Growth Energy Comments on EPA s Proposed Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass Based Diesel Volume for 2017

Transcription

1 Growth Energy Comments on EPA s Proposed Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass Based Diesel Volume for 2017 Docket # EPA HQ OAR Tom Buis Chief Executive Officer Growth Energy 777 North Capitol Street NE, Suite 805 Washington, DC (202) (202) (fax) July 27,

2 I. INTRODUCTION AND EXECUTIVE SUMMARY Growth Energy respectfully submits these comments on the Environmental Protection Agency s proposed rule entitled Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for Growth Energy is the leading association of ethanol producers in the country, with 86 members and 66 affiliated companies who serve the Nation s need for renewable fuel. Growth Energy has participated in each of EPA s major rulemakings implementing the Renewable Fuel Standard ( RFS ) program, including EPA s first attempt to set volume obligations for Growth Energy has been a strong supporter of national strategies to promote the use of renewable fuel and to improve the efficiency of domestic biorefineries. For the reasons set forth below, Growth Energy urges EPA to change course and to refrain from issuing a general waiver that is unauthorized, unnecessary, and counterproductive. EPA should not decrease the 2014, 2015, or 2016 statutory requirements for renewable fuel, other than through its cellulosic waiver authority. Through the Energy Independence and Security Act of 2007 ( EISA ), Congress expanded and strengthened the RFS program in order [t]o move the United States toward greater energy independence and security and to increase the production of clean renewable fuels. 2 Since then, the RFS program has been an overwhelming success. It has created American jobs, revitalized rural America, injected much-needed competition into a monopolized vehicle-fuels market, lowered the price at the pump, reduced greenhouse gas emissions, and made our nation more energy independent and secure by reducing our dependence on foreign oil. Congress expected the RFS program to compel the industry to make dramatic changes in a relatively short period of time. 3 Accordingly, EPA recognizes here that the proposed volume requirements are intended to drive significant growth in renewable fuel use beyond what would occur in the absence of such requirements. 4 But by that measure, this proposal is a total failure. If EPA persists with its proposal, this rule would halt meaningful growth in renewable fuels and eviscerate the RFS program. The resulting stagnation in renewable fuels would contravene Congress s intent and disserve the public interest. EPA has proposed to exercise its cellulosic waiver authority under 42 U.S.C. 7545(o)(7)(D)(i) to reduce the 2014, 2015, and 2016 volume requirements for cellulosic biofuel and to flow those reductions through to the volume requirements for advanced biofuel and renewable fuel. EPA also proposes to invoke the general waiver authority under 42 U.S.C. 7545(o)(7)(A)(ii) to further reduce the 2014, 2015, and 2016 volume requirements for renewable fuel based on a purported inadequate domestic supply in those years. Despite appearances, EPA s proposal will not spur growth in renewable fuel in 2015, 2016, or beyond. Because of the large bank of carryover Renewable Identification Numbers ( RINs ), obligated parties will be able to fully comply with their proposed renewable volume 1 80 Fed. Reg. 33,100 (June 10, 2015). 2 Pub. L. No , 121 Stat (Dec. 19, 2007) Fed. Reg. at 33, Id. at 33,109. 2

3 obligations merely by maintaining their 2014 levels and drawing down the RIN bank. Obligated parties will have a strong incentive to do just that, especially because EPA s proposal will trigger its authority to reset all the volume requirements for renewable fuel going forward and EPA s current proposal and prior 2014 proposal leave little doubt that it will use that authority to establish new volume obligations that will not push the industry to expand and that will thus diminish the value of banked RINs. In fact, there is a strong basis to conclude that EPA specifically and improperly set the proposed 2015 and 2016 renewable fuel volume requirements in order to trigger its reset authority. Not only are those volumes remarkably close to the trigger threshold, but also EPA s Acting Administrator for Air and Radiation, testifying before Congress shortly after the proposal was issued, explained that [w]e actually think it makes a lot of sense to focus a reset on all volumes at one time. 5 The proposed volume requirements fall far short of the Nation s current supply of renewable fuel, even though they exceed historical production. Even under conservative estimates, the available supply of ethanol and biomass-based diesel alone will exceed the statutory volume requirement for renewable fuel by at least one billion ethanol-equivalent gallons, after the proposed flow-through of the cellulosic waiver, in each of the three covered years. Indeed, the proposal effectively concedes this: [A]lthough at least for 2014 and possibly 2015 and 2016, there is no shortage of ethanol and other types of renewable fuel that could be used to satisfy the statutory applicable volume of total renewable fuel, there are practical and legal constraints on the ability of ethanol to be delivered to and used as transportation fuel by vehicles. 6 The fundamental problem with EPA s approach is that constraints on the distribution and use of transportation fuel do not matter in determining whether EPA may exercise its general waiver authority. The phrase inadequate domestic supply in the general waiver provision refers to the amount of renewable fuel available for obligated parties to comply with their volume obligations, which is properly measured by production capacity. By expanding supply of renewable fuel to include downstream constraints on the supply and consumption of a different product that contains renewable fuel (that is, blended transportation fuel), EPA in effect interprets supply of renewable fuel to include demand for renewable fuel. That stretches supply far beyond what reasonable interpretation permits. In any event, there is adequate supply in 2014, 2015, and 2016, even under EPA s flawed interpretation, to foreclose EPA s exercise of the general waiver authority. As this comment explains in detail, there are various feasible, relatively inexpensive, and fast pathways to expand distribution and consumption of ethanol-based renewable fuels and biomass-based diesel. Even the most conservative of these pathways could boost distribution and consumption of renewable fuel by hundreds of millions of gallons more than needed to support compliance 5 Testimony of Janet McCabe, EPA Acting Administrator for Air and Radiation, before Committee of the U.S. Senate on Homeland Security and Government Affairs, Subcommittee on Regulatory Affairs and Federal Management, at 23 (June 18, 2015), at Fed. Reg. at 33,113. 3

4 with the statutory volume requirements for renewable fuel in , after the proposed cellulosic waiver flow-through. At its core, EPA s proposal rests on a fundamental misunderstanding of the RFS program as Congress designed it. The RFS program forces innovation and investment by intentionally requiring future levels of renewable fuel use far higher than what can be achieved with present production capacity, distribution capacity, and technology. The proposal, by contrast, ignores this mandate and instead only looks backward, setting volumes based on existing capacity to produce, distribute, and use renewable fuel. Under EPA s approach, distribution constraints and weak demand become a self-fulfilling prophecy. That would be lamentable for the United States. Renewable fuel is an American industry that promotes energy independence, improves our nation s environment, supports hundreds of thousands of jobs (especially in rural areas), and reduces prices at the pump, all without appreciably raising the price of food or feed. Yet EPA would stunt this industry by capping demand for its product and forcing the industry to idle production and identify export markets for excess capacity. That is particularly strange given that EPA s proposed advanced volume requirement would encourage significant importation of sugarcane ethanol from Brazil. Therefore, the final rule should adhere to the statutory volume requirements for renewable fuel, reduced by no more than the proposed cellulosic waiver flow-through, as follows: bil gal; bil gal; bil gal. These volumes would properly reflect supply regardless of whether EPA correctly interprets the general waiver provision to refer to the amount of renewable fuel available for obligated parties to comply with their volume obligations, or incorrectly interprets it to refer to the amount of blended transportation fuel that can be delivered to vehicles that can use it. At a minimum, however, EPA should raise its proposed renewable fuel volume requirements to account for three factors: The Department of Energy s latest projections for nationwide gasoline consumption imply a higher E10 blendwall in 2015 and 2016 than EPA s proposal assumes. When computing 2014 net D6 RIN generation, EPA erroneously assumed that a D6 RIN was generated on all 846 mil gal of exported ethanol and that all of those RINs would be retired and unavailable for compliance, when in fact much of that volume did not generate a RIN, including hundreds of millions of gallons of un-denatured ethanol. Thus, EPA not only got 2014 wrong, but also understated the market s already-proven generation capacity by hundreds of millions of RINs per year, an error that affects its proposal for 2015 and 2016 as well. 4

5 EPA is required to treat banked RINs as supply when determining the level at which supply would be inadequate for purposes of the general waiver provision. In other words, EPA must set the renewable fuel volume requirements high enough to ensure that the RIN bank is consumed. Unless EPA takes these actions, the oil industry will have little incentive to make the investments needed to expand the production and use of renewable fuel that Congress intended the RFS program to achieve. 5