Regulatory Developments

EPA Administrator: RFS Volumes Will Not Be Cut

In a letter to seven senators, EPA Administrator Scott Pruitt backed away from an October 4, 2017, proposal to either reduce or hold stagnant renewable volume obligations (RVOs) for 2018 and 2019 under the federal renewable fuel standards (RFS).

In the letter, Pruitt also states that he has decided against shifting the RFS point-of-obligation from refiners to blenders and that he had directed his staff to explore whether the Agency has the legal authority to authorize the use of E-15 (15 percent ethanol, 85 percent gasoline) year-round.

Collectively, these three announcements signal a surprising endorsement of the RFS by Pruitt, who, until now, has seemed more inclined to exercise EPA’s statutory authority to issue waivers that reduce the mandatory RVOs established by Congress, an action endorsed by the traditional petroleum fuel industry.

Cost concerns

In the October 4 proposal, the EPA requested public comments on potential reductions in the 2018 biomass-based diesel (BBD), advanced biofuel, and total renewable fuel volumes, and/or the 2019 BBD volume under the RFS program. Comments were also requested on leaving the 2019 BBD RVO unchanged. The Agency said it was concerned that the increasing cost of BBD and particularly imported BBD would cause an upswing in the price of renewable fuel in the United States and also adversely affect energy independence and security of the United States.

Letter and meeting

The proposal caused significant distress in ethanol-producing states. Less than 2 weeks after it was issued, a bipartisan group of 33 U.S. senators wrote to Pruitt, asking him to retract the proposal and increase the RVOs for BBD and renewable fuels overall, as instructed by Congress. Following through on the contemplated reductions of the 2.1 billion gallons of BBD used by Americans in 2015 would threaten the 47,400 jobs the BBD RVO supports as well as $1.9 billion in wages and had an $8.4 billion economic impact, the senators wrote. The senators also pointed out that President Donald Trump has assured states that generate the majority of renewable fuels that he supports the RFSs.

Shortly after sending the letter, some of the senators met with Pruitt, who, they reported, was receptive to their concerns.

Positive preliminary analysis for RFS

In his October 19 letter to the senators, Pruitt notes that the process for the upcoming RVOs is ongoing, and it would not be appropriate for the Agency to prejudge the outcome of rulemaking. “Nevertheless, preliminary analysis suggests that all of the final RVOs should be set at amounts that are equal to or greater than the proposed amounts, including at least 2.1 billion gallons for biomass-based diesel in 2018 and 2019.”

Point of obligation

The possibility of switching the point of obligation from refiners to blenders derived from the thinking that blenders are more responsible for sales of renewable fuels and therefore should bear the compliance obligation. But such a change would move the obligation from several hundred refiners to thousands of blenders, many of which are small businesses. The resulting administrative work would be a “nightmare,” some stakeholders pointed out.

In his letter, Pruitt notes that after meetings with stakeholders and review of more than 18,000 public comments on the potential change, “the record demonstrates that making the change would not be appropriate.”

E-15

Allowing the use of E-15 year-round would require a nationwide waiver of the current Reid Vapor Pressure (RVP) standard. Pruitt writes that since becoming administrator, he has directed the EPA to actively explore whether it possesses the legal authority to issue such a waiver.

“The Agency would welcome the opportunity to work with Congress on this important issue, including issuing definitive analysis on the Agency’s authority to issue a nationwide RVP waiver for E-15,” Pruitt wrote.

‘Great day,’ says Grassley

“It’s a great day for Iowa and a great day for rural America,” said Senator Chuck Grassley (R-IA), one of the leaders of the effort to sway Pruitt’s thinking on the RFS. “Administrator Pruitt should be commended for following through on President Trump’s commitment to biofuels and the RFS. While this is good news for the industry, it’s also good news for the entire country, which is made stronger by the many jobs, increased energy independence and cleaner air that renewable sources of energy like biofuels provide. A strong RFS helps grow domestic energy production and is an important part of an all-of-the-above energy policy.”

The commendation for Pruitt was seconded by the Renewable Fuels Association (RFA).

“The U.S. ethanol industry is grateful for Administrator Pruitt’s epiphany on the road to the RFS,” said RFA’s CEO and President Bob Dinneen.

“As for the members of Congress, governors, and others who advocated so strongly for farmers and consumers, we thank you profusely,” Dinneen added.

Pruitt’s letter to the lawmakers is here.

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