August has been a busy month for issues related to the Renewable Fuels Standard ("RFS").
On August 6, EPA denied the petitions for reconsideration filed by the American Petroleum Institute ("API") and the American Fuel & Petrochemical Manufacturers ("AFPM") regarding the 2013 Biomass-Based Diesel Renewable Fuel Volume. EPA sent a letter to AFPM and another to API before publishing notice of this decision in the Federal Register on August 14. As EPA's technical response memo explains, EPA believes that there is no need to reconsider the applicable volume of biomass-based diesel for 2013 because the issues raised by API and AFPM could have been raised during the comment period and the issues raised do not provide substantial support for revising the standard. In particular, EPA explained that there is no statutory prohibition to increasing the biomass-based diesel requirement over the 1.0 billion gallon standard even that will result in higher prices. EPA disregarded two other arguments by explaining that when the Agency set the 2013 standard, it was aware of and considered both the 2012 drought and the RIN fraud issue.
Other issues raised in the petitions, but rejected by EPA included challenges of the accuracy of EPA's claims regarding domestic energy security, job creation, the costs and impacts on consumers, the impact on carbon emissions, and whether EPA should consider both long and short-term impacts of statutory factors. Even though EPA has denied these petitions for reconsideration, this issue is not yet settled. Both API and AFPM filed petitions for review of the standard in the D.C. Circuit. These petitions have been held in abeyance pending reconsideration and EPA has yet to file an updated status report since issuing its decision. See API v. EPA, No. 12-1465 (D.C. Cir. filed Nov. 26, 2012). Earlier this year, the D.C. Circuit issued relief on the 2012 cellulosic biofuel standard after concluding that EPA unreasonably exercised its discretion when setting the standard. See API v. EPA, No. 12-1139 (D.C. Cir. filed Jan. 25, 2013).
Meanwhile, on August 13, AFPM and API filed a joint petition with EPA seeking a partial waiver of the 2014 RFS volumes. AFPM and API argue that without a waiver, "the RFS will result in inadequate domestic supplies of gasoline and diesel fuel and severe economic harm to consumers and the economy." The two trade associations claim that the U.S. has hit the "blendwall" - meaning the point when the RFS mandates the use of more renewable fuels than can be consumed. Companies demonstrate compliance with the RFS through Renewable Identification Numbers ("RINs"), which permit companies to sell specified quantities of gasoline and diesel for consumption in the U.S. Because the number of RINs available depends on consumption of renewable fuels and the RFS standards are higher than can be consumed, AFPM and API claim that there will be a shortage of RINs available. According to the joint petition, this shortage of RINs will then limit gasoline and diesel supplies within the U.S. because companies "will have no practical option but "˜to reduce their RIN obligation by decreasing the volume of transportation fuel supplied to the domestic market - either by reducing production,' reducing imports, or increasing exports."
AFPM and API have requested that EPA modify the 2014 RFS as follows:
|Renewable Fuel||Statutory Minimum (bil. gal.), 42 U.S.C. § 7574(o)(2)(B)||AFPM/API request (bil. gal.)|
|Biomass-based Diesel||1.0||No change|
|Cellulosic Biofuels||1.75||Lower to reflect actual production|
As we reported earlier this month, EPA acknowledged the impending blendwall issue when setting the 2013 standards and noted the likely need to adjust the 2014 standards. See 78 Fed. Reg. 49,794, 49,798 (Aug. 15, 2013). However, it remains to be seen whether EPA will grant the particular waivers that AFPM and API have requested.