Focus tightens on 2016 US biofuel mandates

OREANDA-NEWS. February 20, 2015. Regulators and the biofuel industry have turned their focus to 2016 ahead of a three-year package of mandates setting minimum US biofuel consumption levels expected by June 22.

The mid-2015 target for biofuel mandates would make 2016 the more likely year to address difficult questions on how to drive increased US biofuels consumption that have bedeviled the federal program for two years, Environmental Protection Agency director of the office of transportation and air quality Chris Grundler said.

The agency must decide how the policy will address current biofuel distribution capacity that remains far short of federal goals for consumption, Grundler said on the sidelines of the National Ethanol Conference in Grapevine, Texas.

"The whole debate is how far, how fast, and what legal tool you are using to make that adjustment," Grundler said.

The agency angered both the biofuel industry and refiners with the longest-running miss of statutory deadlines in program history. Refiners and importers still have no idea of what volume they will be liable for ensuring entered the US transportation fuel supply last year, generating volatility in the RINs market. Biofuel producers, especially manufacturers of conventional, corn-based ethanol, remain uncertain of whether there will be any government force behind investments to increase their domestic market share.

"If the agency is able to promulgate a rule for 2016, it will have an opportunity to send a signal that it will not be held hostage by an imaginary blend wall and get the renewable fuels renaissance moving again," Renewable Fuels Association Bob Dinneen told the conference in opening remarks.

The Renewable Fuel Standard (RFS) requires refiners, importers and other companies adding fuel to the US transportation pool to ensure biofuel is blended into the supply. The program as modified in 2007 required steadily higher volumes of total biofuels, expected to compel blends of ethanol and gasoline higher than the 10pc found nationwide today. EPA must propose and finalize volumes each year by the preceding November.

The agency drafted 2014 mandates requiring 15.21bn USG of biofuels, 16pc below the 18.15bn USG proposed by Congress in 2007 and 8pc below the final 2013 mandate. Space in the mandate for conventional, corn-based ethanol fell by 6pc to 13bn USG. Biofuel groups blasted the proposal, which languished in bureaucratic purgatory between the EPA and the White House until the agency said in November — a year after final volumes were due — it would not produce a mandate during 2014.

Grundler was contrite in an address to the industry this morning, bluntly apologizing for the delays. Offering certainty to the market was "the single-most important thing we can do to advance the RFS," he said.

"I know words are cheap but in this case they are sincere, because I know and I get there are consequences when government fails to act," Grundler said.

The 2014 delay cascaded into the two following mandate years. The agency has yet to even propose volumes for 2015 and under the RFS should have by now developed draft guidance for 2016.

Mandated volumes for 2014 will have to acknowledge that "it's already happened," and volumes for 2015 to a lesser degree will be limited by the year already underway, Grundler said.

A new Republican majority in Congress has stoked talk of modifications, if not repeal, of the roughly decade-old mandate. Party leadership in the US House of Representatives and Senate energy committees have said they will monitor the agency's handling of the program as part of a general wariness of what Republicans consider EPA overreach.

"When we are talking about standards that do not make sense, that are not working, you just do not let them sit around," Senate Energy and Natural Resources Committee chairman Lisa Murkowski (R-Alaska) told Argus of the program in January.

But neither the RFA nor the EPA were interested in modifications that increased the agency's role in the RIN market.

"We have no interest in getting involved in the RIN market," Grundler said. "This is a personal opinion – markets work better without the EPA mucking about in them."