Background. The RFS requires a certain percentage of renewable fuels in the US fuel pool. Four separate percentage standards are required under the RFS program: cellulosic biofuel; biomass-based diesel; advanced biofuel; and total renewable fuels. Cellulosic biofuel and biomass-based diesel categories are nested within advanced biofuel, which is itself nested within the total renewable fuel category.

Last November (2013), EPA published a notice of proposed rulemaking to establish the 2014 RFS standards that would entail a reduction in the cellulosic biofuel and the total renewable fuel standards (RFS) for 2014. (Earlier post.)

Nearly all gasoline sold in the US is now E10 (10% ethanol). Production of renewable fuels has been growing rapidly in recent years, while at the same time, advances in vehicle fuel economy and other economic factors have pushed gasoline consumption far lower than what was expected when Congress passed the Renewable Fuel Standard in 2007. As a result, EPA said, we are now at the “E10 blend wall,” the point at which the E10 fuel pool is saturated with ethanol. If gasoline demand continues to decline, as currently forecast, continuing growth in the use of ethanol will require greater use of higher ethanol blends such as E15 and E85.

Accordingly, in the November 2013 notice, EPA proposed a total renewable fuel target of 15.21 billion gallons; the final 2013 overall volumes and standards required 16.55 billion gallons; the original target as specified in the Clean Air Act is 18.15 billion gallons. EPA set the troublesome cellulosic biofuel target at 17 million gallons—significantly lower than the Clean Air Act (CAA) target of 1.75 billion gallons—but an increase from the 6.0 million gallons specified for 2013.

As EPA dryly noted in its notice in the Federal Register, that proposal “generated significant comment and controversy.” Proponents of the rule from the renewable fuels industry slammed the changes as undermining the Administration goals of decreasing greenhouse gases and improving energy security. Advocates from the refining industry—which is responsible for meeting the standards—had for some time been arguing that the entire program was flawed, given the difficulty particularly in obtaining cellulosic biofuels to meet the aggressive targets. They saw the November 2013 proposal as a “step in the right direction,” but still advocated for the repeal or significant overhaul of the entire program.

Commenters weighted in on how volumes should be set in light of lower gasoline consumption than had been forecast at the time that the Energy Independence and Security Act was enacted, and whether and on what basis the statutory volumes should be waived.

Commenters also expressed concerns regarding the proposal’s ability to ensure continued progress towards achieving the volumes of renewable fuel targeted by the statute.

Reactions to the new delay. The Biotechnology Industry Organization (BIO) said that the EPA’s decision to delay the 2014 Renewable Fuel Standard (RFS) “continues the atmosphere of uncertainty for the advanced biofuel industry.”

We appreciate that EPA will not be finalizing a proposed 2014 RFS rule containing a flawed methodology for setting the renewable fuel volumes. We will continue to work with the agency to get this successful program back on track as soon as possible. The RFS supports companies that invest in, build and start up new advanced and cellulosic biorefineries here in the United States. It’s clear that the advanced biofuel industry has made rapid strides to increase production capacity to meet the annual volume requirements. Unfortunately, the delay in this year’s rule already has chilled investment and financing of future projects, even as first-of-a-kind cellulosic biofuel plants are right now starting up operations. The industry needs a final rule that is legally appropriate and continues to support our efforts.

—BIO President & CEO Jim Greenwood

Bob Dinneen, president and CEO of the Renewable Fuels Association, said:

Deciding not to decide is not a decision. Unfortunately, the announcement today perpetuates the uncertainty that has plagued the continued evolution of biofuels production and marketing for a year. Nevertheless, the Administration has taken a major step by walking away from a proposed rule that was wrong on the law, wrong on the market impacts, wrong for innovation, and wrong for consumers.

… Refiners will continue to resist the competition from biofuels. The RFS must be allowed to be the market forcing mechanism it was designed to be. In the end, the verdict on today’s announcement can only be made after a decision on a path forward for biofuels is identified.

Advanced Ethanol Council (AEC) Executive Director Brooke Coleman said:

Pulling back on the 2014 RFS rule is the right thing to do at this stage in the game when it comes to preserving the integrity of the program. While the cellulosic biofuel industry will not get the policy certainty it needs from this decision, it does suggest that the Administration is listening when it comes to our concerns about giving oil companies too much power to avoid its obligations under the RFS going forward. This battle was never about the 2014 volumes for the oil industry, and we appreciate the Administration’s willingness to pivot in the right direction this late in the game. The key now for advanced biofuel investment is to move quickly to fix what needs to be fixed administratively so we can reestablish the RFS as the global gold standard for advanced biofuel policy.

American Petroleum Institute (API) President and CEO Jack Gerard said the administration’s decision to punt on this year’s RFS standards is a clear demonstration to Congress that the Renewable Fuel Standard has become completely unworkable and must be repealed.

The rule is already a year overdue and the administration has no intention of finalizing this year’s requirements before the year ends. It is unacceptable to expect refiners to provide the fuels Americans need with so much regulatory uncertainty. This is an example of government at its worst.

The Renewable Fuel Standard was flawed from the beginning, horribly mismanaged, and is now broken. The only real solution is for Congress to scrap the program and let consumers, not the federal government, choose the best fuel to put in their tanks. Failure to repeal could put millions of motorists at risk of higher fuel costs, damaged engines, and costly repairs.

—Jack Gerard

The American Fuel & Petrochemical Manufacturers (AFPM) President Charles T. Drevna called the decision to delay issuing the 2014 RVO “a gross dereliction of responsibility that leaves fuel refiners and the biofuels industry alike to navigate a course of ambiguity.”

Today’s announcement indicates that the Administration plans to continuously mismanage this program in a manner that equates to playing Russian roulette with the nation’s fuel supply at the American consumer’s ultimate expense. The Administration’s inaction demonstrates once again that the non-functioning Renewable Fuel Standard (RFS) program is irreparably broken. AFPM calls upon Congress to expeditiously resume work on repealing or significantly reforming the RFS. In the meantime, AFPM will seek legal intervention.

For three years in a row, the Administration has thumbed its nose at Congress and ignored a crystal clear statutory deadline to issue RVOs by November 30 of the preceding year. For this reason, AFPM today filed a notice of intent to sue EPA over its failure to issue the 2014 RFS regulations, which has languished at the White House Office of Management and Budget since August 22, 2014.

—Charles Drevna