Washington Insider -- Tuesday

Trouble at Lordstown Motors

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

RFS One Key in EPA Regulatory Agenda

The Biden administration on Friday released the unified regulatory agenda, with several issues ahead on biofuels. The Environmental Protection Agency (EPA) plans to release its proposals for renewable fuel percentages under the Renewable Fuel Standard (RFS) in July 2021 and finalize the action in December, according to the unified regulatory agenda released by the Biden administration.

As for the RFS levels for 2023 and beyond, the unified agenda noted that under the Clean Air Act, "EPA must set those volumes based on an analysis of factors specified in the statute. This rulemaking will establish volume requirements beginning in 2023." The timeline laid out for the action is for a notice of proposed rulemaking to be released in December 2021, with a final rule in December 2022. EPA noted that the legal deadline is for the action is required 14 months ahead of the first applicable year--2023.

EPA also noted they are "required to modify, or reset," the applicable annual volume targets specified in the statute for future years if waivers of those volumes in past years met certain specified thresholds." While indicating those thresholds have been met, the agency said they are "considering proposing a rulemaking that would modify the applicable volumes targets for cellulosic biofuel, advanced biofuel, and total renewable fuel for future years." However, the timeline for that is listed as "to be determined."

Regarding E15, EPA noted the notice of proposed rulemaking released in January by the Trump administration which proposed options to labeling of E15 fuel dispensers. "First, EPA proposed to modify the text and color of the E15 label," the agency noted. "Second, EPA proposed to remove the E15 label requirement entirely." The proposed reg also required future underground storage tank (UST) equipment to be compatible with higher blends of ethanol and provides additional options for demonstrating compatibility of existing UST systems with higher blends of ethanol. But as with the RFS reset, EPA indicate the timeline for the final rule is "to be determined."

WOTUS Replacement Rule Remains Focal Point

EPA Administrator Michael Regan said in a statement last week that the Trump administration's rollback of various water and wetlands protections is "leading to significant environmental degradation," and that the EPA will work with the Army Corps of Engineers to create new rules protecting ecosystems and providing safe drinking water.

The announcement quickly brought accusations from Republicans that the Biden administration wants to reinstate Obama-era Waters of the U.S. (WOTUS) rule and potentially burden industries such as construction and agriculture in the process.

The Wall Street Journal editorial page reacted harshly to the revision coming from the Biden administration.

"EPA is preparing a private land grab that will limit farming, fracking, home building and economic activity… President Biden wants Congress to shovel out hundreds of billions of dollars for infrastructure, which the EPA then will tie up in a permitting morass--unless, of course, the projects advance climate or social-justice goals. Republicans shouldn't agree to any infrastructure deal that doesn't include permitting and regulatory efficiencies."

But even EPA is not ready to commit to a timeline, their latest regulatory agenda listed the WOTUS replacement timing as "to be determined."

Washington Insider: Trouble at Lordstown Motors

The former General Motors plant in Lordstown, Ohio, emerged as a potential star in the electric vehicle show. Lordstown Motors took over the plant with a plan to build electric pickups there, the Endurance.

But high hopes that accompanied the effort have not been met. A prototype of the truck burned down in testing in February.

Then last week reports surfaced that the company had told investors they had thousands of "pre-orders" for the truck, including from those companies that run big fleets. But the New York Times noted that a report in March from Hindenburg Research had resulted in a push "to bring these companies public well before they were ready and in many cases some of these companies will never be ready."

To open this week, Lordstown's founder Steve Burns, and the company's chief financial officer, Julio Rodriguez, resigned. "An investigation by Sullivan & Cromwell, a law firm hired by a special committee of Lordstown's board, the results of which were disclosed on Monday, confirmed 'issues regarding the accuracy of certain statements regarding the company's pre-orders,'" the Times reported.

Now the Securities and Exchange Commission is investigating the situation, including on a merger of the firm with DiamondPeak plus the sales orders.

The company is expected to hold an event at its factory to tell investors and others about its pickup truck.

But Lordstown is not the only startup in the electric vehicle world that has had problems.

By contrast, there is Tesla that has gathered a global following for its electric cars.

But the question that comes now is can these startups really survive or will be the electric vehicle market be dominated by automakers already in operation -- Ford recently demonstrated an electric version of its F-150 pickup to President Joe Biden.

This still means that electric vehicles have a future in the U.S. automotive fleet. However, those seeking to "cash in" on the trend should take note of what has unfolded with Lordstown and others -- something that has applied to any business and that is you have to have a product to sell and one that buyers trust.

That's what the challenge is ahead. And that doesn't even get into issues surrounding the range or battery charging times that still represent some of the biggest hurdles that companies seeking to broaden the electric vehicle market will have to address.

Events like those with Lordstown suggest that perhaps the timeline for the electric vehicle to push the internal combustion engine out of favor with consumers is now further down the road. That probably is giving some relief to those in the biofuel sector as those fortunes are at least currently tied to motor fuel consumption. This means the challenge ahead for the biofuel industry will be to convince policy-makers and others that their fuel can be a big contributor to lowering emissions ahead of when electric vehicles reach a point of gaining that market share they need to truly make a difference on emissions.

So we will see. Struggles by these startups are not unique to electric vehicles as there are always those who game the system. But the situation is still one that should be closely monitored, especially be a sector where corn and soyoil use in fuels is so important, Washington Insider believes.

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