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Rationale for EPA Renewable Fuel Standard proposal questioned

Rationale for EPA Renewable Fuel Standard proposal questioned

Biofuel proponents questions EPA over RFS proposal reasoning. Proposal now in comment period.

Biofuel proponents are making a mighty push against the EPA proposal to trim the 2014 Renewable Fuels Standard (RFS) mandate. Announced in mid-November, the EPA would reduce the RFS by 2.94 billion gallons – moving from 18.15 billion gallons to 15.21 billion.

Enacted in 2005, the required biofuel production level, argue proponents, reduces the United States’ reliance on foreign oil and bolsters farmers’ bottom lines. The EPA announcement has certainly not helped corn prices as the market continues to falter.

The EPA proposal is now in a 60-day comment period.

While not yet ripe for a lawsuit, the “legal underpinnings of this rule-making are, indeed, a critical issue,” said Bob Dineen, president of the Renewable Fuels Association, on Thursday.

“Some have portrayed the fact that we’re suggesting the (EPA) doesn’t have legal authority to do what they’re doing is a somewhat cynical reversal of where we’ve been. That’s because we’ve been talking about the flexibility the agency has for quite some time. We continue to believe that the agency has incredible flexibility to address some of the issues that have been raised with respect to the RFS – including adjusting volumes.

“It’s how they do that’s what’s important. We don’t believe the agency can invent authority that it doesn’t have by virtue of the statute.”

Dineen said the EPA proposal relies on a general waiver authority that sets up two tests for the waiver, or partial waiver, of the RFS.

“The first test is whether there is severe economic harm. In a situation like here, where ethanol is so much cheaper than gasoline today and providing consumers with a less expensive fuel at the pump, that’s not a test that can be met.

“The second test is one of adequate domestic supply. It’s (the EPA’s) tortured reasoning for what is ‘domestic supply’ that’s at the heart of this issue.

“Certainly, there is more than enough supply of grain-based ethanol and probably more than enough supply of other advanced biofuels, as well. One supply issue would be whether or not there are commercial volumes of cellulosic ethanol. The agency has appropriately used other authority to reduce the cellulosic number significantly.”

The agency, continued Dineen, “is going beyond that authority here, we believe, in reading into a waiver provision clearly focused on production and supply, and introducing consumption into the waiver authority. (The EPA has) introduced the notion of a ‘blend wall’ and the ability to distribute fuel as part of ‘adequate domestic supply.’ That’s where we think the EPA has dramatically overstepped their bounds, overstepped the statute, and is making a fundamental mistake.”

Big oil vs. biofuels

Dineen again pointed to big oil as a hindrance to biofuel production expansion. Once the ability to distribute fuel and the blend wall is the rationale for the waiver, “you turn the RFS over to the oil companies. They’re the ones that get to determine that – how much infrastructure is used, whether they want to provide the market access of (biofuels) to the consumer. History has demonstrated time and again they’ll do everything in their power to prevent that from happening.”

While expressing a desire not to enflame the situation further, Dineen did say the EPA’s position, “is highly vulnerable to a legal challenge. But we’re a long way from that.”

Jonathan Coppess, currently a professor at the University of Illinois and former chief counsel of the Senate Agriculture Committee and administrator of the FSA, agreed there are grounds for future legal action, if needed. “Should this get into the courts … how do you define ‘inadequate domestic supply’? Congress didn’t define any of the terms in the statute.”

As the situation percolates, Coppess said it will be key to see if the EPA continues “to follow the argument … that inadequate domestic supply includes the idea that the infrastructure and other constraints on the ability of consumers to purchase the fuel, as opposed to more simple: does the industry have the capacity to produce, and thus supply the market, the level of fuel the RFS has mandated?”

Just an hour earlier, during a conference call with reporters, Agriculture Secretary Tom Vilsack was asked about the proposed EPA rule. He stressed that the main thrust should be helping to get more biofuels to consumers.

“The EPA has put out a proposed rule and solicited comments on a wide range of aspects on the RFS,” said Vilsack. “That’s not just the (blend percentages) but also on how the government might be able to partner more effectively with industry to expand the distribution of products. Then, we wouldn’t be dealing with the fact of bumping up against the blend wall.

“We can, should and need to do as good a job as possible to make higher blends of ethanol and more advanced biofuels available to customers…

“As it relates to the environmental impact, the biofuel industry has had a positive impact in terms of air quality and water quality. As ethanol production facilities become even more efficient as we advance and move beyond a singular reliance on corn-based ethanol, we’ll continue to see environmental benefits.”

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Dineen said no one in the Obama administration has been “a more passionate, effective, or articulate advocate for ethanol than has Tom Vilsack. He’s done a tremendous amount to advance the cause of biofuels in the country. (The USDA) has worked tirelessly to get out the infrastructure that will allow us to continue to grow.”

However, continued Dineen, infrastructure isn’t everything. “You can have adequate infrastructure. But if oil companies don’t want to provide market access, they can still throw up innumerable barriers. … Without the hammer of the RFS, refiners, in my view, will continue to deny our industry access to the consumer.”

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