EPA Breaks Silence on the Renewable Fuel Standard: The Good, the Bad, the Ugly

On November 21, the EPA announced it would delay setting a 2014 volume for renewable fuels (as required by the Renewable Fuel Standard) to be blended into transportation supplies into 2015. The stunning announcement comes on the heels of several positive developments in renewable fuels, and a year after the EPA proposed lowering the Renewable Volume Obligate (RVO) by 2.94 billion gallons. Last year’s proposal would have lowered the standard overall for the first time since the law was signed in 2005 by President George W. Bush.  With November 22 being the official deadline for releasing the rules from the Office of Management and Budget (OMB), the axing of the 2014 RVO can be seen as a mixed blessing for renewable fuels – providing hope the new 2014 and 2015 targets will reflect the industry’s actual fuel volumes, while also casting serious doubts on the Administration’s support of renewable fuels in 2016 and beyond.

The good news is today’s announcement to scratch the 2014 proposal signals the Administration’s recognition that the proposed reduction was seriously misguided. The fuel volumes in the proposal were not set based on actual production capacity, but instead, on refineries and the oil industries’ concerns surrounding the E10 ‘blend wall.’ According to EPA, last year’s proposed reduction was warranted due to an unanticipated decrease in gasoline consumption, as well as limitations in the distribution of higher ethanol blends such as E85 (85 percent ethanol, 15 percent gasoline). Yet, as obligated parties, refiners and the oil industry are supposed to bring these fuels to market, even if they make up more than 10 percent of the gasoline supply.  Additionally, the tools to utilize higher blends, such as blender pumps for gasoline stations and FlexFuel Vehicles (capable of running on blends up to E85) are readily available compliance strategies.  EPA and DOE have also certified the use of E15 in make and model year vehicles 2001 and newer, which represents at least 80 percent of the passenger vehicles on the road today. Therefore, far greater volumes of biofuels could be utilized in the market.

In previous years, the EPA has retroactively lowered the amount of cellulosic fuels in the mix, to line up with real world production levels.  However, the 2014 proposal sought to cut not only the cellulosic fuels category, but also cut other categories that are already meeting – and exceeding RFS benchmarks, such as biodiesel.  The lowering of biodiesel volumes is particularly curious – since biodiesel does not play a role in the gasoline ‘blend wall,’ and it has been shown that truck drivers and companies are eager for this cheaper, cleaner burning fuel. In the meantime, the United States has seen a small, but important, flourishing of advanced fuels in the last year. Commercial level production is underway at several cellulosic ethanol plants, turning corn stover, an agricultural waste, into biofuel.  EPA has also approved several additional advanced fuels pathways in the past year, including biogas (renewable natural gas), which generated 3.49 million Renewable Identification Numbers (RINs) for liquefied natural gas (LNG) and compressed natural gas (CNG) in August alone. RINs are used to track each gallon of renewable fuel.

The bad news is that this year of uncertainty wracked havoc on all sectors of the biofuels and biobased economy and it could have been avoided.  As laid out within the Renewable Fuel Standard (RFS), EPA has two options when cellulosic fuels production isn’t meeting the proposed volumes, which has been the case every year so far.

       1) The administrator shall reduce the applicable volume of cellulosic by the shortfall projected
       2) The administrator may also reduce the applicable volume of total renewable fuel and total advanced biofuel by the same or lesser amount.

In previous years, EPA simply exercised option one, and lowered the cellulosic fuel volumes by the shortfall projected.  However, in 2013, EPA proposed to exercise both options. This would have reduced the volume of renewable fuel, in addition to the volumes of advanced and cellulosic fuels.  This was primarily because the total volume of renewable fuel for 2014 was projected to be over the 10 percent threshold that triggers the ‘blend wall’, despite the very practical solutions available to solve this issue.  This raises serious concerns about the handling of the RFS and how strong the biofuels commitment really is.

With Congressional and public support for renewable fuels significantly eroded because of the massive campaign against biofuels by the oil industry, 2016 and beyond could be even worse for renewable fuels. The year 2016 is significant because of language in RFS that allows EPA to modify total renewable fuel volumes starting that year, if cellulosic volumes as laid out by the standards aren’t being met. It remains to be seen if this option will be exercised, given the fact that not all advanced fuel targets are being met, and that gasoline consumption is decreasing overall.  If a strong case for renewable fuels cannot be made to the new leadership, particularly, Senator Inhofe (R-OK), who will be Chairman of the Environmental and Public Works (EPW) committee, continued use of biofuels could have a hard road ahead.

There is a moral imperative to deal with climate change – and renewable fuels represent our best available strategy to clean up the transportation sector. According to the EPA, the transportation sector is powered almost entirely by gasoline and diesel, and was responsible for 28 percent of climate change causing greenhouse gases (GHG) in 2012. The RFS, while dealing specifically with vehicle fuels, has also made major developments in renewable jet and marine fuel possible. Without renewable fuels, we simply return to the status quo -- dirty, toxic and expensive petroleum. Vehicles emit at least a third of all carbon monoxide and nitrogen dioxide, smog and haze forming compounds; the World Health Organization (WHO) estimates that air pollution is responsible for 7 million premature deaths worldwide. Tailpipe emissions from gasoline vehicles spew toxic substances such as polycyclic aromatic hydrocarbons (PAHs), which have been linked to an increase in developmental disorders, including autism and attention-deficit hyperactivity disorder. Going forward, biofuels remain critical to greening the transportation sector. 

For more information see: 

Notice: 2014 Renewable Fuel Standards, U.S. EPA 

Sources of Greenhouse Gas Emissions, U.S. EPA 

INFOGRAPHIC: EPA Proposes 2014 Volumes for the Renewable Fuel Standard, Bipartisan Policy Standard