US move to lower biofuels mandate to be tested in court

20 January 2014 22:20 Source:ICIS News

WASHINGTON (ICIS)--The federal government’s plan to reduce the mandated amount of biofuels used in the US this year might well be overturned by a court ruling, an agriculture sector attorney said in an analysis circulated on Monday.

Jonathan Coppess, an attorney and professor of agricultural economics at the University of Illinois, argues that the Environmental Protection Agency (EPA) may have acted beyond its statutory authority in lowering its biofuels consumption mandate for 2014.

In mid-November last year, the EPA proposed to lower its annual mandate for biofuels consumption for the first time, saying that refiners should blend 15.2bn gal (57.5 litres) of ethanol and other renewable fuels into the nation’s gasoline supply in 2014 instead of the scheduled 18bn gal.

The EPA said that 2014’s renewable fuels standard (RFS) requirement was being lowered because “advances in vehicle fuel economy and other economic factors have pushed gasoline consumption far lower than what was expected when Congress passed the RFS in 2007”.

The agency said that under demand circumstances, if it were to mandate higher levels of ethanol blending in gasolines, “continuing growth in the use of ethanol will require greater use of higher ethanol blends such as E-15 and E-85”.

Currently, most US gasolines contain 10% ethanol, known as E-10. As gasoline consumption has declined, the ability to continue to increase ethanol consumption has encountered what refiners call the “blend wall” - the point at which additional volumes of biofuel cannot be used without raising the blend ratio beyond 10%.

The EPA’s move was welcomed by US refiners, especially the agency’s decision to lower the 2014 mandate for use of cellulosic ethanol from the original 1.75bn gal to only 17m gal, just 1% of that initial target.

Refiners had argued that they were being obliged to use a biofuel that did not exist in commercial quantities - and being penalised for failure to meet the EPA quotas. 

The refiners won a federal court case on the same issue regarding the 2012 EPA cellulosic ethanol mandate. That ruling is thought to have influenced the EPA's decision to reduce the 2014 cellulosic mandate so drastically.

The EPA’s decision, however, was vehemently opposed by US ethanol producers and their trade groups, with the Renewable Fuels Association (RFA) among them.

The RFA argued that the agency “does not have the statutory authority to lower the total requirement” of biofuels consumption unless the mandate would cause “severe economic harm” in the nation’s fuels market.

In his analysis, Coppess contends that the RFA may be right.

He argues that the 2007 RFS statute’s provision allowing EPA to waive the biofuels mandate in the face of “severe economic harm” does not cover a situation in which the problem is just one of production and distribution, meaning the blend wall.

In the 2007 RFA, he says, Congress may have intended for the biofuels mandate “to motivate or force the industry to find solutions for the myriad challenges facing renewable fuels, including the blend wall”.

“What we do know from the law is the clear intention that the RFS drive production of increasing amounts of renewable fuels to replace fuels derived from oil,” Coppess says.

“By using the blend wall in this manner,” he said, referring to EPA’s justification for waiving or reducing the 2014 mandate levels, “EPA may well be short-circuiting those goals and intentions.”

“It is therefore difficult to see how EPA is doing anything other than legislating a policy in place of - if not contrary to - Congress,” Coppess says.

Whether EPA’s reduction of the 2014 RFS consumption mandate “makes sense does not matter”, he added.

“The central issue is whether it is constitutionally acceptable for EPA to make this binding policy decision as it carries out the statute,” he said.

The EPA’s proposal to lower the 2014 RFS mandate level is open to a public comment period until 28 January, and a final regulation on the matter is not likely until sometime in the second quarter or later.

When the rule is published in final form and takes legal effect, lawsuits from the renewable fuels industry are likely.

By Joe Kamalick