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EPA’s reasoning in biofuels ruling seems questionable, economist says

RFSThe Environmental Pro­­tection Agency (EPA) appears to have latched on to a questionable reading of Congressional intent last month when it proposed reduced biofuel requirements in the Renewable Fuel Standard (RFS), according to a recent analysis by Jonathon Coppess, a University of Illinois agricultural economist. And then the agency doub­led down on it, he said.

“It is very difficult to square the (RFS) statute’s words with the EPA’s reading of them,” Cop­pess wrote in his June 11 analysis.

In essence, the economist said, Congress intended the RFS to “push” the oil refining and blending industries to dramatically improve consumers’ access to biofuels in a fairly short time. But when the petroleum industry repeatedly failed to accomplish those goals, the EPA rewarded it by easing back on the obligations, he said.

Long delays
For a long time, it seemed that EPA was gun shy and really didn’t want to put out the biofuel requirements. The agency was bound to get pummeled from critics on both sides.

But after months of delays, the EPA in May proposed renewable fuel requirements for 2014, 2015 and 2016, as it was required to by Congress. The 2014 biofuel re­­quirement, set at just under 16 billion gallon, reflected the actual usage of biofuels during the year that was already over.

But the agency set the requirements for 2015 and 2016 well below the levels set when Congress updated the RFS back in 2007. In 2015, the proposed requirement is 16.3 billion gallons, a long shot from the 20.5 billion required in the RFS. For 2016, the EPA also missed the mark, proposing a 17.4 billion gallon requirement, instead of the 22.3 billion gallons set in the RFS.

 The EPA’s reasoning is very curious, Coppess writes.

Under the RFS, Coppess notes that the EPA is allowed to reduce the requirements only if it would cause severe economic or environmental hardship, or if there is an inadequate supply of biofuels. The agency, he said, has locked onto the fact that there is inadequate supply to justify its action, but it takes some major gyrations for the agency to get there.

The EPA admits that there is actually no shortage of ethanol to get to consumers. Ethanol plants in Iowa and other states certainly have the capacity to ramp up production to meet the requirements set in the RFS.

Instead, the agency says it re­­duced the biofuel requirements because there is an inadequate supply system to get the volumes set in the RFS to consumers.
But, as Coppess points out, that’s not what Congress had in mind when it drafted and passed the RFS. Lawmakers really designed the RFS to compel the refiners and blenders to find ways to increase ethanol availability to consumers. The mandate is on the petroleum industry, not on the consumer, he writes.

Turning RFS upside down
“The EPA fails to explain how a statute designed to put a mandate on refineries and blenders to compel them to make dramatic change can also include a waiver provision to relieve them of the obligation if they do not get the product to consumers,” Coppess writes. “Under this proposed rule, the EPA appears to be turning the statute upside down.”

Lawmakers are also starting to question the EPA on its unusual reading of the RFS. At a hearing on the RFS in the Senate Homeland Security and Governmental Af­­fairs Committee, Iowa Sen. Joni Ernst noted the EPA has now decided to use “available refueling infrastructure” as a condition to waive the standard even though Congress expressly rejected that when they set the law.

“Can you explain why EPA is blatantly overlooking the law?” Ernst asked the EPA’s Janet McCabe.

McCabe answered that, under the agency’s interpretation, Con­gress intended for these fuels not only to be produced, but to be used.

“So when you have a situation where the fuels cannot in fact be delivered to consumers on the time frame that was set out in the statute, and Congress provided this waiver authority, we believe it’s a reasonable interpretation for us to reduce the volumes to a level that still will comply with Congress’ intent to drive the fuels,” she said.

However, as Coppess notes, it still sounds like the agency is rewarding the petroleum industry for missing its requirements under the RFS.