EPA Proposes Renewable Fuel Standards for 2013

This week, the EPA proposed volumetric standards for biomass-based diesel, advanced biofuels, cellulosic biofuels, and total renewable fuels that must be blended into the nation’s transportation fuel supply in 2013. In the meantime, the oil industry is opposing the EPA’s implementation of the Renewable Fuel Standard (RFS) each step of the way, and it is trying to get Congress to repeal the law.

On January 31, the EPA announced that it "continues to support the use of renewable fuels within the transportation sector through the RFS2 program, which encourages innovation, strengthens American energy security, and decreases greenhouse gas pollution. The Energy Independence and Security Act of 2007 (EISA) established the RFS2 program and the annual renewable fuel volume targets, which steadily increase to an overall level of 36 billion gallons in 2022. . . . The proposed 2013 overall volumes and standards are: Biomass-based diesel (1.28 billion gallons; 1.12 percent); Advanced biofuels (2.75 billion gallons; 1.60 percent); Cellulosic biofuels (14 million gallons; 0.008 percent); Total renewable fuels (16.55 billion gallons; 9.63 percent)." The EPA will be accepting public comments for 45 days.

While Congress set the volumes for each type of fuel for each year through 2022 in the RFS law, the EPA has the authority to modify the volume in any given year if, in the EPA’s assessment, the biofuel industry will be unable to supply the volume set in the law. The cellulosic biofuel industry, in particular, is only just beginning to bring commercial scale production on line, and so, in recent years, the EPA has had to reduce the standard, based upon its best estimates of the amount the industry would be able to produce in the coming year.

It is a difficult task to get this estimate right. The industry is just starting up. Inevitably, there are unanticipated variables that either delay or accelerate production of new biofuels. If the EPA’s estimate is lower than the actual amount of cellulosic biofuel produced, then biofuel producers in the nascent industry may be left without a market for their product. But if the EPA’s estimate is too high, then fuel blenders will have to pay the price for the difference between the higher standard and the lower amount of fuel actually produced.

In 2012, the EPA over-estimated the amount of cellulosic biofuels that would be produced. For 2013, the EPA is proposing to raise the standard for cellulosic biofuels to 14 million gallons, anticipating new production from commercial plants now coming on line.

The EPA’s announcement follows on the heels of a decision last week by the U.S. Court of Appeals for the District of Columbia, which vacated the EPA’s 2012 standard for cellulosic biofuel. In a lawsuit against the EPA by the American Petroleum Institute (API), the court ruled that the EPA was overly optimistic in its estimate of the amount of cellulosic biofuel that the industry would produce in 2012 and that it must change its methodology in the future. The court rejected most other arguments against the RFS that were presented by the oil industry. Read more about this case and decision here, from analysts at the University of Illinois, and here in Politico .

This court decision follows on the heels of yet another decision on another lawsuit brought by API against the EPA challenging the EPA’s decision to permit the sale of E15 fuel (gasoline that contains 15 percent ethanol rather than 10 percent blends which have been sold until now) for vehicles made since 2001. The U.S. Court of Appeals for the District of Columbia denied API’s petition for a rehearing on the EPA’s decision. Read more about this case and decision in Bloomberg Businessweek .

As reported in the January 15 edition of The Hill , API has launched a concerted political and media effort to repeal the RFS.