BIO Comments on U.S. House of Representatives Committee on Energy and Commerce’s White Paper Examining the Implementation of the RFS

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July 26, 2013

The Honorable Fred Upton The Honorable Henry A. Waxman
Chairman Ranking Member
Energy and Commerce Committee Energy and Commerce Committee
U.S. House of Representatives U.S. House of Representatives
2125 Rayburn House Office Building            2322A Rayburn House Office Building
Washington, DC  20515 Washington, DC  20515

 

via email at: rfs@mail.house.gov

The Biotechnology Industry Organization (BIO) is pleased to comment on the U.S. House of Representatives Committee on Energy and Commerce’s (Committee) fifth Renewable Fuel Standard (RFS) assessment white paper[1]examining the Implementation of the RFS.

Introduction:

BIO is the world’s largest biotechnology organization, with more than 1,100 member companies worldwide and in all 50 U.S. states.  BIO represents leading technology companies in the production of conventional and advanced biofuels and other sustainable solutions to improving energy security and reducing U.S. dependence on oil imports.  BIO also represents the leaders in developing new technologies for food, feed, fiber, and fuel.

These innovative industrial and agricultural biotechnology companies are developing new feedstocks and biological catalysts for production of a range of fuels from conventional ethanol to advanced biofuels, renewable chemicals, and biobased products.  These technologies are reducing oil imports and contributing to U.S. energy security by providing affordable domestically produced alternatives to oil through environmentally friendly energy crops, cleaner-burning biofuels and renewable chemicals that help reduce greenhouse gas emissions and provide more sustainable sources of energy and materials.  Further, the technology being developed by these companies, in large part due to the regulatory and financial certainty provided by the RFS, is helping the U.S. economy by mitigating the impact high and volatile global oil prices have on all facets of the economy and reducing gas prices at the pump for American consumers.    

Given BIO’s broad and diverse set of member companies who have decided to invest in the United States due to the policy stability provided by the RFS, we are able to provide a unique perspective on the issues the Committee is seeking to address regarding Implementation of the RFS. 

As discussed in BIO’s responses to the Committee’s first four white papers, the RFS has been a success in driving the commercialization of technologies that help to reduce the U.S. transportation system’s overwhelming reliance on foreign petroleum.  The RFS provides exactly the type of long-term regulatory stability needed to send a signal to investors to develop a domestic biofuels industry that lessens our dependence on foreign fuels and creates jobs in America, using homegrown technology.

Congress established the RFS to encourage the use of existing biofuels and the development of advanced biofuels in order to reduce our reliance on the rising cost and price volatility of oil.  It is crucial we maintain the RFS in order to spur alternative energy production and mitigate the impacts of overreliance on oil.     

White Paper Response:

The Committee has again requested comments on a list of questions in this white paper.  In order to properly address these questions, BIO has listed each question below in order with its answer immediately following.  

1.    Does EPA’s annual RVO-setting process work well or are there concerns? If there are problems, are they correctable by EPA? Are any statutory changes needed?

EPA’s consistent and carefully balanced implementation of the RFS has provided advanced biofuel developers and investors with confidence that if they can produce advanced and cellulosic biofuels, there will be market access for these fuels.[2]BIO supports EPA’s continued recognition that many factors must be taken into consideration in developing projections of its Renewable Volume Obligations (RVO) under the RFS, and that information obtained directly from biofuel producers should be evaluated in addition to the U.S. Energy Information Administration’s (EIA) estimate.[3]  To ensure the maximum possible reliability of future year projections, and to comply with the ruling of the U.S. Court of Appeals for the D.C. Circuit in API v. EPA (API v. EPA), No. 12-1139, slip op. at 5-10 (D.C. Cir. January 25, 2013),[4]EPA must maintain the  ability to interpret and implement RVOs based on the best available information.

EPA’s methodology – including input from producers – is likely to produce the most accurate projection, as companies have now constructed and are commissioning first-of-a-kind commercial-scale cellulosic biofuel production facilities.  Construction and commissioning of these first commercial cellulosic biorefineries has provided valuable experience and insight into the challenges of bringing such facilities online.

BIO believes EPA has the regulatory flexibility to adjust the RVOs as necessary to properly forecast future production in a manner that will drive development of the advanced and cellulosic biofuel producers, but in a manner that is not burdensome to obligated parties.  EPA has demonstrated this in developing more accurate RVOs each year by utilizing the knowledge it has gained from these experiences to ensure the most reliable prediction possible.  This regulatory flexibility was upheld by the U.S. Court of Appeals for the D.C. Circuit.

In order to maintain the certainty the RFS provides for investors in the biofuels industry, BIO would urge Congress to allow EPA to continue to exercise the flexibility it has under the RFS, rather than foster instability in the marketplace by undoing the current process and forcing investors in the industry to wait for years on end for EPA to rewrite the rules.

2.    Are the cellulosic biofuel provisions in the RFS working well or do they need to be changed? Has EPA modified its cellulosic biofuel standard-setting process for 2013 and future years appropriately, following the DC Circuit’s decision to vacate EPA’s 2012 standard? If not, what further changes are needed? Should EPA be required to reduce the advanced biofuel and total renewable fuel volumes when it lowers the cellulosic biofuel volume? What would be the consequences of such a change?

The cellulosic biofuel provisions in the RFS are working well.  This provision is driving investment and commercialization of cellulosic biofuels.Facilities like INEOS Bio’s in Vero Beach, Florida, and KiOR’s in Columbus, Mississippi, representing several hundred million dollars of investment in the United States, are poised to begin production of the next generation of renewable fuel from wood and woody waste in 2013.  Dozens more advanced biofuel projects are planned or under construction.

As discussed earlier, while API v. EPA vacated EPA’s cellulosic standard, it also rejected API’s argument that EPA was required to follow EIA projections in setting its annual RFS.  The court alsorejected API’s argument that EPA was not entitled to consider information from cellulosic biofuel producers in setting its projection, finding that cellulosic producers were, of course, an “almost inevitable source of information” for EPA.  Under the D.C. Circuit’s decision, EPA was free to reinstate the volumes that it had established, as long as the information available at the time would support the agency’s conclusion that those volumes were reasonably achievable.        

EPA published itsProposed Rule on the Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards[5]shortly after the court ruling.  In setting its 2013 numbers, EPA properly followed the DC Circuit Court’s decision.  EPA developed a methodology, using input from EIA, producers, companies, and others in industry to implement cellulosic volumes based on the best available information.  

Further, EPA should not be required to reduce the advanced biofuel and total renewable fuel volumes when it lowers the cellulosic biofuel volumes.  EPA has the regulatory flexibility to adjust the cellulosic volumes as appropriate without adversely affecting the advanced biofuel volumes.  By even raising the possibility that advanced biofuels should be reduced in conjunction with cellulosic biofuels it creates a self-fulfilling prophecy, potentially slowing advanced biofuel companies’ entry to the market by chilling investment from the financial community and bolstering legal challenges to any future advanced biofuel projections.

Rather it would be better for EPA to focus on garnering more cellulosic and advanced biofuel pathways under the RFS.  We would encourage EPA to find ways within the law to expedite the approval of new feedstocks, which will help the industry produce cellulosic biofuel volumes. Challenges surrounding cellulosic biofuel numbers can also be handled by overcoming limits to market access for all biofuels; commonly referred to collectively as the blendwall, these limits represent a series of barriers contrived by obligated parties[6]to prevent biofuels from gaining access to the marketplace.[7]  Multiple avenues exist for blending additional volumes of biofuel into the nation’s fuel supply. E15 blends are approved and ready for use, and production of flex fuel vehicles (“FFVs”) continues to increase. These options, combined with the introduction of new “drop-in” fuel molecules, provide a suite of opportunities for RFS compliance. The main obstacle to compliance is the dilatory tactics of obligated parties to pursue the options available to them.[8]Obligated parties have had more than five years to begin establishing the infrastructure necessary to distribute RFS-mandated biofuel volumes, but have taken few steps to do so. Congress should therefore resist all efforts by obligated parties to reduce RFS obligations based on blendwall claims.

3.    How can EPA improve its enforcement of the RIN credit trading program? Does EPA have the resources that would be required to oversee RIN production and enforce against production of invalid RINs? What role should obligated parties have in verifying the integrity of RINs and what additional information do they need to exercise due diligence? Will EPA’s proposed voluntary third-party quality assurance program address the concerns of all RIN market participants? If not, what else is needed?

As noted by the Committee, EPA administers the RIN credit trading program as a “buyer beware” system, where RIN purchasers are responsible for conducting due diligence on the validity of RINs.  This buyer beware approach is consistent with other compliance credit trading programs EPA administers under the Clean Air Act.[9]  The oil industry trade group, the American Petroleum Institute (API), in its comments on the original RFS, fully supported the RIN compliance trading program.[10]  The National Petrochemical & Refiners Association also fully supported the RIN system as the compliance mechanism for the RFS.[11]

BIO commends EPA for its steadfast commitment to ensuring the RFS works as Congress intended to promote the commercial development of a domestic biofuels industry to help further this country’s energy security. Stability in the RIN market is important to the functionality and effectiveness of the RFS. Reducing regulatory uncertainty for biofuel producers and obligated parties – for instance, through timely rulemakings and greater transparency in RIN trading – would provide the greatest benefit for all program participants compared to any legislative changes. Unfortunately, legal and legislative challenges to the RFS by petroleum refiners and producers have delayed the finalization of the 2013 RVO, adding to the existing atmosphere of regulatory uncertainty.

EPA and advanced biofuel companies already expend tremendous resources in ensuring the validity of RINs. Advanced biofuel companies in the process of raising capital and building commercial biorefineries must simultaneously invest time and money in meeting the regulatory requirements both for Registration of Fuels and Fuel Additives (Title 40 CFR §79) and for RFS2 Registered Renewable Fuel Producers (Title 40 CFR §80.1450). Prior to generating RINs, a renewable fuel producer must have independent third-party engineering reviews and verification of its facility’s capacity to produce fuel and co-products, its feedstocks and suppliers, its process heat source and suppliers, its waste separation plan (if needed), and any required permits. Regulatory delays and barriers in these registration processes are already a significant challenge for advanced biofuel companies trying to commercialize new technology. Federal policies should clear a path for companies making investments, building new biorefineries and bringing innovative technologies to the marketplace.

EPA’s proposed voluntary Quality Assurance Plan (QAP) duplicates to a large degree the engineering review and attest engagement requirements for CFR §79 and §80 under RFS. EPA even notes this redundancy in its proposed rule.[12] BIO recommended in its comments to EPA’s proposed rule that the final QAP not include unnecessary, duplicative and burdensome requirements on biofuel producers, especially less well capitalized, smaller producers that should be encouraged to make RFS qualifying fuel. Elimination of duplicative regulatory requirements can reduce the overall costs of the program for renewable fuel producers.

BIO additionally urged EPA to ensure that the QAP is truly a voluntary program in practice, as intended. Making the program truly voluntary will help level the playing field between large and small producers and help ensure that all producers are encouraged to participate in the RFS. EPA should be wary of creating an additional layer of regulation that competing companies and industries can use to raise regulatory and business costs to an intolerable level and drive small renewable fuel producers from the market.

EPA recognized in its proposed rule that already, without the proposed QAP in place, “individual obligated parties are now conducting their own audits of renewable fuel production facilities”; including “indemnification clauses in the contracts with RIN suppliers”; and “opting instead to purchase RINs primarily from the largest biodiesel producers”.[13] EPA and Congress should therefore recognize that obligated parties have significant leverage within the RFS program to impose costs and conditions on renewable fuel producers as well as to selectively identify and trade RINs from certain producers within the EPA Moderated Transaction System (EMTS). In fact, the committee’s white paper recognizes that obligated parties have this leverage.

Obligated parties should be expected to seek to comply with the RFS at the lowest cost to themselves, their customers and end consumers. Obligated parties may not require a QAP as a condition for trading RINs from larger, well-established producers. Larger producers – already potentially able to produce lower cost fuel through economies of scale – may not feel the need to participate in a QAP and would thereby be able to provide fuel at a lower cost than small producers. There is no guarantee that obligated parties will favor verified RINs, since they generally view them as a burdensome compliance cost. Small producers forced to use a QAP option by obligated parties could see significantly higher costs with no corresponding enhancement in their participation in the RFS.

Since EMTS adequately enables due diligence against RIN fraud, the potential costs of the proposed QAP are disproportionate to its potential rewards for renewable fuel companies that have not yet actively participated in the RIN market. Cellulosic biofuel producers in particular may be unable to capture additional value for verified RINs because the RFS program provides obligated parties a compliance option for cellulosic renewable volume obligations that does not exist for other RVOs. The cellulosic waiver credit was designed to establish an upper bound for the value of a cellulosic biofuel gallon and assigned RIN as well as to ensure liquidity in the RIN market.[14]

Flexible and transparent RIN trading benefits all, but it should not facilitate the imposition of costs by one party on a competitor. Renewable fuel producers and petroleum refiners are competitors. In partially granting the American Petroleum Institute’s recent “Petition for Review of Final Agency Action,” the United States Court of Appeals for the District of Columbia Circuit indicated that, “[a]part from their role as captive consumers, the refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry.”[15] Given this assertion by the Court, Congress should be wary of giving refiners added power to contribute to delays in the growth of the cellulosic biofuel industry through legislative and regulatory uncertainty. In its comments on the proposed rule, BIO urged EPA to rigorously ensure that the QAP does not enable and facilitate potentially discriminatory and anti-competitive behavior by obligated parties against biofuel producers.

4.    What is responsible for the rise in ethanol RIN prices in 2013? Can future increases in RFS compliance costs be avoided, and if so, how? If the government takes action to limit increases in RFS compliance costs, how might such action affect this market-based program?

It should be noted that the rapid increase in RIN prices in 2013 has occurred in the absence of a final rule on 2013 RVOs.  RIN prices for conventional biofuels (corn ethanol) began to climb in late January – following the publication of the proposed 2013 RVOs – and peaked in early March – following the compliance deadline for the 2012 RVOs.[16] RIN prices have again peaked in July, after the final rule for the 2013 RVOs was transmitted from EPA to the White House Office of Management and Budget for interagency review. It is possible that regulatory uncertainty is contributing to speculative activity in RIN trading. Again, the delay in the rulemaking for the 2013 RVOs was caused in part by legal and legislative challenges to the RFS by petroleum refiners and producers, including last year’s request of Governors from several States and a number of organizations requesting a waiver of the national volume requirements for the RFS pursuant to Section 211(o)(7)(A).[17]  These challenges have a negative effect on the production of cellulosic biofuels by chilling investment in the industry; further, they slow other regulatory rulemaking procedures necessary for the industry’s progress toward commercial scale production.

Congressional challenges also contribute to the uncertainty of EPA’s implementation of the rule.  In its proposed Department of the Interior, Environment, and Related Agencies Appropriations Act for Fiscal Year (FY) 2014, the U.S. House Appropriations Subcommittee for Interior, Environment, and Related Agencies reduced EPA’s overall funding by 34 percent from FY 2013 levels and capped personnel levels for the agency at 1992 levels.  In doing so, Congress is creating a self-fulfilling prophecy that the RFS is unworkable by EPA, by taking away EPA’s resources to do so.     

Figure 1: Source, Oil Price Information Service.

The EPA has proposed an overall RVO of 9.63 percent of transportation fuel for 2013 – with 1.6 percent reserved for advanced biofuels.[18] While the agency has derived this RVO from the requirements in the Energy Independence and Security Act, the final number of actual gallons necessary to meet the RVO will depend on transportation fuel production and use within the United States throughout the year. A final tally will be determined only in February 2014 during annual compliance reporting and retiring of RINs.

Obligated parties, including refiners, have to blend biofuels with gasoline to separate the RINs for either compliance reporting or trading. With demand for gasoline essentially flat, after multiple years in which demand has been destroyed by spiraling and unstable prices, there does not appear to be a market-driven reason for the increase in RIN prices – since obligated parties need only retire sufficient RINs at the end of the compliance period to meet a percentage of the fuel they produced.

But RINs are traded among a relatively small number of obligated parties and other market participants. According to the Oil Price Information Service:

“A majority of these RINs sellers are large independent gasoline retailers, such as Sheetz, Gulf, Quiktrip, Wawa and 7-Eleven, sources told OPIS. Some RINs sellers could also include oil refiners that have a comparatively larger retail network than they do refinery capacity.”[19]

Further, OPIS notes “that the values of RINs acquired by actual blending at the racks are significantly lower than the spot market.”[20] It would appear, then, that much of the run-up in RIN prices has been on the speculative resale of separated RINs. And this speculation has occurred in the absence of a final RVO. But blending additional gallons of renewable fuels is a lower-cost – and potentially lucrative – option for RFS compliance.

5.    Are increases in RIN prices likely to affect the production or marketing of renewable fuels? If so, how might this affect implementation of the RFS and RIN prices moving forward?

RIN prices are intended to provide incentive for obligated parties to increase the use of biofuels in the U.S. transportation fuel mix. As BIO has previously demonstrated in a white paper on the value proposition offered by the RFS compliance mechanism:

“The RFS2 requirement is a critical determinant of the demand for renewable fuels, providing both market assurance and value, particularly for cellulosic and advanced biofuels. For cellulosic biofuels, the RFS2 requirements provide assurance that all cellulosic biofuel produced up to annually prescribed volumes will have a market. The RFS2 compliance mechanisms promulgated by EPA also allow producers of innovative renewable fuels, such as advanced and cellulosic biofuels, to capture additional value for their products.”[21]

But regulatory uncertainty is likely to have a larger impact on renewable fuel production and marketing than RIN prices, particularly in the advanced biofuel sector, which is commercializing new technology.

The U.S. biofuel industry has generated an average of 1.05 billion gallons of conventional biofuel each month through May 2013.[22] At a steady rate, the industry will provide approximately 12.56 billion gallons of conventional fuel during 2013. These companies benefit from steady, predictable demand for their product, understanding that demand for gasoline is flat. Biofuel producers – particularly ethanol producers who do not sell transportation fuel to the end market – do not separate RINs. They generate the RINs but transfer them with the volume of biofuel when selling it. RIN prices may incentivize additional demand for conventional biofuel before the year’s end, but only if overall transportation fuel demand increases.

RINs of any type can be used to satisfy the overall RVO, and obligated parties should be expected to choose the lowest cost RINs. EPA data shows that nearly 6.3 billion RINs were separated in the first five months of 2013, and 2.56 billion 2012 vintage RINs are available to be used to comply with the 2013 RVO (in February 2014). Fewer than 80 million RINs have been retired during 2013. RIN prices for the advanced categories of biofuels have followed much the same pattern of price increases as conventional biofuel RINs.

The 2013 RVO for biomass-based diesel was finalized September 27, 2012, projecting production and availability of 1.28 billion gallons of fuel in 2013. This volume was first proposed in June 2011. And EPA factored this volume into the proposed 1.6 percent RVO for advanced biofuel in 2013, but that percentage obligation has not been finalized. With this relative certainty of an expanding market size, biomass-based diesel production in 2013 has increased steadily each month, from 80 million gallons in January to 140 million gallons in May.

6.    Should the provisions applicable to obligated parties be modified to provide relief for entities unable to generate sufficient RINs? Would such an approach apply different compliance requirements for refiners that blend ethanol and refiners that do not blend ethanol? What would be the justification for and potential consequences of such a change, including the potential for market distortions?

Congress should not modify or change provisions of the RFS for obligated parties unable to generate sufficient RINs.  The RFS was designed to open the U.S. transportation fuel market to renewable fuels, because it has to date been completely dominated by petroleum producers, refiners and other interests.  To give obligated parties an opportunity to opt out because they are unwilling to meet their obligations under the RFS undermines the whole program. 

As discussed in question 3, the oil industry supported development of the RIN market as a tool to help meet its obligations in a flexible and cost-effective manner.Obligated parties have had more than five years to begin establishing the infrastructure necessary to distribute RFS-mandated biofuel volumes, but have taken few steps to do so. Congress should therefore resist all efforts by obligated parties to reduce RFS obligations based on the RIN market. Any concession by Congress to accommodate these assertions regarding the RIN market will only serve to embolden obligated parties in their effort to resist compliance with the RFS.    

 

7.    Is the RFS incentivizing refiners to make less gasoline available to the American market, either through increased exports or reduced refinery production? If so, can anything be done to address this?

The RFS is not incentivizing refiners to make less gasoline available to the American market, either through increased exports or reduced refinery production.  U.S. exports of refined fuels have been growing in recent years with finished transportation fuel becoming America’s top export (measured in dollars) for the first time in 2011, well before the rise in RIN prices or the argument that the RFS obligations were the cause for increased exports.  In 2011, the U.S. consumed 18.8 million barrels a day of petroleum products, a 9 percent decrease from 2005.  At the same time, domestic production of liquid fuels increased by 24 percent from 2005 because of onshore crude oil in the lower 48 states, fuel ethanol, and natural gas liquids.  As a result of lower consumption and higher production, the need for imported oil fell, from 60 percent of consumption in 2005 to 45 percent in 2011.  Because of the growth in the industry, gross imports fell 17 percent from 2005, while exports increased by 150 percent beginning in 2005.[23]  The increase in exports is due to demand destruction in the United States and growing demand in neighboring countries as reported by the Associated Press in December 2011:

Crude oil, the raw material from which gasoline and other refined products are made is a lot more expensive.  Oil prices averaged $95 a barrel in 2011, while gasoline averaged $3.52 a gallon – a [then] record.  A decade ago oil averaged $26 a barrel, while gasoline averaged $1.44 a gallon.

The volume of fuel exports is rising.  The U.S. is using less fuel because of a weak economy and more efficient cars and trucks.  That allows refiners to sell more fuel to rapidly growing economies in Latin America for example.  In 2011, U.S. refiners exported 117 million gallons per day of gasoline, diesel, jet fuel and other petroleum products, up from 40 million gallons per day a decade earlier.[24]

According to API, in 2012, fuel and other petroleum products were a significant part of U.S. exports, as measured in dollars, at $117 billion.  While API suggested that an increased use of biofuels was a factor, they again identified the same culprits as in 2011, a lagging economy and more fuel efficient cars.  API went on to point out that in addition to the external factors, the industry chooses to export gasoline for a variety of factors.  Primarily, many East Coast refineries (PADD I) are having difficulty remaining competitive, especially given the relatively high crude oil costs and competition from foreign refiners.  They also note that it is more economical to export excess production of gasoline in the Gulf refineries (PADD III) overseas than to ship gasoline from the Gulf to areas like the northeast, which can get gasoline from Europe or Canada at a lower cost.[25]  Because of increased domestic production, refiners areenjoying robust crack spreads, benefitting from comparatively stronger margins than others.[26]

These increases reflect obligated parties’ greatest problem: they are facing a shrinking domestic market, even as export markets provide growth opportunities, due to demand for their primary product, transportation fuel. 

American consumers have drastically cut back on driving over the past several years due to high and unpredictable gas prices, which have followed unstable international oil prices. At the same time, the oil industry has sponsored a myth-filled public relations campaign to destroy demand for alternative fuels.[27] In 2012, the average U.S. household spent $257 more on transportation fuel than in 2011 – even while driving substantially fewer miles. The 3.3 percent increase in gasoline prices in 2012 outpaced the 2.9 percent average growth in American’s incomes, compounding a multiyear trend of fuel prices outpacing use and income growth.[28]

 

 

A recent national opinion poll conducted by Research Now found that more than half of Americans plan to find additional ways to cut back on driving if fuel prices spike again. A majority of those surveyed (55%) ranked “taking fewer road trips to visit friends and family” as their most likely sacrifice in the face of rising fuel prices.[29]

Fuel price spikes both decrease demand for fuel and stall economic growth as America continues to recover from its economic recession. The 30 percent increase in the price of oil from October 2011 through April 2012 adversely affected household budgets and likely contributed to a slow rate of increase in consumer spending.[30] According to Dean Maki, chief United States economist at Barclays Capital, a $10 increase in the price of oil shaves about two-tenths of a percentage point off America’s growth rate and raises unemployment by one-tenth of a percentage point.[31] Another study has shown that 10 of the 11 U.S. recessions since World War I have been preceded by significant oil price spikes.[32]

The U.S. petroleum refining industry over many years consolidated operations in the Southern United States to take advantage of growing export markets and to handle heavier, sour imported crude oil. This consolidation left them poorly positioned to efficiently handle the recent boom in shale oil production in Midwest and Northeast states. Further, despite the continued projected growth in oil production in the United States[33], oil is traded on a global market and prices will still be affected by international events.[34] As long as oil is tied to the global market, U.S. production will not be enough to offset shocks in the global market, leaving American consumers, and the U.S. economy, vulnerable to any rise in oil prices.

Conclusion:

Implementing the RFS has certainly been a complex and challenging effort for the EPA.  However, despite some setbacks and delays, in BIO’s view, the EPA has provided consistent and carefully balanced implementation of the RFS that has provided advanced biofuel developers and investors with the confidence needed to take financial risks and begin multi-year efforts to commercialize advanced and cellulosic fuels.  EPA has the flexibility in setting annual RVOs to include input from producers along with other resources in addition to EIA evaluations in setting its projections.

           Hopefully these comments, along with BIO’s responses to the previous four White Papers, are beneficial for the Committee as it concludes its review of the RFS andhow to address the challenges surrounding its implementation. The RFS provides exactly the type of long-term regulatory stability needed to send a signal to investors to develop a biofuels industry that lessens our dependence on foreign fuels and creates jobs in America.  The single most important thing Congress can do to reduce our nation’s dependence on foreign oil, create more high quality jobs,  and cut pollution is to leave the RFS in place, as-is.

We are just 1/3 of the way through the timeline Congress laid out in 2007 and we must stay the course or risk losing the progress we’ve made. Should Congress feel compelled to act on the RFS, it should not revise the RFS but instead it should investigate the artificial barriers erected by obligated parties and, if necessary, take action to remove them to ensure that the market for transportation fuel alternatives established by the RFS is allowed to operate.  Any remaining challenges to overcoming the blend wall can be addressed through the broad regulatory flexibility granted to EPA under the statute.  None of these solutions require changes to the RFS.

 

Sincerely,

Brent Erickson
Executive Vice President
Industrial and Environmental Section
Biotechnology Industry Organization

 

Download BIO's comments (PDF)

 

 


[1]U.S. House of Representatives Energy and Commerce Committee. 7 June 2013. RENEWABLE FUEL STANDARD ASSSESSMENT WHITE PAPER: Energy Policy http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/analysis/20130607RFSWhitePaper4.pdf

[2]“The value proposition for cellulosic and advanced biofuels under the US federal renewable fuel standard.” Ind. Biotech. J. 7(2), April 2011.

[3]Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards, 78 Fed. Reg. 26, 9294 (Feb. 7, 2013), available at: http://www.gpo.gov/fdsys/pkg/FR-2013-02-07/pdf/2013-02794.pdf.

[4]U.S. Court of Appeals for the D.C. Circuit in API v. EPA, No. 12-1139 (D.C. Cir. January 25, 2013) http://www.cadc.uscourts.gov/internet/opinions.nsf/A57AB46B228054BD85257AFE00556B45/$file/12-1139-1417101.pdf       

[5]Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards, 78 Fed. Reg. 26, 9292 (proposed Feb. 7, 2013) (to be codified at 40 C.F.R. pt. 80) (available at: http://www.gpo.gov/fdsys/pkg/FR-2013-02-07/pdf/2013-02794.pdf) [hereinafter The Proposed Rule].     

[6]‘Big oil’ may block branded retail blender pumps: Green Plains http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/8102457

[7]Fill Up With Ethanol?  One Obstacle is Big Oil, http://online.wsj.com/article/SB117547886199856472.html

[8]Trade group requests U.S. probe of oil industry’s efforts to impede renewable fuels, http://eenews.net/eenewspm/2013/03/19/archive/9?terms=RFA%2C+ConocoPhillips

[9]RFS Renewable Identification Number (RIN) Quality Assurance Program; Proposed Rule (Feb. 21, 2013), 78 Fed. Reg. 35, p.12162.

[10]Comment submitted by Alfonse Mannato, American Petroleum Institute (API), on the Environmental Protection Agency (EPA) Proposed Rule: Regulation of Fuels and Fuel Additives: Renewable Fuel Standard Program, November 12, 2006.http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2005-0161-0185.

[11]Comment submitted by Bob Slaughter, National Petrochemical & Refiners Association (NPRA). November 9, 2006.http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2005-0161-0170.

[12]RFS Renewable Identification Number (RIN) Quality Assurance Program; Proposed Rule (Feb. 21, 2013), 78 Fed. Reg. 35, p.12169, “Note that the components proposed for monitoring, whether on an ongoing or periodic basis, are components that are already regulated under the RFS program.”

[13]Ibid. p.12160 and p.12163.

[14]Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program; Final Rule, (March 26, 2010) Fed.Reg. Vol. 75, No. 58, II.I.3, p.14727.

[15]U.S. Court of Appeals for the D.C. Circuit in API v. EPA, No. 12-1139 (D.C. Cir. January 25, 2013) http://www.cadc.uscourts.gov/internet/opinions.nsf/A57AB46B228054BD85257AFE00556B45/$file/12-1139-1417101.pdf

[16]Energy Information Administration, Today In Energy, “What caused the run-up in ethanol RIN prices during early 2013?”, June 13, 2013, at http://www.eia.gov/todayinenergy/detail.cfm?id=11671.

[17]Notice of Decision Regarding Requests for a Waiver of the Renewable Fuel Standard (Nov. 27, 2012), 77 Fed. Reg. 228,  (available at: http://www.gpo.gov/fdsys/pkg/FR-2012-11-27/html/2012-28586.htm)

[18]Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards; Proposed Rule (Feb. 7, 2013), Fed.Reg. Vol. 78, No. 26.

[19]OPIS Ethanol & Biodiesel Information Service, July 22, 2013 • Volume 10, Issue 29, p.4.

[20]Ibid.

[21]“The value proposition for cellulosic and advanced biofuels under the US federal renewable fuel standard.” Ind. Biotech. J. 7(2), April 2011.

[22]Environmental Protection Agency, EPA Moderated Transaction System (EMTS) data, http://www.epa.gov/otaq/fuels/rfsdata/2013emts.htm.

[23]U.S. Oil Imports and Exports, Congressional Research Service, April 4, 2012

[24]Chris Kahn, In a first, gas and other fuels are top US  export, Associated Press, December 31, 2011, available at: http://news.yahoo.com/first-gas-other-fuels-top-us-export-200739553.html

[26]  Edgar Ang, “Major Gasoline Retailers Ranking In Profits from Lucrative RINs Sales.” Oil Price Information Services, July 17, 2013.

[27]Brad Mallory, “Ad Against Ethanol Causes Controversy.” Keloland Television, July 17, 2013. http://www.keloland.com/newsdetail.cfm/ad-against-ethanol-causes-controv....

[28]U.S. Energy Information Administration, U.S. household expenditures for gasoline account for nearly 4% of pretax income, February 4, 2013, at http://www.eia.gov/todayinenergy/detail.cfm?id=9831  

[29]Lorraine Mirabella, “Consumers cut family activities when gas prices rise, poll shows.” Baltimore Sun, June 26, 2013. http://articles.baltimoresun.com/2013-06-26/business/bal-consuming-consu...

[30]U.S. Energy Information Administration, Petroleum; Weekly Spot Price, July 2012, at http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D

[31]New York Times, Rising Oil Prices Pose new threat to U.S. Economy, February 24, 2011, at http://www.nytimes.com/2011/02/25/business/economy/25econ.html?_r=0

[32]Resources for the Future, Reassessing the Oil Security Premium, Stephen P.A. Bran and Hillard G. Huntington, February 20120, at http://www.rff.org/RFF/Documents/RFF-DP-10-05.pdf

[33]U.S. Energy Information Administration, U.S. Field Production of Crude Oil, at http://www.eia.gov/dnav/pet/hist/leafhandler.ashx?n=pet&s=mcrfpus1&f=m

[34]U.S. House of Representative’s Energy and Commerce Committee, RENEWABLE FUEL STANDARD ASSESSMENT WHITE PAPER: Energy Policy, June 7, 2013, p. 3 at http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/analysis/20130607RFSWhitePaper4.pdf

 
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