final rule flies in the face of the law and sets another dangerous precedent.  In 2005, the Energy Policy Act (RFS1) put key stakeholders on notice that renewable biofuels were to have more space in the transportation fuel market.  Then, in 2007, RFS2 provided a second explicit notice and clear requirements along with methods by which affected parties could comply with the statute.  Biofuel producers responded by committing financial and logistic investments to make the production capacity available. On the other hand, the petroleum industry clung to the habits of the past buying RINs rather than facilitating greater consumer access to E15 and higher blends.

It will take some more time to fully assess the immediate implications of the EPA’s backsliding.  Meanwhile, a few preliminary observations can be made at this time.  The EPA missed the obvious purpose, intent and statutory provisions in the law.  Consequently, the EPA missed the opportunity to send a signal to the petroleum industry: consumers can indeed expect more biofuel options at the fuel dispensers and the industry must comply with the law.

Finally, the EPA missed a rare opportunity to stick to the law, as the RFS was written by Congress years ago, for President Obama to present to the Paris Climate Conference.  The RFS should still be held up as one of the most constructive and effective models for what can be done to reduce GHG emissions from the millions of vehicles that are, and will be, part of the rolling stock for many years to come.

Despite the EPA decision, we will continue to stand strong together and find ways to push past the EPA’s failure to fully enforce the RFS.  We will find creative ways to deploy the USDA Biofuel Infrastructure Partnership and the Minnesota E15 Dispenser grant programs to help fuel retailers give consumers greater access to more biofuel options.  Through these actions we will build increased energy security, continue to boost the economy and further reduce GHG emissions.