EPA Won't Finalize Renewable Fuel Standard in 2014, Cites Lengthy Delays

By Andrew Childers

Nov. 21 — The Environmental Protection Agency announced Nov. 21 that it won't issue a final renewable fuel standard for 2014 by the end of the year.

Instead, the EPA plans to issue a new rule in 2015 to set standards for 2014 through 2016 in an effort to bring the annual rulemaking back into compliance with statutory deadlines after several lengthy delays in recent years.

The EPA decision was greeted by renewable fuels producers, who had opposed the agency's proposal to lower the statutory blending requirements for 2014. But the petroleum industry and some environmental groups cited the postponement as further evidence the law should be scrapped.

The agency was required by statute to finalize the rule by Nov. 30, 2013, and is nearly a year overdue. The EPA said the compliance deadline for its 2013 rule will be extended until the new rule can be issued.

“In light of this delay in issuing the 2014 RFS standards, the compliance demonstration deadline for the 2013 RFS standards will take place in 2015,” the EPA said in its notice.

Precedent Avoided

Though renewable fuels producers said further delay is only adding uncertainty that hampers new investment, particularly in advanced biofuels such as cellulosic ethanol, they viewed the EPA's action as a win because the agency hasn't yet set a precedent of using its Clean Air Act authority to waive down the annual blending requirements.

“We’re glad EPA didn’t make a huge mistake by finalizing a methodology for its adjustment that would have significantly undermined the program, and, we think, damaged it irreparably,” Bob Dinneen, president and chief executive officer of the Renewable Fuels Association, told Bloomberg BNA Nov. 21.

The EPA had proposed (RIN 2060–AR76) reducing the overall renewable fuel standard blending mandate below the statutory requirements for the first time in 2014. The agency had proposed that petroleum refiners and importers blend 15.21 billion gallons of renewable fuels into their products in 2014 (78 Fed. Reg. 71,732). That is less than the 18.15 billion gallons required by the Energy Independence and Security Act (Pub. L. No. 110-140) because the agency didn't believe the fuel sector could absorb any additional ethanol.

As part of the proposal, the EPA had for the first time invoked its authority under Section 211(o)(7) of the Clean Air Act to reduce the renewable fuel standard requirements if implementing the standard could cause severe economic harm or if there is inadequate domestic supply to meet the requirements. The agency said “supply” could refer to overall domestic biofuel production as well as to fuel supplies available to petroleum refiners and even fuel consumers. A broader interpretation would allow the EPA to consider other factors such as the petroleum industry's ability to blend the amount of ethanol mandated into the nation's gasoline supply.

Renewable fuels producers had opposed the EPA's interpretation of its waiver authority because they said the petroleum industry could effectively hinder the growth of renewable fuels by blocking introduction of higher ethanol blends in gasoline such as fuel containing 15 percent ethanol (E15) or 85 percent ethanol (E85).

Cellulosic Producers Feel Uncertainty 

Though all renewable fuel producers said that the EPA's rule introduces new uncertainty into their markets, it is particularly acute for cellulosic ethanol producers who this year have finally reached commercialization following several years of lagging well below the EPA's production estimates.

“In one sense, EPA pulling back is a recognition by them that their proposal was flawed and we viewed that as a positive development for the advanced biofuels industry,” Brent Erickson, executive vice president for the Industrial and Environmental Section at the Biotechnology Industry Organization, told Bloomberg BNA Nov. 21. “On the flip side, the ongoing uncertainty is also damaging in terms of future investment.”

The cellulosic ethanol industry has produced 18.2 million gallons of the fuel as of Nov. 10, according to EPA data. That exceeds the 17 million gallons the EPA had proposed be blended into the nation’s gasoline supply in 2014.

Repeal Pushed, Lawsuit Threatened

The EPA's continued inability to issue the annual blending requirements by the statutory deadlines—with delays growing longer each year—is further evidence the law is unworkable and should be repealed, petroleum groups said.

“The rule is already a year overdue and the administration has no intention of finalizing this year's requirements before the year ends,” Jack Gerard, president and chief executive officer of the American Petroleum Institute, said in a Nov. 21 statement. “It is unacceptable to expect refiners to provide the fuels Americans need with so much regulatory uncertainty. This is an example of government at its worst.”

American Fuel & Petrochemical Manufacturers announced Nov. 21 that it plans to sue the EPA over delays in issuing the final 2014 rule.

“EPA’s track record concerning the issuance of RFS rules has become an egregious pattern of non-compliance,” American Fuel & Petrochemical Manufacturers said in its notice of intent letter to the EPA.

The EPA's renewable fuel standard for 2012 was issued 40 days late, while the 2013 rule was more than eight months late, the refiners group said.

“The fact that EPA proposed the 2014 standards over a year ago, and now 2014 is almost over, is another reason why Congress needs to step in and repeal or significantly reform this badly broken program,” Charles Drevna, president of American Fuel and Petrochemicals Manufacturers, said in a Nov. 21 statement.

House Open to Reform

House Energy and Commerce Committee Chairman Fred Upton (R-Mich.), Energy and Power Subcommittee Chairman Ed Whitfield (R-Ky.) and Environment and the Economy Subcommittee Chairman John Shimkus (R-Ill.) said in a joint Nov. 21 statement they are open to revisions to the law that would allow the EPA to better administer the renewable fuel standard.

“Businesses and consumers have been waiting a year now for clarity and guidance from EPA, but this decision to completely abandon the 2014 targets only adds to the growing uncertainty and frustration,” they said. “EPA cannot just choose to arbitrarily ignore the law and the deadlines established by Congress. This unexpected announcement highlights that there are still significant challenges facing the RFS and underscores the need to come together and find a practical, bipartisan solution.”

A spokesman for Shimkus, who led a committee study group to consider possible bills to amend the renewable fuel standard in 2013, couldn't say Nov. 21 what sorts of revisions might be considered or when the committee would discuss the law.

Sen. Jim Inhofe (R-Okla.), who will chair the Senate Environment and Public Works Committee in the next Congress, also called for the law to be revised.

“This only feeds the environment of uncertainty our economy has suffered with over the past six years, and is not how we should do business in America,” he said in a statement.

Corn Ethanol Opposed

Environmental groups that oppose the renewable fuel standard's reliance on ethanol produced from corn also called on Congress to revise the law.

“Today's announcement is further evidence that Congress must reform our badly broken food-to-fuel policies,” Mike Lavender, a policy analyst at the Environmental Working Group, said in a statement. “By failing to reduce the amount of corn ethanol blended into gasoline, the Obama administration today missed an opportunity to immediately reduce greenhouse gas emissions.”

Lukas Ross, climate and energy campaigner at Friends of the Earth, said the EPA's handling of the renewable fuel standard is causing “absolute chaos” and called on Congress to reform the law to emphasize advanced biofuels rather than corn-based ethanol.

“Today’s announcement shows that Congress handed the EPA an unworkable policy. Now it’s time for Congress to step in and fix the corn ethanol problem they created,” Ross said in a statement.

Action Called Unlikely

While the EPA's inability to issue the annual rule by the statutory deadline may buoy calls to reform or repeal the renewable fuel standard, Erickson said he doubts the votes exist in Congress to pass legislation, particularly with larger fights over the budget and economy looming.

“There are a lot of tribes in Congress,” he said. “Committee leadership in the House and Senate may have one view. Individual caucuses and regions may have another view.”

To contact the reporter on this story: Andrew Childers in Washington at achilders@bna.com

To contact the editor responsible for this story: Larry Pearl in Washington at lpearl@bna.com