Regulatory freeze lifted on 2017 RFS biofuel volumes

Source: ICIS News

2017/03/21

HOUSTON (ICIS)--The US Renewable Fuel Standard (RFS) biofuel volume mandate for 2017 took effect on Tuesday, after a regulatory freeze introduced by the Trump administration expired, industry players confirmed.

The Trump administration introduced a 60-day delay on regulations that had been published in the Federal Register between 28 October 2016 and 17 January 2017.

According to the White House, the purpose of the regulatory freeze was to review "questions of fact, law, and policy" that any previously approved regulations might raise.

This included the Environmental Protection Agency’s (EPA) final rule for renewable volume obligations (RVO) under the RFS, which were finalised in November last year.

The RFS requires refiners and fuel importers to blend increasing volumes of biofuels each year for the US market. That includes cellulosic ethanol, biomass-based diesel, advanced biofuel and total renewable fuel.

The EPA mandated that 15.0bn gal of total volumes in 2017 be for conventional biofuel, which is primarily ethanol derived from corn feedstock.

The agency also released its final rule on RVOs for biomass-based diesel, setting the amount at 2.0bn gal in 2017, and 2.1bn gal in 2018.

As of Tuesday, no further delays to the RFS rule had been posted.

Renewable Fuels Association (RFA) president and CEO Bob Dinneen said that the postponement of the effective date for the rule was “simply procedural” and was never expected to affect implementation, enforcement or compliance with the RFS.

Dinneen also noted that regardless of the effective date, the volume requirements would apply to the entire 2017 compliance year, from 1 January to 31 December 2017.

“The narrative promoted by some in the oil industry notwithstanding, President Trump clearly stands behind the nation’s farmers and the Renewable Fuel Standard,” Dinneen said.

In February, President Donald Trump addressed a letter to attendees of the 2017 National Ethanol Conference (NEC) in San Diego, expressing his support for the US ethanol industry.

The National Biodiesel Board vice president of federal affairs, Anne Steckel, also welcomed the news.

“Though last year’s market actually outpaced the 2018 requirement, we are pleased to see that the rule is effective and that the industry can move forward under the program as outlined,” Steckel said.

In early March, the renewable fuels industry was sent into turmoil after the RFA said a Trump official told them the president would sign an executive order shifting the burden for blending ethanol and biodiesel into the nation’s fuel supply from oil refiners to fuel retailers.

There was discussion of the possibility of a backroom deal between a trade group and Trump advisor Carl Icahn, a billionaire investor in CVR Refining, a Texas energy company.

Under the RFS, oil refiners are required to blend biofuels and are responsible for complying with the law, known as the point of obligation. The possible modification would move the point of obligation to retailers and reduce incentive for refiners to blend biofuel.

US Senator Chuck Grassley, a Republican from Iowa, and Senator Amy Klobuchar, a Democrat from Minnesota, led 23 senators in writing a bipartisan letter last week advising President Trump to maintain the point of obligation under the RFS and reject changes that alter the current system.

The senators outlined the detrimental effects of changing the point of obligation from refiners to blenders, marketers or retailers, as one prominent refiner is suggesting. Shifting the point of obligation would give refiners little incentive to produce necessary fuel blends, making it difficult for downstream entities to comply, the senators wrote.

Changing the point of obligation also would “result in a massive, costly, time-consuming shift in compliance” because small businesses, especially in rural areas, lack the resources needed to comply.  The program administration would become complicated and “unnecessarily result in significant uncertainty and market disruptions,” the senators wrote.