Although the renewable fuels industry and its supporters credit the U.S. Renewable Fuel Standard (RFS) with stimulating the growth of the industry and with exponentially increasing the production of renewable fuels, the RFS is (and perhaps always been) controversial. The preferences the law created for non-fossil fuels naturally placed it in opposition to entrenched economic interests of the oil and gas industry, differences which have increasingly come to the fore as the RFS mandates have grown and the difficulties in meeting the mandated volumes have increased. These controversies have played out in the forum of public discussion, as well as Congress, the courts, and agency administrative proceedings. The following is a summary of the major areas of dispute that have arisen: you can find a more complete discussion of these issues in a two-part posting on my Biofuel Policy Watch blog.
- Impacts of the 2012 U.S. drought on the corn ethanol mandates. As the U.S. drought intensified in the summer and autumn of 2012, numerous trade groups, NGOs and other organizations called for EPA to lower or waive the mandated volumes for corn ethanol for 2012 and 2013, out of a belief that the diversion of much of the nation’s corn crop to ethanol production will lead to higher food prices. In response, EPA opened a public comment period on whether it should waive or reduce the corn-starch ethanol mandate under the RFS. On November 16, 2012, EPA announced that it had denied the petitions to waive the 2012 or 2013 volume mandates under the RFS, however most observers expect this issue will not go away, as attention continues to be directed to “food vs. fuel” issues in biofuel production.
- Challenges to the cellulosic fuel mandates. Delays in commercial development of cellulosic ethanol have left the industry far short of meeting the aggressive volume mandates for cellulosic fuels that were established under the RFS. In fact, prior to 2012 there were no fuels produced in the U.S. that qualified as cellulosic biofuels under the RFS. Although EPA has continually relaxed the cellulosic requirements on a year-to-year basis, there have been repeated calls for EPA to abolish or reduce the amounts of cellulosic fuel required under the RFS. This issue remains active: although EPA has denied petitions to remove the cellulosic mandates and has also scored some court victories, there are still active lawsuits pending and the continuing threat of Congressional action aimed at eliminating these volume mandates.
- The problem of fraudulent RINs. Another concern arose during 2012, upon the discovery that a small number of companies had been selling fraudulent (i.e. nonexistent) Renewable Identification Numbers (RINs), the unique identifiers attached to volumes of fuel qualifying as “renewable” under the RFS. These companies pocketed large payments from fuel blenders and suppliers for the nonexistent RINs, who then found themselves out of compliance with the RFS and subject to penalties for failing to produce or purchase sufficient RINs to meet their volume obligations. This attracted a good deal of media attention and has introduced considerable uncertainty into the RIN market. In October 2012, EPA published a notice outlining the elements for a Draft Quality Assurance Plan which they intend to be the centerpiece of a proposed regulation to address fraudulent RINs. The EPA notice contemplated that the agency would propose a rule that established standards under which third parties could set up programs for independent verification and validation of RINs. A number of entities have already begun setting up such independent third-party validation programs.
- Challenges to the Entire RFS. There continues to be opposition to the overall RFS legislation, with frequent calls for its repeal or overhaul. For example, the American Petroleum Institute has recently adopted a policy favoring outright repeal of the RFS “because it is not working well and because it will force higher concentrations of ethanol in gasoline that could harm vehicles.” Possible legislative challenges are expected in the new Congressional session. In response to these threats, a group of industry groups and other stakeholders have formed a coalition called FuelsAmerica, with the mission of aggressively publicizing the benefits of the RFS.
D. Glass Associates, Inc. is a consulting company specializing in government and regulatory support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass also serves as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ regulatory affairs consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of Joule Unlimited Technologies, Inc. or any other organization with which Dr. Glass is affiliated. Please visit our other blog, Biofuel Policy Watch.