Time for a change in the RFS

, for the first time in four years, Congress has stepped up its work to explore the possibility of reforming the Renewable Fuel Standard program.
By Michael McAdams | July 09, 2017

As I alluded to in my most recent column, for the first time in four years, Congress has stepped up its work to explore the possibility of reforming the Renewable Fuel Standard program. Efforts in both chambers of Congress are ongoing with hopes of creating an open atmosphere for debate and a good-faith exchange between multiple stakeholder groups impacted by the RFS program.

Given their efforts, the time seems ripe for me to review Congress’s intent when they wrote the RFS and discuss some of its outcomes—good and bad. Whether you like it or not, there are clear winners and losers. 

When we think back to the very beginning of the RFS program in 2005, the policy drivers were clear.  The three legs of the stool were energy diversity, energy security and carbon reduction. As we fast forward to today, we find the energy diversity and security aspects less compelling, as the advent of hydraulic fracturing has created an unforeseen wealth of domestic oil and gas supply. I would also add that, for some policymakers, support of U.S. agriculture and rural development was equally as important as energy security. As for the Advanced Biofuels Association, we have consistently endeavored to build a second-generation industry of advanced and cellulosic drop-in fuels compatible with our existing infrastructure, delivering a minimum of 50 percent greenhouse gas (GHG) emissions reductions.

A decade after the overwhelming bipartisan passage of the RFS2 in December 2007, the results are in. They are spelled out in data from the EPA’s Electronic Management Transaction System. Here are 2016’s production numbers:
• D6 renewable fuel (corn ethanol): 15.156 billion gallons.
• D4 biomass-based diesel: 4.003 billion gallons.
• D5 advanced biofuel: 97 million gallons.
• D3 cellulosic biofuel: 190 million gallons (primarily renewable biogas—not liquid fuels). 
 
The winners are the first-generation producers who, since 1978, have built their plants with the consistent support of a blenders tax credit, import tariff, or mandate—and, in some cases, all three. The losers are second-generation advanced and cellulosic drop-in fuel producers who have barely gotten off the ground. Therefore, I believe that we must focus on fixing the advanced and cellulosic elements in an RFS reform bill. 

First, we have statutory issues with basic definitions of acceptable feedstocks. For instance, the use of wood is extremely constrained under the RFS, though wood is one of the most abundant and affordable feedstocks available in the U.S. Additionally, the creation of intermediate feedstocks definitions by the U.S. EPA creates expensive administrative burdens to prevent double counting of potential RINs. The regulatory scheme micromanages and constrains opportunities to add new technologies and feedstock pathways under the RFS program. Prior to the regulatory revamp in 2015, the average wait time for EPA pathway approval was 2.9 years.

In addition, we must provide statutory certainty to how long a new plant will benefit from RIN generation under the program beyond the current 2022 deadline, when management of the program is slated to be relegated entirely to EPA. The cellulosic waiver credit also creates issues undercutting the current cellulosic RIN, as obligated parties can simply choose the waiver credit in lieu of a RIN generated by the production of actual cellulosic gallons. No other biofuels pool has such a waiver credit.

Finally, there are many other areas of concern, including pump labeling, coprocessing, carbon-14 dating, waste definitions, segregation requirements, and ocean-going vessels not covered by RINs. The list goes on, but 10 years have passed since the passage of the RFS2, and it is time that these issues be evaluated and addressed as a part of comprehensive reform.

I agree with EPA Administrator Scott Pruitt: It is indeed the constitutional duty of Congress to write the laws. Decisions should come from Congress’s clear policy direction. It’s time to get it right for advanced and cellulosic fuels. Let’s not miss our opportunity.


Author: Michael McAdams
President, Advanced Biofuels Association
michael.mcadams@hklaw.com
www.advancedbiofuelsassociation.com