Back on Track: EPA Issues On-Time, Robust Renewable Fuel Standard Volumes for 2017-18

by Jim Lane (Biofuels Digest) In Washington, the US Environmental Protection Agency released the 2017 renewable fuel volume obligations (and the 2018 volume obligations for biomass-based diesel), with a strong push beyond what has been termed the “blend wall” and stimualting refiners to implement more “cost-effective changes at their refineries to blend more renewable fuel.”

The agency finalized a total renewable fuel volume of 19.28 billion gallons, of which 4.28 BG is advanced biofuel and 311 million gallons is cellulosic biofuel. Thus, the implied RVO for conventional biofuels like corn ethanol will be 15BG—up from the 14.8 BG proposed in May.

“Renewable fuel volumes continue to increase across the board compared to 2016 levels,” said Janet McCabe, the agency’s acting assistant administrator for the Office of Air and Radiation. “These final standards will boost production, providing for ambitious yet achievable growth of biofuels in the transportation sector. By implementing the program enacted by Congress, we are expanding the nation’s renewable fuels sector while reducing our reliance on imported oil.”

The key? The EPA has essentially abandoned its previous attempt to slow the adoption of renewable fuel by citing the oil industry’s lack of infrastructure-building as a “supply constraint”. Under the Clean Air Act, the EPA has authority to waive down Congressionally-targeted volumes in the case of supply constraints, which members of Congress said they intended to mean a lack of renewable fuel production, rather than a lack of infrastructure deployed by refiners to distribute renewable fuel.

Renewable fuel producers had contended that should refiners have the ability to stall deployment of renewable fuels by not deploying infrastructure, obligated parties would have gained veto power over the Clean Air Act and Congress.

The new standards reflect modest growth in the standards but remain below the more than 2.6 billion gallons of biodiesel and renewable hydrocarbon diesel expected in 2016.

The EPA substantially boosted volumes from the original proposals issued earlier in the year.

Brian Jennings, Executive Vice President
“As more ethanol was blended with record-high consumption of gasoline this year, ACE urged EPA to increase the 2017 implied conventional biofuel volume to the statutory level of 15 billion gallons and we are very pleased EPA has agreed to do so. For the last couple of years, EPA has unfortunately sided with oil companies and refiners instead of rural voters to ‘ride the brakes’ on RFS blending volumes, relying on excuses such as the make-believe E10 ‘blend wall’ and lower gasoline use to reduce renewable fuel use below statutory levels. But we are supportive of the move to increase volumes for 2017 without a ‘blend wall’ excuse. U.S. gasoline use is expected to rise again in 2017, so increasing RFS volumes will help restore some confidence to the rural economy and reassure retailers that it makes sense to offer E15 and flex fuels like E30 and E85 to their customers.”

“Nevertheless, we remain opposed to EPA’s misapplication of the RFS general waiver authority to use ‘infrastructure constraints’ as an excuse to limit renewable fuel use below statutory levels for 2014, 2015, and 2016, which is why we are party to Americans for Clean Energy et al. vs EPA, a lawsuit pending in the U.S. Court of Appeals for D.C. We look forward to the Court taking up our case early in 2017 and deciding in our favor.” READ MORE and MORE (Environmental Protection Agency) and MORE (The Washington Post) and MORE (Fuel Fix) and MORE (The Hill) and MORE (Washington Examiner) and MORE / MORE (DTN Progressive Farmer) and MORE (Daily Caller) and MORE (Agri-Pulse) and MORE / MORE (Bloomberg) and MORE (Argus Media) and MORE (National Retail Federation) and MORE (RegBlog) LISTEN (IowaAgribusinessRadio) and MORE (Animal.AgWired.com) and MORE (Omaha World-Herald) and MORE (InsiderCarNews)

Excerpt from Fuel Fix: The hikes follow a recent turnaround in what had been a steady decline in the amount of fuel American motorists were consuming. In August retail gasoline sales exceeded 26.5 million gallons a day, the highest level for that month since 2012, according to the U.S. Energy Information Administration.

That allowed the EPA to increase ethanol production without increasing ethanol’s share of the total fuel supply to as great a degree.

“We are disappointed that EPA has taken a step backwards with this final rule,” the American Petroleum Institute’s Downstream Group Director Frank Macchiarola said in a statement. “Today’s announcement only serves to reinforce the need for Congress to repeal or significantly reform the [Renewable Fuel Standard].”

Rep. Bill Flores, R-Waco, has joined with other congressman on a bipartisan bill that would force the EPA to keep the ethanol mandate at less than 10 percent of the total fuel supply. READ MORE

Excerpt from The Washington Post: With prices of RINs lurching from pennies to well over $1 a piece, the market is $10 billion to $15 billion in size. And it can be very volatile because the EPA issues its targets so late in the year that buyers and sellers must speculate on what the ultimate mandates will be.

On Wednesday, the price of RINs rose 15 to 17 cents a gallon, according to Citigroup, which in a note to investors called the system “RINsanity” and said that the EPA goal was “practically unachievable given the current infrastructure and demand” for motor fuel.

“The volumes here are not great news from our perspective but also not completely unexpected from this Administration,” Stephen H. Brown, vice president for federal government affairs at refiner Tesoro, said in an email. “The program just continues to get unworkable for everyone in the near future.”

Valero, the nation’s largest oil refiner and a major ethanol producer, issued a statement saying that EPA “missed an important opportunity to fix the implementation of the renewable fuel standard.”

Soon, none of this may matter. Trump has already indicated that he might ax the RINs program. After Trump gave an economic campaign speech in September, his campaign posted a list of regulations to eliminate, including the tradable credits. However, even if Trump abolishes the RINs trading program, he might still need to come up with a way to meet the renewable fuel standards set in energy legislation passed both in 2005 and 2007. On the campaign trail in Iowa, Trump had said he supported the Renewable Fuels Standard. READ MORE