May 29, 2015

EPA Releases Long-Awaited Renewable Fuel Rule

On May 29, 2015, the U.S. Environmental Protection Agency (EPA) released its long-awaited proposed volume obligations for the Renewable Fuel Standard (RFS) for 2014, 2015 and 2016, as well as volume obligations for biomass-based diesel in 2017. The proposal has been the focus of renewable fuel advocates, the oil industry and other interested stakeholders for several years. The EPA’s most recent proposal is a stark contrast to the across-the-board cuts in volumes that had been proposed early last year. That proposal was ultimately rescinded in December of 2014.

The proposal attempts to reconcile the desire to continue promoting the development and use of renewable fuels with the reality of shrinking gasoline consumption and the lack of commercialization of cellulosic fuels, which make up an increasing percentage of the total advanced biofuel category. While the numbers proposed (reflected below) are an increase from the earlier 2014 proposal, the volumes are still below the statutorily required volumes as enacted as part of the Energy Independence and Security Act of 2007. In its proposal, the EPA notes that it is attempting to be “directionally consistent” in its attempt to set volumes that are aspirational. In addition, by taking a multiyear approach, the EPA is attempting to get the timing of the program back on track — an issue they have been criticized for by both parties and all stakeholders.

In its proposal, EPA recommends:

Fuel Category

2014

2015

2016

2017

Cellulosic Biofuels

33 million gallons

106 million gallons

206 million gallons

N/A

Biomass-Based Diesel

1.63 billion gallons

1.70 billion gallons

1.80 billion gallons

1.90 billion gallons

Advanced Biofuel

2.68 billion gallons

2.90 billion gallons

3.40 billion gallons

N/A

Total Renewable Fuels

15.93 billion gallons

16.30 billion gallons

17.40 billion gallons

N/A[i]

Already there have been indications of potential legal action against the proposal — both from supporters and detractors of the program.

The proposal will also be noticed on Capitol Hill, where efforts are underway in both chambers to pass comprehensive energy legislation this congress. To date, those efforts have been silent on RFS reform; however, now that volumes have been released, interested stakeholders will be looking at ways to improve their respective positions, and energy legislation is the most likely vehicle. RFS reform is a politically difficult issue for Republicans and Democrats, dividing agricultural interests from the oil industry with other sectors also being directly and indirectly impacted. How the respective bodies address any legislation proposals will be important to watch as such proposals will not only impact the program itself but could also have an impact on support for any proposal during final passage.

[1] U.S. Environmental Protection Agency. 29 May 2015.
http://www.epa.gov/otaq/fuels/renewablefuels/documents/420f15028.pdf

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