Ethanol Blog

Reflecting on the Anatomy of a Biofuels Agreement

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Agriculture and biofuels groups joined a briefing call on Oct. 3 with Trump administration officials ahead of a new biofuels deal. (DTN file photo)

Agriculture and ethanol interests have been up in arms.

Just how could EPA release a biofuels proposal reportedly not consistent with a deal made with President Donald Trump?

When you compare what was publicly reported in September about a deal to what EPA proposed recently, it would seem the agency didn't exactly follow the agreement.

You be the judge.

Agriculture's expectation was the agency would account for small-refinery exemptions to the Renewable Fuel Standard by averaging the actual volumes waived from 2016 to 2018.

Instead, EPA proposed using U.S. Department of Energy recommendations on waived volumes from 2015 to 2017 that fall far short of gallons actually waived.

Industry groups have said what is in the proposal doesn't match details of a deal originally leaked to the media in September, what was shared on that Oct. 3 briefing call and in the Oct. 4 announcement.

On Sept. 16 Reuters reported a deal would require EPA to calculate a three-year rolling average of the total biofuels exempted since 2016 via small-refinery exemptions. The agency would then add the average to annual renewable volume obligations in the RFS starting in 2020.

Previous press accounts primed the pump of ag groups' expectations: The deal was expected to include a projection for future small-refinery exemptions to the RFS based on an annual average of the 4.04 billion gallons of biofuels exempted from 2016 to 2018, or 1.35 billion gallons per year.

"That is not accurate," EPA spokesman Michael Abboud told DTN on Oct. 22. "EPA has consistently stated that it will seek comment on how to and at what levels it projects small refinery relief in the 2020 compliance year, these ranges are informed by the last three compliance years and the statutory discretion provided to EPA by Congress."

In addition, the agreement also was said to include increasing 2020 RFS volumes by about 1 billion gallons. That would include 500 million for corn-based ethanol and 500 million gallons for biodiesel and other advanced biofuels. This is not part of EPA's latest supplemental proposal.

BRIEFING CALL

The administration held a briefing call with agriculture and biofuels interests on Oct. 3 to announce a deal had been struck. Then on Oct. 4 the administration officially announced the deal and agriculture groups celebrated.

That was 11 days before EPA released the actual proposal on Oct. 15.

But what exactly did EPA tell agriculture and biofuels on Oct. 3 and what did EPA Administrator Andrew Wheeler actually announce on Oct. 4?

According to a recording of the Oct. 3 call obtained by DTN, at no time does EPA Deputy Assistant Administrator of the Office of Air and Radiation Clint Woods share details on the actual methodology the agency would use to account for future waivers.

At that time, EPA had not yet completed the actual proposal.

So Woods offered no details about agency plans to use the DOE recommendations instead of the average of actual gallons exempted from 2016 to 2018.

EPA provided the following statement to DTN when asked about the briefing call: "As EPA has stated previously, the Oct. 15 proposed supplemental rule is the proposed text from our announced agreement with the White House and USDA on Oct. 4. EPA has since hosted multiple background briefings with members of the committee's staff and continued to offer briefings to members that are interested."

The bottom line: EPA's Woods didn't provide details about the DOE aspect of the upcoming proposal, and agriculture and biofuels groups on the Oct. 3 call didn't ask about that level of detail.

WHEELER INTERVIEW

Then on Oct. 4 Wheeler announced the deal would account for waivers based on the previous three years.

In a radio interview with 1040 WHO in Des Moines on Oct. 4 Wheeler said the EPA was going to "guarantee" next year's RFS volumes would include 15 billion gallons on conventional ethanol.

Wheeler told the interviewer the agency would base its proposal on waivers granted during the previous three years. Wheeler said nothing about the agency using DOE recommendations.

"We're doing that by estimating what small-refinery exemptions might be next year so we're going to go over 15 billion, so at the end of the day we net out at least 15 billion gallons," he said.

"There may be waivers next year but, because those are required under the law, but what we're doing is we are putting forth 15 billion gallons plus an additional amount based upon what we've given out in the last three years on the waivers, so that any waivers given next year will be subtracted from that larger number and we will end up at at least 15 billion gallons."

MORE ON THE CALL

On the Oct. 3 call Woods told ag stakeholders the agency's proposal would "ensure at least 15 billion gallons of ethanol" would be required by the RFS for 2020.

"Under this action we will be projecting the volumes that we expect next year's small-refinery exemptions would cover and adding those projected volumes to the previously proposed volume obligations above 15 billion," Woods said on the call. "We will take comment on a range of projections that are informed by accounting for the volumes exempted in the three most recent compliance years as well as based upon the RFS statutory program."

A caller then asks Woods for clarification.

"In original comments you mentioned adding those gallons back in," the caller said, "and I think you later clarified you said projecting the waived gallons from the prior three-year average as part of the formula. Just wanted to make sure I heard you guys right that that's what you're describing here."

Woods responds, "I think that is exactly what we're describing is to project those future small-refinery exemptions informed and based upon the most recent three compliance years in our obligations under the Renewable Fuel Standard. I think we'll be taking comment on a wide variety of issues around that but exactly on that front to help provide certainty and the correct methodology for making those projections make sense to get us to at least 15 billion gallons for conventional ethanol."

Not only does the Oct. 15 proposal not include an average of the "most recent three compliance years," but it uses much lower DOE volume estimates for 2015 to 2017.

Also on the Oct. 3 briefing call, U.S. Deputy Secretary of Agriculture Stephen Censky expressed support for the deal.

"We're very appreciative of the leadership that President Trump has shown," he said.

"He shows that he has really listened to the farmers, he's listened to the biofuels stakeholders, about what can be done. What we heard and what the White House heard, what the president heard from all the stakeholders was that the No. 1 priority is to ensure that the renewable volume obligations in the RFS are actually met. And we believe that this proposal that is going to be rolled out tomorrow does just that. We think this is a great agreement."

Even key details of the plan leaked to the media in September did not include the use of DOE recommendations to project exemptions.

The EPA proposal released on Oct. 15 calls for using an average of DOE recommendations for the 2015-2017 timeframe, or about 2.3 billion gallons for an average of 770 million gallons.

Clearly, the proposal caught agriculture and biofuels interests by surprise.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(TN)

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