RFS Lawsuit Advances

Refiners: EPA Required to Review Point of Obligation Annually

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The National Biodiesel Board says in a court brief it wants the U.S. Environmental Protection Agency to reconsider recently finalized biodiesel volumes. (Photo by Michael Coghlan)

OMAHA (DTN) -- The biofuel and petroleum industries are back in court as both sides argue the Environmental Protection Agency should have implemented the Renewable Fuel Standard differently in 2017.

Attorneys for biofuels and petroleum interests filed court briefs in the United States Court of Appeals for District of Columbia Circuit on Monday, challenging EPA on the 2017 Renewable Fuel Standard rule.

Petroleum lobbies are asking the court to force the EPA to re-do the rule for a number of reasons.

First, a number of refiners say EPA did not consider their request to change the point of obligation. Though biofuels and petroleum refiners largely agree refiners and importers of gasoline and diesel should be the obligated parties in the RFS, some in the petroleum industry want ethanol blenders to shoulder the mandate.

The refiners filing the legal challenge include Valero Energy Corp., Monroe Energy LLC, American Fuel and Petrochemical Manufacturers, as well as a number of other companies, also are challenging EPA's methodology for setting cellulosic and advanced biofuels volumes.

In addition, the National Biodiesel Board is challenging EPA's decision to leave the biomass-based diesel mandate at 2.1 billion gallons, although the industry contends it can produce much higher biodiesel volumes.

In November 2017, the EPA filed a notice indicating petitioners who wanted a change in point of obligation didn't prove their case.

"In evaluating this matter, EPA's primary consideration was whether or not a change in the point of obligation would improve the effectiveness of the program to achieve Congress's goals," the agency said.

"EPA does not believe the petitioners or commenters on the matter have demonstrated that this would be the case. At the same time, EPA believes that a change in the point of obligation would unnecessarily increase the complexity of the program and undermine the success of the RFS program, especially in the short term, as a result of increasing instability and uncertainty in programmatic obligations."

In a court brief filed on Monday, the refining interests said the agency did not respond to comments filed by the industry in asking for a review.

"Instead, it declared that comments regarding who is obligated under the annual renewal fuel obligations are 'beyond the scope' of the annual rulemaking," according to the brief.

Some petroleum industry groups have argued for years that the EPA is required to consider a possible change in the point of obligation annually. Most biofuels and petroleum interests have stood opposed to changing the point of obligation, arguing program costs can be controlled when more parties are obligated to either blend biofuels or buy renewable identification numbers, or RINs, to comply with the RFS.

BIODIESEL CLAIMS

During the first week of December, the EPA set biomass-based diesel volumes at 2.1 billion gallons. The agency originally proposed a cut, while the industry wanted the number set at 2.5 billion gallons.

The EPA's final biomass-based diesel numbers came as a huge disappointment to an industry that maintains it has the capacity to produce 2.6 billion gallons.

In a court brief filed this week, the National Biodiesel Board said the agency "set the 2018 biomass-based diesel volume based on factors that are not among those Congress instructed the agency to consider."

The EPA said in its final RFS, that the biodiesel volume should be set below expected production because the advanced biofuel volume actually drives biodiesel production.

The industry contends EPA did not address the required factors when setting the volume, and instead "discussed them only in an 'additional supplementary assessment' included in a draft memorandum to the docket."

Instead of using the factors to assess biomass-based diesel as a replacement for petroleum fuel, EPA used the factors to assess biodiesel as a replacement for other advanced biofuels.

The National Biodiesel Board said the agency takes the same approach in setting the 2018 rule.

In setting the biodiesel number, the brief said, the agency is required to consider the effect of the production and use of renewable fuels on a number of fronts.

That includes how biofuels may affect the environment, the energy security of the United States, and the expected annual rate of future commercial production of renewable fuels.

In addition, the agency is required to consider the effect renewable fuels may have on the infrastructure of the United States, how the use of renewable fuels affects consumers' costs of transportation fuel and transport of goods. Also required is a consideration of how the use of renewable fuels may affect job creation, the price and supply of agricultural commodities, rural economic development and food prices.

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

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Todd Neeley