Midterm Elections, RVO Decisions, and Lame Duck Tax Relief

With former U.S. EPA Administrator Scott Pruitt taking aim at the biofuels industry, what started out as a challenging year is now winding down on an ostensibly more moderate and manageable note.
By Michael McAdams | September 04, 2018

With former U.S. EPA Administrator Scott Pruitt taking aim at the biofuels industry, what started out as a challenging year is now winding down on an ostensibly more moderate and manageable note. While little is getting done on the legislative front at the moment, there are several efforts to keep eyes on the RFS and advanced biofuels industry in the coming months.

This is not to say we can take a back seat; we must still remain vigilant and engaged. But EPA Acting Administrator Andrew Wheeler’s hand seems to be steadier than his predecessor’s, and matters at EPA appear to be moving in a more transparent and thoughtful direction. When testifying recently before the Senate Environment and Public Works Committee, the acting administrator was judicious in answering questions about EPA’s small refinery exemptions (SREs). He has publicly stated that there should be more transparency in the process for granting SREs, and that it would be difficult to find the “disproportionate economic hardship” described in the statute, given currently low RIN prices. These are both positive signs for our industry. Positive signs long overdue, given the storms we have weathered over the past several months—calls to permit RINs for exported biofuels, handing a free pass on compliance for PES, and EPA granting 48 SREs from compliance with the RFS.

On the plus side, House Energy and Commerce Environment Subcommittee Chairman John Shimkus, R-Ill., continues to hold substantial congressional hearings on the state of the RFS program. These hearings have investigated potential changes that could address the disagreements between corn ethanol and the oil industry. On the Senate side, Majority Whip John Cornyn, R-Texas, continues to thoughtfully engage with stakeholders, and encourage the development of solutions that will help move the RFS program forward for everyone. These are not easy tasks, but I truly appreciate the leadership both men are providing in their endeavors.

As for the mess Pruitt left behind at EPA, the agency is now facing at least three lawsuits challenging its determinations in granting the 48 SREs for compliance years 2016 and 2017. These suits challenge the manner in which the SREs were granted, the criteria used to grant them, EPA’s failure to provide information on the determinations in response to numerous Freedom of Information Act requests, and specific determinations.

So what should we expect this coming fall? To start, Congress has 15 scheduled legislative days prior to its midterm elections—not much time to get a lot done. We should continue to be on the lookout for new proposals for RFS reform that could be released in order to create momentum for comprehensive reform in 2019. Comments on EPA’s proposed 2019 Renewable Volume Obligations are due on August 17. The agency will begin reviewing comments, and I suspect we will see a final RVO released after the midterm elections, but before the statutory deadline of Nov. 30.  Furthermore, we can expect to see some initial motions on the SRE lawsuits pending against EPA in the coming months.

On the tax front, I expect the earliest we will see meaningful tax extenders conversations materialize will be during the lame duck session after the midterm elections. A change in majority control of at least one of the chambers could further complicate the conversation on tax, teeing up a January timeline for clarity on extenders much like we saw in 2017. Recently, trade associations including ABFA and the National Biodiesel Board joined coalitions from the trucking and fuel marketing sectors in calling for a straight extension of the biodiesel blenders’ credit. This unified effort makes it far more likely that we can negotiate a good path forward for the biodiesel and renewable diesel industries—hopefully, a longer-term agreement negotiated as quickly as possible. We are all working toward this goal.

As always, we have much to do this fall. Stay engaged, and be sure to vote this November to remind our public servants about the importance of the RFS and its broad impact on America.   


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