Friday, February 01, 2013

Opposing Views On EPA's Proposed Renewable Fuel Standard

Jan 31: U.S. EPA is proposing the 2013 percentage standards for four fuel categories that are part of the Agency's Renewable Fuel Standard program (RFS2). EPA said the proposal will be open for a 45-day public comment period and EPA will consider feedback from a range of stakeholders before the proposal is finalized. EPA continues to support the use of renewable fuels within the transportation sector through the RFS2 program, which encourages innovation, strengthens American energy security, and decreases greenhouse gas pollution.

    The Energy Independence and Security Act of 2007 (EISA) established the RFS2 program and the annual renewable fuel volume targets, which steadily increase to an overall level of 36 billion gallons in 2022. To achieve these volumes, EPA calculates a percentage-based standard for the following year. Based on the standard, each refiner and importer determines the minimum volume of renewable fuel that it must ensure is used in its transportation fuel.

    The proposed 2013 overall volumes and standards are: Biomass-based diesel (1.28 billion gallons; 1.12 percent); Advanced biofuels (2.75 billion gallons; 1.60 percent); Cellulosic biofuels (14 million gallons; 0.008 percent); and Total renewable fuels (16.55 billion gallons; 9.63 percent). Overall, EPA's RFS2 program encourages greater use of renewable fuels, including advanced biofuels. For 2013, the program is proposing to implement EISA's requirement to blend more than 1.35 billion gallons of renewable fuels over the amount mandated for 2012.

    The American Petroleum Institute (API) reacted immediately and criticized EPA for ignoring a recent court decision [See WIMS 1/25/13] in its 2013 proposed mandate for nonexistent cellulosic biofuel. API Downstream Group Director Bob Greco said, "The court recognized the absurdity of fining companies for failing to use a nonexistent biofuel. But EPA wants to nearly double the mandate for the fuel in 2013. This stealth tax on gasoline might be the most egregious example of bad public policy, and consumers could be left to pay the price. EPA needs a serious reality check."

    API indicated that EPA's 2013 proposed mandate will require refiners and importers of gasoline and diesel to purchase 14 million gallons of the nonexistent biofuel in 2013. Although cellulosic biofuel has never been available on the commercial market, EPA continues to increase the mandate each year and has fined companies for failing to purchase sufficient quantities. In a decision this month, U.S. Court of Appeals said that EPA is not allowed "to let its aspirations for a self-fulfilling prophecy divert it from a neutral methodology," and said EPA must set more reasonable mandates. 

    Greco said, "For four years running, biofuel producers have promised high cellulosic ethanol production. EPA uses these aspirational claims to set mandates, but the promised production hasn't happened. With today's announcement, EPA has proven yet again that its renewable fuels program is unworkable and must be scrapped." Greco said API recommends that "EPA base its prediction on the current year's cellulosic biofuel production when establishing the mandated volumes for the following year. This approach would provide a more realistic assessment of potential future production rather than simply relying on the assertions of companies whose self-interest is to advertise lofty projections of their ability to produce the cellulosic biofuel."

     Sen. David Vitter (R-LA), Ranking Republican of the Environment and Public Works (EPW) Committee issued a statement that echoed the API concerns saying, "The EPA continues to make up unicorn-like standards in this area of renewable fuels production, and clearly are ignoring last week's appellate court ruling. EPA has been getting away with mandating exaggerated fuel standards based on a pie in the sky wish, and even after last week's embarrassing loss, they persevere in ignoring the cold hard facts. Increasing the standard after their 2012 requirements were vacated is beyond ludicrous, and they continue to force refiners to either purchase even more gallons of product that doesn't exist or pay a fine."

    Brooke Coleman, executive director of the Advanced Ethanol Council (AEC) released a statement saying, "The advanced ethanol industry appreciates U.S. EPA's due diligence on getting to the right number on cellulosic biofuels. The cellulosic biofuels industry is just breaking through at commercial scale with the most innovative and cleanest liquid fuel in the world. U.S. EPA worked hard to ensure that the cellulosic biofuels volume standard for 2013 would be tied directly to the commercial production of cellulosic biofuels expected to come online this year. While weaning the United States off of its addiction to foreign oil is not easy, the volume standards proposed today will continue to provide advanced biofuel investors and innovators with a predictable and durable path forward in that effort. U.S. EPA's acknowledgement of the Brazil situation underscores the need to knock down the ethanol blend wall quickly, so that we are not protecting 90 percent of the market exclusively for fossil fuels. The RFS is one the most, if not the most forward-looking and intelligent energy programs ever enacted in the United States. We look forward to finalizing these targets as quickly as possible to provide our investors and fuel producers with the certainty they need to meet the RFS."

    Renewable Fuels Association (RFA) President and CEO Bob Dinneen released comments saying:

"The 2013 RFS requirements will be the catalyst that finally compels oil companies to get serious about breaching the so-called blend wall. This year's RFS requirements will necessitate the use of more E15, E85 and other higher-level blends. Injecting larger volumes of biofuels into the U.S. fuel supply and spurring a more rapid transition to domestically produced renewables is exactly what the RFS was intended to do. The program is working as envisioned by Congress.

"EPA again considered the best available information -- including projections from the Energy Information Administration -- to set the 2013 cellulosic biofuel requirement. The proposed standard in no way exaggerates the volumes that will be available in 2013 based on current information, and may ultimately prove to be conservative. Cellulosic ethanol is being produced today at commercial scale in Florida, and with construction nearing completion at several other commercial sites, we fully expect 2013 to be the breakthrough year for cellulosic ethanol. At the same time, the fact that EPA waived 98.6 percent of the statutory cellulosic biofuel standard demonstrates the extraordinary flexibility and adaptability of the RFS program.

"We are concerned, however, that the proposed 2013 advanced biofuel standard will open the door even wider to imports of more expensive Brazilian sugarcane ethanol. We hope the requirement can be met with domestic advanced biofuels, like waste-derived ethanol and biodiesel. However, we must be mindful that imports accounted for 92 percent of the 2012 advanced biofuel standard. In an unconstrained fuel market where E15 and other mid-level blends were broadly available, imports would not be a major concern. However, in today's constrained market, where oil companies continue to throw up roadblocks to E15 and other mid-level blends, every gallon of imported ethanol is one less gallon of domestically-produced ethanol that will be used. This occurs only because EPA allows more expensive imported Brazilian ethanol to claim the advanced biofuel RIN that is currently trading at $0.48. High-priced sugar ethanol imports began to cannibalize the U.S. market in 2012, and today's decision potentially adds fuel to the fire.

"RFA will continue to encourage EPA to revisit its lifecycle analysis, which graciously assigns advanced biofuel status to sugarcane ethanol. EPA's outdated analysis suggests sugarcane ethanol reduces greenhouse gas emissions by 52 to 71 percent relative to gasoline. However, the most recent peer-reviewed, published estimate found the range of sugarcane GHG reductions to be 40 to 62 percent, meaning nearly half of current sugarcane imports likely do not meet the 50 percent GHG reduction requirement."

    The Union of Concerned Scientists (UCS) issued a release saying that, "EPA should exercise more discretion to reduce competition between food and fuel." Jeremy Martin, senior scientist with UCS's Clean Vehicles Program, noting that markets for corn, sugar and vegetable oil are tight and thus any expansion of mandates for any food-based biofuels will put pressure on food prices and accelerate agricultural expansion and deforestation said, "This year's drought reminded us that our food supplies can be easily disrupted. Cellulosic biofuel production is behind schedule, but that doesn't mean we need to accelerate mandates that threaten our environment and our food supplies."

     UCS noted that its research suggests there is enough non-food feedstock in the United States to meet the total 36 billion gallon biofuel target under the RFS, but that doing so will take longer than previously expected due to the financial crisis and other factors. Martin said, "Cellulosic fuels still offer the best bet for replacing large amounts of oil without disrupting our food supplies. Along with vehicle efficiency and other technology, cellulosic fuels can help us to cut our projected oil use in half over the next 20 years."

    Access a release from EPA  (click here). Access more information on the standards and regulations from EPA (click here). Access more information on renewable fuels (click here). Access a release from API (click here). Access a release from Sen. Vitter (click here). Access a release from AEC (click here). Access a release from RFA (click here). Access a release from UCS with various links to related information (click here). [#Energy/RFS]

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