EPA Releases Proposed Renewable Fuel Mandates for 2017

May 23, 2016

On May 18, the Environmental Protection Agency (EPA) released proposed renewable fuel mandates for 2017 under the Renewable Fuel Standard (RFS).  The proposal also included a proposed 2018 volume mandate for biomass-based diesel (the 2017 biomass-based diesel number was finalized in late 2015).  
 
Under the Renewable Fuel Standard, EPA sets an annual benchmark representing the amount of renewable fuels that each "obligated party" -- defined as a fuel refiner or importer -- is responsible for generating.  
 
In an important victory for NATSO members, the EPA did not propose -- or even solicit comments on -- changing the definition of "obligated party" to require blenders, including many NATSO members, to become obligated parties rather than refiners and importers.  Certain refiners have strongly pushed EPA in recent months to pursue this shift in order avoid having to fulfill their responsibilities under the RFS.  NATSO met with EPA and White House officials in recent weeks to oppose this policy shift, arguing it would: (i) undercut the RFS's purpose of maximizing renewable fuel consumption; (ii) result in an administrative nightmare for EPA officials; and (iii) place blenders in an unfair position of having to fulfill an obligation to blend renewable fuel into products that may not be amendable to such blending.  Indeed, unlike blenders, refiners and importers control whether the blendstock is amenable to being blended with renewable fuel.  
 
The RFS specifies four separate categories of renewable fuels, each with separate volume mandates.  The proposed 2017/2018 volume obligations are below, alongside the final required mandates for 2014-2016.
 
Renewable Fuel Volumes Requirements for 2014-2018
 20142015201620172018
Cellulosic biofuel (million gallons) 33 123 230 312* n/a
Biomass-based diesel (billion gallons) 1.63 1.73 1.90 2.00 2.1*
Advanced biofuel (billion gallons) 2.67 2.88 3.61 4.0* n/a
Renewable fuel (billion gallons) 16.28 16.93 18.11 18.8* n/a
(*Proposed Volume Requirements)
 
Proposed 2017 Percentage Standards (used to determine total volume requirements)
Cellulosic biofuel:  0.173% 
Biomass-based diesel:  1.67% 
Advanced biofuel:  2.22%
Renewable fuel:  10.44%
 
The corn ethanol community is unhappy with the proposal because it mandates less ethanol than Congress directed when it passed the Energy Information Security Act of 2007.  NATSO has historically supported EPA's exercise of its "waiver authority" to lower this number to avoid the "blendwall" and conform with reasonable expectations of what the market can absorb.  This is important because a renewable fuel mandate that exceeds the market's consumption capacity will result in a shortage of "RINs" -- the credits that obligated parties use to demonstrate that they have fulfilled their obligations.  A RIN shortage could lead to a higher RIN value, increasing RINs' cost for a refiner if a refiner does not blend enough biofuels.  Many have argued increasing refiners' RIN costs could be translated to higher oil prices and passed on to consumers. Higher RIN costs could also prompt an increase in exports, since export volume does not generate an RFS obligation.
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David Fialkov

David Fialkov is the Vice President of Government Relations, as well as the Legislative and Regulatory Counsel, at NATSO. In this capacity, Mr. Fialkov direct's NATSO's legislative, regulatory, and legal strategy on a range of issues, including transportation, energy and fuels, labor, data security, and taxes. Mr. Fialkov also oversees NATSO's political engagement program, including individualized legal and political counsel to member companies. Prior to joining NATSO, Mr. Fialkov was the senior associate in the Government Affairs and Public Policy practice at the law firm of Steptoe and Johnson in Washington, D.C. At Steptoe, Mr. Fialkov advised clients on legislative, regulatory, and political issues, as well as legal concerns. His primary clients included trade associations representing the motor fuel wholesale and retail industries, including the National Association of Convenience Stores and the Society of Independent Gasoline Marketers of America. Mr. Fialkov's focus was not only on the motor fuels business, but also the litany of other issues that retailers confront, including labor matters, foodservice issues, healthcare and employment issues, tax matters and data security. Prior to joining Steptoe, Mr. Fialkov graduated with honors from George Washington University Law School. He received his B.S. Summa cum laude with highest honors from Clark University in Worcester, MA. He lives in Washington, D.C. with his wife Allison and daughter Lilah. More
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