The wait isn’t over: EPA delays ethanol/biofuels decision

The wait isn’t over: EPA delays ethanol/biofuels decision

EPA punts 2014 Renewable Fuels Standard decision into new year. Renewable fuels industry responds.

The EPA will not make a decision on the 2014 Renewable Volume Obligations (RVO) under the Renewable Fuels Act (RFA) until next year. The agency, already behind schedule with its decision and the source of much unhappiness in the renewable energy industry, received a large dose of criticism after the announcement.

“The continued delays create great uncertainty for the biodiesel industry and soybean farmers and limits the industry’s ability to invest and expand,” said Ray Gaesser, American Soybean Association President. “The Proposed Rule was unacceptable and would have taken biodiesel backward from the amounts produced and utilized in 2013. However, ASA believes that EPA can and should finalize a 2014 rule that sets the biomass-based diesel volumes at or above the nearly 1.8 billion gallons that were produced and consumed in the U.S. in 2013.”

Michigan Sen. Debbie Stabenow, chairwoman of the Senate Agriculture Committee, said the agency, “needs to work toward a new rule in 2015 that will provide long-term certainty needed for the advanced biofuels industry to give real competition to Big Oil at the gas pump.  I urge the administration to make this a priority and take a hard look at how this could seriously set back growth at a crucial time when tremendous progress is being made toward commercial-scale production of advanced biofuels that are creating home-grown American energy.”

Shortly after the EPA announcement, Delta Farm Press spoke with Bob Dinneen, president of the Renewable Fuels Association. Among his comments:

What happens from here?

“Unfortunately, we don’t know what happens from here. That’s part of the problem. The (Obama) administration has essentially decided not to decide. That just perpetuates the uncertainty that has plagued the biofuels industry. For a year now, they’ve wrestled with how to address this.

“The good news, from our perspective, is the EPA hasn’t finalized a bad rule – a rule that was wrong on the law, for consumers, for farmers, for innovation. By delaying a decision it really does keep the industry from moving forward as we’d like.”

On ‘Big Oil’ throwing up roadblocks to the disbursement of biofuels…

“The oil companies aren’t interested at all in increasing the amount of renewable fuels used in this country. They think we’re just fine continuing to frack in North Dakota and drill ever deeper in the Gulf of Mexico to get our oil supply.

“In their view, because we’re clearly producing more now, the Renewable Fuels Standard is an anachronism. They want it repealed and have been engaged on Capitol Hill in efforts to at least significantly undermine the continuation of the RFS.

“One of the reasons that EPA has been unable to make a decision on this rule is the furor the oil companies have created.”

2005

On the first RFS in 2005…

“The first RFS passed required a 7.5 billion gallon requirement. At that time, the oil companies said, ‘Oh, there’s no way a bunch of farmers in the Midwest can produce that much fuel.’

“Well, the industry did produce it. And they did it not by the 2012 deadline, but by 2007. Congress looked at the success of that program and decided, ‘Hey, if that’s the way the market will respond to the signal, we can do more.’

“That led to an increase from 7.5 billion to a 36 billion gallon requirement. Importantly, 21 billion of that 36 billion was supposed to be from advanced biofuels. That pointed to cellulosic ethanol and a cap was put on the amount of grain-based ethanol that could be produced.”

A bit of history on the RFS2…

“When the RFS was passed in 2007, there was a 36 billion gallon requirement. (Lawmakers) knew that would mean more than 10 percent ethanol would have to be used.

“It was passed specifically so that we’d generate innovation in biofuels production. That has happened. You see cellulosic ethanol facilities and other enhanced biofuels being commercialized at a record pace today.

“The RFS was also intended to drive innovation in ethanol and biofuels marketing, to move us beyond 10 percent. Congress wanted to maximize the domestic use of renewable fuels not place limits on it.

“In 2007, the expectation was the RFS would drive more E85 into the market, for example. That would allow flex-fuel vehicles to make use of even more ethanol. E15 is available today but the oil companies have steadfastly refused to make it available to consumers and have scared people from using that high level blend.

“If the act was allowed to be implemented according to the state, according to what Congress dictated in 2007, it would break through that 10 percent level. Again, the oil companies have refused to do that.

“Everyone else in the transportation fuel sector responded appropriately to the signal sent by the RFS in 2007: the ethanol industry expanded; the advance biofuels community was able to seek commercialization and get investment to begin production; the auto companies responded by producing more and more flex-fuel vehicles capable of utilizing E85.

“The only sector that saw that act in 2007 and refused to accommodate it was the oil companies. They have not invested in the E85 refueling infrastructure. They have, as I’ve indicated, discouraged marketers from offering E15 or any higher level blends to consumers. And they’ve created a situation where the EPA doesn’t know how to implement the statute according to Congressional intent without creating disruption the marketplace because the oil companies aren’t yet ready.”

Response

On the response from the agriculture community…

“When the EPA, a year ago, proposed for the first time to ignore the state and reduce the volumes of renewable fuels used in this country, the agency received more than 300,000 comments. Most of those were from farmers telling EPA, ‘Look, this is a time we should be expanding renewable fuels not reducing their use.’

“They pointed out farmers were in the process of harvesting of the largest corn crop in history. In part that was because farmers understood the market signal set by the RFS. Farmers across the country certainly have rallied in defense of this program.

“That isn’t to say that agriculture itself is monolithic on the issue. That’s because the livestock and poultry industries are concerned about the impact that the demand for ethanol is having on corn prices, feed prices. They’re concerned with feed than with rural economic development and growth and the opportunities that farmers can reap from the RFS.

“That has created some tension but look at where corn prices are today. Clearly, it isn’t the RFS driving corn prices but other factors. In 2012, it was the drought that drove up corn prices. At that point, the ethanol industry responded by lowering production. 

“The need for the value-added market for grain farmers is still of paramount concern.”

Any indication of when a decision might come down?

“There’s no schedule.

“There have been some reports that there won’t be an RFS for 2014. That isn’t accurate. There will be a requirement for 2014 that will be set retroactively sometime in 2015 based on what they know was produced and blended. So, by definition it won’t be driving growth in the marketplace. It’s unfortunate the agency has put itself in this position.

“But a decision is expected sometime in 2015. I can’t tell you if it’ll come down in February, March, April or August. They want to do 2014, 2015 and, potentially, 2016 all together.”

Anything else?

“The oil companies believe that the EPA’s failure to get the rule out in 2014 shows the RFS isn’t working. I agree to the extent that it clearly a signal that the EPA is suffering from regulatory paralysis.

“The (oil companies) want to use that as a reason to legislate, to change the program. The program doesn’t need to be changed. It needs to be implemented as intended in 2007. That would drive the marketplace innovation that was the vision of Congress back then.

“The EPA can do that. If Congress gets involved at this point it would just mean more uncertainty for this market. That’s not what’s needed.”

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