Industry group threatens lawsuit over 2014 renewable fuel quotas

The oil industry’s biggest trade group has already gone to court three times over the government’s handling of annual renewable fuel requirements, but on Thursday, the American Petroleum Institute said it was prepared to go another round. And this time, the API isn’t waiting for regulators to issue the quotas first.

In a letter to the Environmental Protection Agency, the trade group said it intends to file a lawsuit challenging the EPA if it does not abide by a Nov. 30 deadline to set the renewable fuel quotas for 2014.

Federal law requires renewable fuel requirements for the next calendar year to be issued before December, and biomass-based diesel targets are supposed to be pushed out no later than 14 months before they would be required. But it took the EPA until August to finalize the 2013 quotas — 206 days after that statutory deadline. And that came after a running 40 days late setting the 2012 quotas and letting 116 days lapse after the deadline for issuing the 2010 numbers. (In setting the 2011 quotas, the EPA was just 9 days late).

“EPA’s continual tardiness has real, adverse effects on industry,” said API general counsel Harry Ng in the filing with the agency. Refiners that are obligated to blend renewable fuels under the annual quotas need the information ahead of each covered year “to make operational, logistical and investment decisions,” Ng added.

Delay’s effect

In setting the 2013 quotas, the EPA implicitly recognized its missed deadline by giving refiners four extra months, until June 30, 2014, to comply with the mandates. But the late notice gives refiners little flexibility when it comes to managing their stable of tradable renewable credits that demonstrate compliance, said Patrick Kelly, API’s senior fuels policy adviser.

The EPA’s four-month extension also was a tacit acknowledgment that the 2014 quotas will be late, Kelly said.

“In previous years, they’ve been late, but not so egregiously late as to complicate compliance planning,” Kelly added. “But this year, coming out in August, it really had a detrimental effect on planning.”

Earlier this week the API asked the EPA to reconsider those 2013 quotas, in part because the agency’s decision to rely on new data to calculate the final numbers pushed the percentage of required renewable fuels higher — busting planning and previous business decisions by some refiners.

“The agency is clearly not taking these deadlines seriously,” Kelly said. “This is something that should be a routine process by now.”

Blend wall

In setting the 2013 numbers, the EPA acknowledged refiners’ concerns that they have hit the blend wall, a point where they can no longer mix in enough ethanol to meet the mandate’s volumetric targets for renewable fuels without exceeding a 10 percent threshold acceptable for use in all cars and trucks.

The EPA promised to make reductions in crafting the 2014 targets, with a hint that the final numbers would reflect the 10 percent ethanol blend wall.

An internal EPA proposal reportedly slashes the overall renewable fuel requirement to 15.21 billion gallons in 2014, down from the 16.55 billion gallons required this year.

But EPA Administrator Gina McCarthy stressed later that the agency “has made no final decision on the proposed renewable fuel standards for 2014.”

“No decisions will be made on the final standards without a full opportunity for all stakeholders to comment on the EPA’s proposed 2014 renewable fuel standards and be heard on how to best foster a growing biofuels industry that takes into account infrastructure- and market-related factors,” she said in a statement. “The Obama Administration remains firmly committed to furthering the development of all biofuels –- including corn-based ethanol, cellulosic biofuel, and advanced biofuel –- as part of the President’s commitment to developing a clean energy economy.”

In a Sept. 26 meeting with regulators at the Office of Management and Budget, oil industry representatives, including lobbyists from Tesoro, Exxon Mobil and the American Fuel and Petrochemical Manufacturers, suggested the 2014 volume quotas be set at a point that keeps the required amount of renewable fuel at no more than 9.7 percent of the nation’s gasoline supply.

The API has previously gone to court to fight the annual renewable fuel requirements for 2011, 2012 and 2013, with its latest challenge filed Oct. 8 in the D.C. Circuit Court of Appeals.

Biofuel backers said the oil industry trade group was resorting to tired legal tricks to protect its market share.

“This is another frivolous effort by API to abuse the court system in their slavish effort to repeal a public policy that is working for farmers, gasoline marketers and consumers,” said Renewable Fuels Association president Bob Dinneen at the time. “While the 2013 (quotas) were issued later than anyone would have liked, the fact is the statute is crystal clear, and all stakeholders have been producing and blending at levels that will unquestionably meet the 2013 requirements.”

API notice of intent on 2014 renewable fuel obligations by jdlouhy3911