Lawsuits against the Environmental Protection Agency became more likely on Friday, with the long-overdue release of the agency’s renewable fuel requirements that would reduce corn ethanol targets.
The EPA’s flagship Renewable Fuel Standard sets requirements for amounts of biofuels that refiners must blend in the nation’s gasoline and diesel supplies.
It’s a program the refiners want abolished by Congress, although they have worked with EPA in recent years to tweak the policy until Capitol Hill gets around to passing a bill.
Nevertheless, new litigation over the latest RFS rules, which set fuel targets retroactively for 2014, 2015, and 2016, won’t necessarily originate from the oil industry when the rules are finished in November. Lawsuits from the corn ethanol industry and biofuel community could be the first filed in the D.C. Circuit Court of Appeals.
The new proposed rules for 2014, 2015, and 2016 would allow volumes of ethanol up to 13.25 billion gallons for 2014, 13.40 billion gallons for 2015, and 14 billion gallons in 2016, according to EPA. The numbers are nearly a billion gallons shy of where Congress directed the agency to set the standards in those years because of EPA’s application of its waiver authority.
“Today’s announcement represents a step backward for the RFS. EPA successfully enforced a 13.8 billion gallon [RFS] in 2013. The industry produced 14.3 billion gallons of ethanol last year. There is no reason to promulgate a … rule that takes us backward,” said Renewable Fuels Association president and CEO Bob Dinneen.
The ethanol industry threatened to sue the agency when it first proposed the 2014 RFS nearly two years ago. In that proposal, the EPA did something unprecedented by making substantial cuts in the amount of corn ethanol that refiners are required to blend under the program.
Although EPA has the authority to waive other aspects of the RFS from one year to the next, the ethanol mandate is subject to special rules that prevent it from being adjusted unless there is a disruption in the supply of ethanol.
EPA, however, explained in the rule that it was cutting the standard based on “demand” factors, not supply constraints. Those demand factors were influenced by an idea floated by the oil industry that the fuel supply chain in the United States has reached its limit, or “wall,” for blending ethanol into gasoline.
The oil industry argues that increasing the amount of ethanol in the fuel supply beyond this limit to accommodate the RFS would result in damaged vehicle engines. The refiners want to keep the level of ethanol in gasoline at about 10 percent, or E10, which is the common gasoline-to-ethanol blend found at most fill-up stations around the nation.
The Renewable Fuels Association, representing the corn ethanol industry, says the oil industry argument is bogus and should not provide a legal basis for restructuring the standard. They argued that a number of other factors, such as demand for higher ethanol blends beyond E10, were not considered by EPA in issuing the first 2014 rule, and it should be re-proposed.
Amid the furor of the ethanol industry, corn producers and farmers, the agency did withdraw the original 2014 proposal. But on May 29, when the EPA re-proposed the rule, the same oil industry-supported rationale for reducing the overall ethanol target was still there. Furthermore, not only was the oil industry’s “blend wall” scenario guiding the targets for 2014, it was also there for 2015 and 2016.
The Renewable Fuels Association says EPA’s use of the blend-wall scenario to guide its decisions on setting the ethanol target remains a concern for the industry.
The trade group would not confirm or deny the possibility of a lawsuit once the rule is final. At this stage, the RFS requirements are only proposals, and the industry will use the comment process “in an effort to have a more rational final rule,” the group said. Nevertheless, a spokesperson said “we will consider all options when the rule is final.”
Tom Buis, CEO for the ethanol group Growth Energy, said EPA simply “acquiesced to the demands of Big Oil” in these rules, and will work to reverse EPA’s rationale to waive higher percents of ethanol.
Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, representing the refiners, said, “Undoubtedly, there will be a lawsuit” from the ethanol industry. Thompson served as deputy general counsel for EPA under the George W. Bush administration. He said the ethanol producers will likely sue, but their arguments over EPA’s authority to waive the mandate are baseless. “The ethanol industry is wrong,” he said.
He argues that given the right circumstances, which include prices and other issues that affect demand, the refiners believe EPA has the authority to act as it sees fit.
