EPA to set overdue biofuel quotas in deal with oil industry groups

WASHINGTON — Compelled by an oil industry lawsuit, the Environmental Protection Agency has agreed to set biofuel quotas for 2014 by Nov. 30 — two years after they were initially due.

The time frame was laid out Friday in a settlement agreement resolving a lawsuit by the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers, which had challenged the EPA’s repeated delays in establishing those renewable fuel mandates.

Under the deal, the EPA is committing to re-propose the 2014 biofuel quotas and unveil a first draft for 2015 by June 1, with the final targets established by Nov. 30. And, while it isn’t explicitly required in the agreement, the agency separately pledged to finalize the standards for 2016 this year too, under the same timeline.

“We’re determined to get back on track,” said Christopher Grundler, director of the EPA’s Office of Transportation and Air Quality, in a conference call with reporters to discuss the deal. “Our goal is to provide the market with the certainty it needs to grow renewable fuel volumes.”

The renewable fuel standard obligates refiners to add steadily increasing amounts of ethanol and other alternatives into the nation’s transportation fuel supply — up to 36 billion gallons in 2022, with the amount of traditional corn-based renewable fuel essentially capped at 15 billion gallons.

Congress established the basic framework in 2005 and then updated it again two years later, but it is up to the Environmental Protection Agency to establish annual volumetric quotas for the products mandated under the law: traditional renewable fuel, advanced biofuels that aren’t derived from corn starch, biodiesel and cellulosic biofuel.

Oil companies and refiners have been imploring Congress to repeal the law or give it a big overhaul, arguing that they are now being pushed beyond a “blend wall,” where the volumetric targets force them to mix a higher proportion of ethanol into fuel than the 10 percent level approved for use in all cars and trucks.

Oil industry leaders said Friday that while they welcomed the new deadlines for EPA, the underlying deal shows that bigger changes to the renewable fuel standard are essential.

“The only long-term solution is for Congress to repeal the program and let consumers — not the federal government– choose the best fuel to put in their vehicles,” said Stacy Linden, general counsel for the American Petroleum Institute.

Rich Moskowitz, the general counsel for the American Fuel and Petrochemical Manufacturers said that the trade association was pleased with the deadline for EPA to issue “the overdue RFS rules.”

But “we remain concerned with the government’s implementation of this broken program,” Moskowitz added. “EPA’s failure to comply with the statutory deadline injures refiners and exacerbates the problems associated with this unreasonable government mandate.”

EPA officials have said that the program is tough to administer.

Grundler declined to say Friday whether  Congress should revise the program, but echoed EPA Administrator Gina McCarthy’s previous concerns that it is difficult for the agency to complete a lengthy federal rule making process under one-year timeframes.

“This is a very challenging program for the agency to implement,” he said. “Renewable fuel policy is one that involves a lot of stakeholders and they all see it a little bit differently. So making these decisions is a complicated task.”

The numbers for 2014 were particularly difficult, Grundler said, because that year, the nation’s gasoline pool reached what EPA calls the “saturation point,” and industry refers to as the blend wall.

While EPA is planning to finalize quotas for 2014, 2015 and 2016 simultaneously, the years will not be combined; instead there will be three separate annual targets.

Since 2014 is in the rear view mirror — and any EPA-set mandates can’t influence renewable fuel production or use for that long-gone year — the agency plans to set quotas that reflect the actual volumes of renewable fuels that were used in 2014.

Biofuels producers that crave the market demand guaranteed by the annual targets also have chafed against the EPA’s quota-setting delays. But while they welcomed the court-ordered deadlines on Friday, biofuel backers insisted that EPA should not back down from setting aggressive renewable fuel quotas.

“Our producers have faced ambiguity for too long and today is welcome news that (EPA is) establishing a level of certainty with this announcement,”said Growth Energy CEO Tom Buis. “However, far more important than timing is that that the EPA establishes a final rule that moves our industry forward, and reflects the bipartisan vision Congress intended for the RFS.”