One Step Forward
On March 21, the 2017 renewable volume obligation (RVO) mandates under the Renewable Fuels Standard quietly became law. With no fanfare, nor a press release from the U.S. EPA, the mandates officially took effect after being caught up in the 60-day regulatory hold enacted by President Trump on his first day in office. This is certainly a welcome event for those of us in the biofuels industry—we have finally gained long-sought certainty about the program and its requirements through the end of 2017.
Naturally, the next shoe to drop will be the proposal for the 2018 RVOs. Moving forward, the EPA will need to answer an important question for those concerned with the future of the program: Will it continue to rinse and renew the 2018 mandates with the same basic principles as the past two cycles?
The advanced biofuels industry had another victory this month, as rumors dissipated surrounding a potential executive order (EO) that would have directed EPA to shift the point of obligation under the RFS. At least for now, the point of obligation will stay with the refiners, where it currently resides, instead of being shifted to the rack by unilateral action from the White House. In a rare moment of unity, most of the major trade associations in the renewable fuels and oil industries signed a letter in opposition to the change. EPA Administrator Scott Pruitt has now indicated that EPA has a process in place to review the comments submitted on the EPA’s denial of the petition, prior to finalizing the proposal to deny the request. The rumored EO garnered a significant amount of press attention, and the EPA rules on the pending proposal to deny the request, our industry must remain engaged and vigilant, in order to defeat the proposed change.
Having successfully navigated these two thorny thickets—at least for the moment—we must continue to address other contentious issues creating factions within the industry. I can tell you firsthand that for the first time in four years, both House and Senate staff are pushing all stakeholders to come to the table to discuss RFS reform. In a public statement, E&C Subcommittee on Environment Chairman Rep. John Shimkus, R-Illinois, stated that he would like to have a bill moved out of the committee by August. This means the committee must begin crafting a package this spring. The Senate, on the other hand, has made slower progress. This is no doubt due, in part, to many Senate staffers having left for new positions at the EPA. Senate Environment and Public Works Committee Chairman Sen. John Barrasso, R-Wyoming, must hire new counsel to handle the RFS. Despite this challenge, members in both chambers and both parties see political opportunities in making changes to the RFS. The time is ripe for reform.
Speaking of reform, another key issue for the spring will be tax. While Congress is currently tied up with healthcare, tax reform is the next big-ticket item on their agenda—hopefully for April—so stay tuned. It remains unclear what the House Ways & Means Committee intends to do on the biodiesel blenders credit, which expired at the end of 2016. The National Biodiesel Board continues to lobby to change the blenders credit to a producers credit, a shift opposed by a number of major trade associations such as the American Trucking Association, National Association of Convenience Stores, and National Association of Truck Stop Operators, all of whom benefit from the existing blenders credit. We remain hopeful that the Senate Finance Committee will continue its support for the existing suite of credits, which includes the blenders credit, the second-generation credit for cellulosic fuels, and the alternative fuels tax credit.
Inevitably, all of these issues will be addressed. What remains troubling is that the industry continues to be so factionalized on each of these issues, which will impact the future of advanced biofuels. If the U.S. is to see the use of more advanced and cellulosic fuels, we have to provide more certainty and less friction to create a stable environment for investment in these companies. To that end, we all need to continue to reach out and give a little room to encourage growth for the industry as a whole.
Author: Michael McAdams
President, Advanced Biofuels Association