The Environmental Protection Agency will hear all day Tuesday from all segments of the fuel industry at the first public hearing in Washington to discuss the Trump administration's first stab at setting annual targets under the agency's renewable fuel program.The oil refiners attended in force, raising a plethora of problems they see with the Renewable Fuel Standard that have been raised almost since the program was updated a decade ago. Scott Segal, a top lobbyist for San Antonio-based Valero, the largest independent refiner in the world, presented the problems with the program, which he said can pose a threat to the economy if not dealt with.Tuesday's hearing was meant to gather public feedback on the EPA's Renewable Fuel Standard targets for 2018, which must be in place by Nov. 30. The targets require refiners to blend an increasing amount of renewable biofuels into the nation's gasoline and diesel supplies through 2022. At the root of the problem is the cost of Renewable Identification Number credits that independent and merchant refiners have to buy to comply with ever-increasing biofuel targets, according to Segal.
"First, the RFS is based on laudable goals, but its implementation gets in the way of achieving those goals," Segal said in prepared remarks. "The current implementation of the RFS – with its tight market for renewable implementation numbers or RINs – actually encourages ethanol imports and fails to encourage ethanol exports," he said. That has national security experts pointing "out that high RINs prices also undermine our merchant refining sector to the detriment of readiness and the economy."The ethanol industry's lead trade group, the Renewable Fuels Association, said at the hearing that it is pleased with the 2018 targets that the Trump EPA has proposed. Group CEO Bob Dinneen began his public remarks by thanking EPA officials for sticking to the corn ethanol blending targets set forth under the law. The EPA set the proposed ethanol mandate at 15 billion gallons for next year. It is a target that Dinneen says refiners won't have a problem meeting given the surplus of RINs available from previous years when the Obama EPA set the ethanol target below the requirements."We believe EPA is well-justified in that decision, given the overwhelming evidence that more than sufficient D6 RINs [conventional ethanol renewable identification numbers] will be available for compliance this year and next," Dinneen said in prepared remarks.
But that doesn't mean everything is going well for the ethanol industry. Dinneen also testified that the Trump EPA is proposing to lower the target for more advanced "cellulosic ethanol" to 238 million gallons in its 2018 rule. "We understand the agency's dilemma in establishing an appropriate [annual target] for cellulosic ethanol, but we truly believe the agency has erred on the side of pessimism with regard to the potential for significant growth in cellulosic ethanol commercialization," Dinneen said.
Under the 2007 energy law, corn ethanol has reached its ceiling for compliance under the program, with cellulosic ethanol expected to meet the next tranche of the RFS to meet the 36 billion gallon target in less than five years.Similar issues were raised by biodiesel producers, who said the 2018 proposed rule undercut the industry's progress. Biodiesel is considered an advanced biofuel under the RFS, and more of it will be required to help meet the 2022 target with the cap on corn ethanol reached.
The association representing the biodiesel industry underscored the job losses that would occur if the annual target isn't increased."The current numbers shortchange the progress we have made," said Donnell Rehagen, chief executive officer at the National Biodiesel Board. "They are a step back for the RFS, job creation, small businesses and rural economies. Let me assure you — these steps backwards are not about paper but people."
The EPA 2018 proposal set the biomass-based diesel target at 2.1 billion gallons through 2019. It also set the 2018 advanced biofuels target on the minimum amount of 4.24 billion gallons, a decrease from 4.28 billion gallons for 2017, according to the biodiesel group.It wants the EPA to increase the advanced-biofuel requirements for 2018 to at least 5.25 billion gallons and the biomass-based diesel target to at least 2.75 billion gallons.