Lewinsky’s Dress Syndrome and the EPA Biofuels Debacle

by Jim Lane (Biofuels Digest) So, the EPA hands down cruel cutbacks in renewable fuel targets as the Administration reels under Obamacare pressure. What happened to biofuels, why is “everyone’s friend” biodiesel getting the shaft, what’s next? And what is Lewinsky’s Dress Syndrome, anyway? Answers for your questions.
On Friday November 15th, the EPA issued a proposal for the 2014 obligated biofuels blending volumes under the Renewable Fuel Standard – slashing the volumes from the original targets set by Congress in 2007 under the Energy Security & Independence Act, and substantially reduced from the volumes that industry is producing and blenders are blending in 2013.
What exactly happened, and what’s the response going to be?
Here are answers to many of the questions readers have been expressing.
Q. What happened?
A. In a nutshell, the best way to think of this is that the Obama Administration has thrown in the towel, based on the intensity and breadth of opposition to increasing or holding to RFS targets.
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Q. What exactly is Lewinsky’s Dress Syndrome?
A: A political blindside that alters the calculus of an entire political season. In the case of Obamacare, there’s been nothing to match it for avoidable self-inflicted political wounds since Monica Lewinsky revealed that she kept and did not dry-clean “the dress”.
Q. So, you can point the finger at the White House as the chief villain? What about EPA?
A. If you need a villain, look no further than the Office of Management & Budget. Perhaps the most under-resourced, overly-stretched unit in the US government. Given that the biodiesel mandate this year is at 1.28 billion gallons, a jump to 1.7 billion gallons, since biodiesel costs more than regular diesel, triggers an OMB review.
With the complexity of regulatory oversight – one day, it’s the impact of a new free trade policy, the next day, the impact of a seat-belt law, the third day, the biodiesel mandate, think Tarzan as far as how complex the insight into RFS and RINs has to be over there.
A calculation of “it costs $1 per gallon more for biodiesel, so 450 million more gallons equals $450 million more in cost, and that’s too much impact”, is just about the size of it.
Q. But letting biodiesel shoulder a heavy lift worked this year – industry is producing 1.7 billion gallons of biodiesel, right?
A. Right. But keep in mind that they have long since blown through the biomass-based diesel target and are producing for the big gap between that overall number and the advanced biofuels overall volume.
Q. Why don’t they just set a 1.28 billion gallon mandate for biomass-based diesel and then a huge advanced biofuels pool volume, as they have in past years — and let sectors compete to fill that pool?
A. Ah, because Brazilian sugarcane ethanol fits in there — and they want to depressurize the ethanol debate more than they want to put a backstop behind biodiesel.
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Q. Was E15, in retrospective, a huge mistake?
A. Building an E85 market would have, in retrospect, done more to avoid this result than the multi-year effort to gain E15 adoption — but it is fair to invoke the “Lewinsky’s Dress” factor here. Who really could have foreseen all the negative pressure-building forces here?
And, it also it is not entirely clear that OMB officials have the resources to gain enough of a nuanced understanding of the impact of high-priced RINs have in opening up an E85 market, to make E85 a stable strategy, either.
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Q. So, nothing has changed since that 2010 US poll that revealed that 58 percent of Americans believe that US energy policy needs to “fundamentally” change, but 51 percent say that they would oppose a tax to pay for the development of renewable energy?
A. Yep, nothing changed. The same poll revealed that 59 percent of Americans believed that the US would have an alternative energy platform to oil by 2035. Apparently, financed by some mysterious, interstellar dark matter. Citizens as well as strategic investors sincerely believe that someone else is going to pay for it. It’s a case of “Not In My Backyard, and Not Using My Bucks, Either, Ever”. As we outlined in “NIMBY, NUMBEE and Nod” a few years back. Sigh.
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Q. What’s the most effective thing that industry could come up with right now?
A. Since a 1.7 billion gallon biodiesel target works out to around a B3 mandate (based on roughly 60 billion gallons of diesel consumption for 2014) — a $1.00 difference per gallon between diesel and biodiesel, even if it turned out that the spread reached those levels (and with soybean prices dropping, not a sure thing), it works out to a $0.03 premium per gallon.
A consumer survey that determined that consumers were willing to invest that $0.03 per gallon for the benefits of energy security, emissions reduction, jobs, putting lubricity back into diesel to replace that lost with the move to ultra low-sulfur diesel to reduce engine wear-and-tear — such a survey would go a long, long ways to addressing the political ramifications of boosting the diesel-side targets.
Q. Is industry working on such a survey yet?
A. Not that we know of. Maybe something will turn up.
Q. Why is it essential that consumer support — difficult to muster — be gained? Why not simply convince the government that three cents a gallon is worth it for all those benefits?
A. I wouldn’t bet on the government. Think of it this way. In 2010, the state of Massachusetts canceled enforcement of its own Clean Energy Biofuels Act because of what it termed a finding of “unreasonable cost”. The cost in question was three cents a gallon.
Q. But that was for some unreasonable mandate for some fantasy fuel, right?
A. Nope, it was a 2 percent biodiesel mandate. Three cents a gallon. Really happened. READ MORE and MORE (Des Moines Register) and MORE WATCH Video (Iowa Public Television) and MORE, MORE (DomesticFuel.com) and MORE (Renewable Energy World/Bloomberg) and MORE (Algae Biomass Organization) and MORE (25 x '25) and MORE (Midwest Energy News) WATCH VIDEO (Platts/Growth Energy) WATCH VIDEO (Platts)