The Environmental Protection Agency is looking at major cuts to its Renewable Fuel Standard program, citing increasing costs from renewable fuel imports as a factor in its decision.
EPA made its intentions known in a Tuesday notice that outlined a number of options to significantly reduce volumes of biofuels under the program. The RFS program requires that refiners blend increasing amounts of ethanol and other biofuels into the nation's gasoline and diesel supplies through 2022.
The notice said EPA is targeting biodiesel and advanced biofuels because of an expiring tax credit that the agency said has resulted in higher costs to blend the fuels to meet the RFS requirements.
The notice said the cost of advanced biofuels is higher on a per-gallon basis than the petroleum fuels it seeks to replace. The expiration of the biodiesel tax credit at the end of last year will exacerbate the increased cost of the fuels, the EPA said.
The loss of the tax credit "has already impacted the effective price of biodiesel to blenders, as well as the price of biodiesel blends to consumers," the notice read. "While it does not appear that the expiration of the tax credit has had a direct impact on the price of unblended biodiesel in 2017, we expect that the expiration of the tax credit has had a significant impact on the effective price of biodiesel sold to blenders."
In addition, "the level of imports and exports can also affect the price of renewable fuel used in the U.S., and both imports and export volumes have varied considerably over the last several years," it said.
The EPA is looking at cutting the total renewable fuel requirement from 19.24 billion gallons under the proposed 2018 standard to 18.77 billion gallons for 2019, a 2.5 percent cut.
Other possible changes would include reductions of the 2018 advanced biofuel target from 4.24 billion gallons to 3.77 billion gallons.
The action immediately sparked the ire of the biofuel and ethanol industries, which called the proposed changes baseless under the law and warned that the proposed reductions could spark a trade dispute if perceived as protectionistic under World Bank rules.
"There is no rationale for further lowering either the 2018 advanced biofuel volume requirement or the total renewable fuel volume," said Renewable Fuels Association President Bob Dinneen.
The Tuesday action was done through a notice of data availability, which means EPA is looking for feedback from the industry and others on possible changes it is considering, but nothing has been set in stone or proposed as a regulation.
Nevertheless, the biofuel industry sounded the alarm, calling the notice baseless, especially when the agency recently proposed reducing several types of biofuels under its annual requirements for 2018.
"As we outlined in our recent public comments to EPA on the proposed 2018 [requirements], we see no statutory basis whatsoever for attempting to limit biofuel imports through the use of a general waiver," Dinneen said.
"It is also likely that using RFS waiver authorities in an attempt to limit exports would be perceived as a non-tariff trade barrier, which could run afoul of U.S. obligations under World Trade Organization rules," he said
Doug Whitehead, chief operating officer at the National Biodiesel Board, said the EPA's proposal is even more disappointing for the industry than the proposed reductions under the proposed 2018 standard.
"EPA's proposal earlier this summer was inadequate, underestimating the power of domestic biodiesel production and ignoring the intent of the law. This request for comment is even more disappointing," Whitehead said. "NBB will be working with EPA to demonstrate the industry's proven success record, continued growth and impacts to American workers who were promised that this administration had their back."