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June 22, 2018 6:00 PM, EDT

Biofuel Trade Groups Express Concerns About Future of Renewable Fuel Standard Program

House Environment Subcommittee hearing House Environment Subcommittee/YouTube

The U.S. Environmental Protection Agency has proposed increasing the mandated volume of biomass-based diesel by 330 million gallons for 2020, from a static volume of 2.1 billion gallons in 2018 and 2019, to 2.43 billion gallons in 2020.

Under the June 26 proposal, so-called “conventional” renewable fuel volumes, primarily met by corn ethanol, would be maintained at the 15 billion gallon target set by Congress for 2019, while the advanced biofuel standard for 2019 would be increased by almost 600 million gallons, and the cellulosic biofuel standard for 2019 would be increased by almost 100 million gallons more than the 2018 standard.

The agency is required to finalize the rule setting blending requirements for renewable fuels by Nov. 30.

The National Biodiesel Board said that while it appreciated EPA’s plan to increase biomass-based diesel and advanced biofuel categories under the Renewable Fuel Standard, it expressed concerns that the agency has been granting dozens of retroactive small refinery hardship exemptions that “undercut prior year volumes and could still have a negative impact on future year standards.”

Despite the increase in biomass-based diesel, the new proposed target is well below the actual number of gallons produced this year and last, according to recent testimony at a House panel.

Members of biofuel and gasoline trade organizations told members of the House Environment Subcommittee last month that they have concerns about the future of advanced biofuels under the federal RFS program. Some want fixes to the program, while others want it to go away.

Testifying in a 90-minute subcommittee hearing on June 22, biofuels trade organization executives complained that the program has become a victim of political bias on the part of former Environmental Protection Agency Administrator Scott Pruitt, who had been issuing waivers through a closed-door process to a number of small — and in a few cases, large — biofuels producers, allowing them to reduce their blending levels of biofuels and instead refine oil.

Critics say the process could not only reduce biofuel production levels but also threaten to scare investors away.

Michael McAdams

McAdams via House Environment Subcommittee/YouTube

“Based on what has been reported in the press, we suspect that EPA has granted up to 30 exemptions for small refineries in compliance years 2016 and 2017 — three times what we have seen previously,” Michael McAdams, president of the Advanced Biofuels Association, told the subcommittee. “We urge you to take politics out of the equation.”

Robin Puthusseril, vice president of Greater Chicago Truck Plaza, said she views biodiesel as having the potential to be a part of America’s long-term “all-of-the-above energy future.”

“I am concerned, however that the EPA in recent months has granted small refinery hardship waivers to an unprecedented number of refineries,” said Puthusseril, speaking on behalf of Natso. “Going forward I would hope that EPA acts in a manner more consistent with the RFS by requiring all waiver requests be received and assessed prior to finalizing compliance mandates for a given compliance year.”

Robin Puthusseril

Puthusseril via House Environment Subcommittee/YouTube

With the 2007 law that created the RFS program due to end in 2022, Congress is weighing whether to legislatively reform the program or allow EPA to make needed adjustments administratively, said subcommittee Chairman John Shimkus (R-Ill.)

But oil producers continue to maintain that the RFS program has been unsuccessful and should be eliminated, forced to compete in the marketplace without government regulatory support.

“The RFS was intended to grow a market for first-generation biofuels while spurring commercialization of its advanced and cellulosic biofuels,” Derrick Morgan, senior vice president of the American Fuel and Petrochemical Manufacturers, told the subcommittee. “Although reasons for these goals are understandable — energy security, rural development and environmental benefits — our experience with the RFS has made it clear that the law is failing to deliver upon many of its goals.”

Derrick Morgan

Morgan via House Environment Subcommittee/YouTube

However, Randy Howard, CEO of Renewable Energy Group, speaking on behalf of the National Biodiesel Board, said he sees biomass-based diesel as the future of the transportation industry.

“Biodiesel is truly a success story of the RFS,” Howard told the subcommittee. “I see biodiesel as the key to the future of liquid transportation fuels.”

Randy Howard

Howard via House Environment Subcommittee/YouTube

Shimkus agreed with supporters of biodiesel that the fuel has been a bright spot of the RFS.

“For biodiesel, the production capacity has grown significantly and billions of gallons are now added to the nation’s diesel supply each year,” Shimkus said. “In that regard, the RFS provisions for biodiesel has been a success. But biodiesel remains expensive when compared to petroleum-based diesel fuel and there has been little progress making it more cost-competitive.”