With the EPA nearing a decision on the biofuel mandate for 2015 and 2016, ethanol makers and corn farmers worry that the agency could trigger an override of ambitious targets written into law for ever-increasing use of renewable fuels through 2022. The so-called re-set, also referred to as an “off ramp,” would give the agency the discretion to set the yearly targets at whatever levels it chooses. The schedule written by Congress in 2007 calls for renewable fuel consumption by cars and light trucks to reach 36 billion gallons in 2022, more than double this year’s expected rate.
“Yes, that is a very big concern,” Tom Buis, chief executive of the ethanol trade group Growth Energy, told reporters, when asked if the EPA might trigger the re-set. “We hope they don’t do it.” The re-set, undoubtedly a smaller guaranteed share of the fuel market, could imperil the development of second-generation biofuels made from non-food sources, said Buis. “If they get this wrong, we go backwards.”
In setting the target of 36 billion gallons of biofuels in 2022, Congress said cleaner-burning, second-generation biofuels would account for 21 billion gallons of the total. Advanced biofuels are years later than expected in coming to the market. The EPA has proposed a target of 2.9 billion gallons of advanced biofuels for this year, compared to the 5.5 billion gallons listed in the 2007 law. Biodiesel would account for nearly 60 percent the advanced fuels. Corn ethanol is the dominant biofuel by far.
Asked directly about the re-set by a Growth Energy member during a luncheon appearance, EPA administrator Gina McCarthy, in a lengthy response, said, “We continue to have that as an issue.” The agency is expected to announce the biofuels mandates by Nov. 30. It has proposed targets that are well below the volumes specified by law for this year and 2016, but that still call for year-on-year increases.
The oil industry says it will not accept targets higher than the EPA has proposed, and biofuels advocates say there is no reason to deviate from the 2007 law. “What they [EPA] have proposed just tickles the blend wall,” Buis told reporters, when lawmakers intended for biofuels to be sold at blend rates higher than the traditional 10 percent.
“I understand the point that is being made,” McCarthy told the Growth Energy luncheon. “Cellulosic [ethanol] just did not progress, I think, at the rates Congress thought it would.” The EPA intends to build the market for biofuels, she said. “I have to do it in a way that will pass muster” in case of legal challenge.
The possibility of a biofuels re-set was overshadowed for months by loud arguments over the proper mandate for this year and next.
If the EPA reduces any of the biofuels targets – advanced biofuels, cellulosic biofuels, biomass-based diesel or the overall Renewable Fuels Standard – by at least 20 percent for two years in a row, or by at least 50 percent for one year, the agency would get the authority to adjust the targets for every year after 2016, according to a Congressional Research Service report.
“There is substantial basis” to conclude that the EPA intends to trigger the re-set provision, says the National Corn Growers Association. The agency has proposed a cut of 20.5 percent for this year and 21.8 percent for 2016, says NCGA in comments filed with the EPA. “As a result … EPA would then have virutal autonomy to set new volume requirements as it sees fit.” The corn association worries that if that were the case, the agency would preserve the status quo rather than press for rapid expansion of renewable fuels.
The CRS study says it is “very likely” that a re-set will be imposed for cellulosic fuels given that production is only a fraction of the level envisioned by law. “There may be questions about whether the impact of the modification section can be contained to one advanced biofuel … or whether there would be a domino effect whereby other renewable fuels are impacted.” Use of the re-set brings “potential for EPA to significantly reduce the applicable volumes or to maintain ambitious targets.”
For the EPA homepage for the Renewable Fuels Standard, click here.
The Congressional Research Service report, “The Renewable Fuels Standard (RFS): Waiver Authority and Modification of Volumes, is available here.
A Wall Street Journal chart, “Growing the Fuel Supply,” that capsulizes development of various biofuel feedstocks, is available here.