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MARKET WATCH

Are the 2014 Renewable Fuel Standards on their way?

Posted by LeAndra Spicer on August 14, 2014

The Environmental Protection Agency (EPA) is no stranger to backlash. Companies required to comply with EPA regulations argue the requirements are too strict while environmental groups protest the Agency fails to do enough.

The Renewable Fuel Standard (RFS) is not exempt from this conflict. Petroleum interests demand its repeal, environmental groups insist renewable feedstocks harm the environment more than fossil carbon, and the biofuels industry advocates for higher volume mandates.

How did we get here?

Legislation set forth in the Energy Independence and Security Act (EISA) requires the EPA set annual volume standards for total renewable fuel consumption, cellulosic biofuels, biomass-based diesel, and advanced biofuels. In the absence of federal mandates that dictate consumption, the EPA bases its targets on biofuels supply. In setting these standards, the EPA considers:

  • Market analysis including information on pilot and demonstration scale renewable fuel plants and potential production sources by company and facility
  • Energy Information Association (EIA) projections and analysis
  • Public and private market information
  • Independent peer review
  • Scientific data
  • Public comments

Despite a lack of cellulosic biofuels available to the commercial market, the EPA set aggressive production targets to spur its production. The 2011 cellulosic biofuel target was 6.6 million gallons, and the 2012 target was 8.65 million gallons. Zero gallons became available for commercial production.

What did the EPA have to say about the discrepancy?

“We believe that the cellulosic biofuels standards should provide an incentive for the industry to grow according to the goals that Congress established through EISA. However, we also believe that the cellulosic biofuel standard that we set should be within the range of what can be attained based on projected domestic production and import potential.

Any estimate we use to set the cellulosic biofuel standard will have some uncertainty in terms of actual attainment. Our intention is to balance such uncertainty with the objective of providing an incentive for growth in the industry.”

The courts disagreed. In January 2013, a federal appeals court ruled the EPA does not have the authority to set standards at levels designed to incent growth within the cellulosic biofuel industry. The court required the agency reevaluate its projections for cellulosic biofuel to reflect market conditions and vacated the 2012 mandate for cellulosic biofuels.

In April 2014, prompted by changes in announced and actual commercial production, the EPA lowered its 2013 cellulosic biofuels volume requirement from six million gallons to 810,185 gallons. The compliance deadline remains unknown.

Refiners were originally set to comply by the end of February, but that deadline was delayed first to June and then to September. In a third extension announced on July 31, the EPA stated refiners would have 30 days after the final 2014 renewable fuels standard is published to demonstrate compliance with the 2013 cellulosic biofuels volume requirement. The EPA explained the extended deadline as necessary given refiners will use their 2014 renewable fuel obligations to calculate how many RINs they may need to carry over from 2013.

When will the 2014 Renewable Fuel Standards be set?

As for the outstanding 2014 standards, the EPA has proposed a volume standard of 17 million gallons. Rumblings across the biofuels industry indicate proposed levels will likely rise in the final rule but still fall below the original fuel mandate. The final 2014 proposed rule is expected to undergo final review within weeks and then be issued to the public.

Although the EPA has not yet finalized the 2014 RFS rule, there is no reason to think the delay will carry over to 2015. The EPA has announced its intent to issue a proposed rule each spring and is obligated by law to issue final volume requirements by November 30. The EPA may issue its proposed 2015 RFS rule as early as September and finalize the rule next March. Time will tell if the Agency complies with its own deadlines going forward.


Comments

Don Chastain

10-14-2014

Well done summary for those of us who need to catch up on this dynamic subject!

Topics: renewable fuel standard

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