New RFS Numbers Continue to Fall Short
Jan 20, 2016
In late November 2015, the Environment Protection Agency (EPA) finally announced the biofuel consumption figures for the United States that would have to be met under the Renewable Fuel Standard (RFS) for 2014, 2015, and 2016. The EPA barely met a deadline set by a federal district court judge to have the new requirements in place by the end of that month, as part of a settlement of a lawsuit initiated by the U.S. petroleum industry in March 2015.
By that time, actual biofuel production and use was well-documented for 2014, and 92 percent complete for 2015, so it was only 2016 levels that were still at play. In its final rule, EPA raised the RFS above the level it had included in its proposed rule back in June 2015, from an aggregate 17.4 billion gallons to 18.11 billion, but still nearly 20 percent below the statutory target spelled out in the Energy Independence and Security Act of 2007 (EISA), which contained the RFS-2 provisions.
On the surface, these RFS levels might be seen as a reasonable outcome, satisfying neither the U.S. biofuels sector and or its opponents in the U.S. petroleum industry, which continue to advocate for an outright repeal of the RFS. However, this decision by EPA essentially gives quasi-legal status to the concept of a ‘blend wall’. This notion is a construct of the alliance between the U.S. petroleum and automobile industries that seeks to justify limiting the share of ethanol in the vehicle fuel supply by a combination of the oil/gasoline supply chain resisting the installation of equipment that can deliver variable amounts of ethanol in fuel sold to drivers through so-called ‘blender pumps’ and slow-walking on the part of automotive manufacturers of the recognition that newer vehicles can utilize higher percentages of ethanol in their fuel without adversely affecting engine performance.
At EPA’s request, the U.S. Department of Energy did extensive testing on this matter back in 2009-2010, and at the end of the process found a higher ethanol blend (E15) could be used in cars from model year 2001 or newer without problems. The EPA subsequently issued waivers allowing drivers of such vehicles to use E15 but relatively few service stations around the country offer it for sale. As of early 2016, there were 189 retail locations selling E15 fuel nationwide, available at just over 1 percent of all gas stations.
In effect, the EPA’s final rule rewards the combined efforts of the U.S. petroleum and automobile industries to stall the introduction of higher ethanol blends, such as E15 and E85 for flex fuel cars, into the vehicle fuel market. In its final rule published on November 30, 2015, the agency referred to the general waiver authority provided by Congress in the EISA as their legal basis for reducing the RFS level for 2016, but mischaracterized the scope of that authority in a fundamental way. The final rule referenced “constraints in the marketplace needed to supply certain biofuels to consumers” as the reason why it is waiving the statutory levels of biofuel consumption established in law, but in fact the agency’s waiver authority only encompasses shortfalls in production or adverse economic impacts as legal bases for exercising that authority. Essentially, it treats the bottleneck in the availability of higher ethanol blend fuels as an exogenous factor in the market, rather than the result of deliberate intransigence on the part of the petroleum and automobile sectors.
Consequently, it is no surprise that a number of groups involved in the U.S. biofuels industry filed a lawsuit in the Washington DC federal Circuit Court of Appeals on January 8, 2016 against EPA, challenging the agency’s interpretation of the waiver authority in issuing the final RFS rule. The plaintiffs include the following organizations--Americans for Clean Energy, American Coalition for Ethanol, the Renewable Fuels Association, BIO, Growth Energy, the National Corn Growers Association, and the National Sorghum Producers. Less than a week later, the American Fuel and Petroleum Manufacturers Association (APFM), filed a motion in that case supporting EPA’s interpretation of their authority. APFM is a trade association that represents companies in the U.S. petroleum-gasoline-distillate sector. It will likely be many months before petitioners are able to make their oral arguments before the court in this case, and months longer before a decision is reached.