EPA Delay Opens Window for RFS Reform

Renewable Fuel Standard RFS

The Environmental Protection Agency’s lack of punctuality might have given the oil and gas industry and environmental advocates their best shot so far at undoing the Renewable Fuel Standard. But political realities of a Republican Senate means it could still be an uphill battle next year.

Despite being more than a year late, EPA won’t say when it will issue final RFS requirements.

That was clear during Acting Assistant Administrator for Air and Radiation Janet McCabe’s testimony before visibly frustrated members of the House Oversight Committee at a hearing Wednesday.

Ranking Member Jackie Speier (D–Calif.) warned McCabe that without a definitive timeline, RFS repeal or reform bills (more than a dozen have already been introduced) could gain momentum.

The House Energy and Commerce Committee has laid the groundwork for reform, publishing a series of white papers last year that analyze the RFS in light of the changing energy landscape.

Those in the House who don’t like the RFS will have a strong ally in Sen. Lisa Murkowski (R-Ak.), who is expected to chair the Senate’s Energy Committee in the 114th Congress. She’s been a vocal critic of the RFS, and has previously introduced reform initiatives that will likely get more attention next year.

But not everything is lining up for those who want to undo the RFS. The 2016 election dynamic, particularly in the Senate, throws a wrench into the process.

“Twenty-four of the 34 Senators who are up for re-election in 2016 are Republicans. Those Republicans represent 69 percent of U.S. corn production and 67 percent of ethanol production capacity,” Tim Cheung, an energy analyst for ClearView Energy, said in an interview.

That group includes powerful Republicans like Rob Portman (R-Ohio) and John Thune (R-S.D). Future Majority Leader Mitch McConnell might be hesitant to entertain the RFS, in order to protect those candidates from having to go on the record about the issue, according to Cheung.

Democrats don’t have a unified front on the RFS either. While the likely ranking member of the Senate Energy Committee, Maria Cantwell (D–Wash.) is a big advocate of the RFS, several of her colleagues like Senators Ben Cardin (D–Md.) and Chris Coons (D–Del.) have pushed for reform.

Sofie Miller, senior policy analyst at George Washington University’s Regulatory Studies Center, thinks that economics strongly support a repeal of the RFS. “Getting rid of the RFS would finally solve a policy that has long benefitted corn and soy farmers at the expense of everyday American consumers.” But she added that politics might favor biofuels interest groups, which are giving everything they’ve got to keep the RFS alive.

Those groups wield a lot of political influence that isn’t limited to just Republicans or Democrats, particularly in the Corn Belt states like Iowa and Indiana.

A report by Taxpayers for Common Sense reveals that total lobbying expenditures by the corn ethanol industry from 2007-2013 was over $158 million. The report used figures from the Center for Responsive Politics.

Originally enacted in 2005, the RFS was intended to improve energy security and reduce carbon emissions by requiring more biofuels in gasoline.

But it was also created during an entirely different U.S. energy economy, when consumer demand for oil was much higher, and before the domestic shale boom. The radically different energy environment has shifted the debate about the RFS, and might have also affected the EPA’s ability to manage it.

The EPA has repeatedly missed its deadlines on issuing new standards, which are due by Nov. 30 of each year. The 2014 announcement is now more than a year late, the biggest delay in the program’s history.

“Problems with the RFS are structural and trace back to decisions and assumptions that Congress made when it expanded the program in 2007,” Jonathan Lewis, senior counsel for climate policy at the Clean Air Task Force, said by email. “So in that sense, legislative reform makes sense, since EPA can’t fix the mistakes that Congress hardwired into the statute.

An uncommon alliance of environmental, oil and gas, and food groups are using the missed deadline to make the case that the RFS is a broken policy and needs fixing by Congress.

“Failure to issue those requirements demonstrates that the underlying concept of forcing the energy economy to use minimum amounts of certain motor fuels is fundamentally flawed,” Thomas Elam, president of FarmEconLLC said in a statement.

“EPA’s announcement underscores the need for comprehensive legislative reform of the RFS,” Bill Day, a spokesman for Valero, also argued in a statement. “The bottom line is that EPA has not closed the books on 2013, has no final 2014 RFS, and has no date for a final 2015 RFS,” he said.

But corn, ethanol and other biofuel groups retort that the delay reflects an acknowledgement by EPA that it went too far in its proposal, which cut RFS volumes by 16 percent from the congressional mandate of 18.15 gallons to 15.21 billion gallons.

McCabe said that “watershed issues” like reaching limits on the amount of ethanol that cars can use – a concept known as the “blend wall” – and controversy over the agency’s right to reduce the mandate from statutory levels were largely responsible for the delay.

Opponents argue that even if the blend wall has been reached, that doesn’t give EPA the right to pull back from targets set forth in the Energy Independence and Security Act of 2007.

“EPA claims in its notice this morning that ‘controversy’ surrounding the [ethanol wall] is partly responsible for the delay.  To me, that seems to mean political considerations,” Scott Segal, an energy lobbyist with the Washington, D.C. firm Bracewell & Giuliani said by email. “But I believe that this latest failure might point the way to actual, sensible reforms in the renewable fuel standard.”

Cheung explained that pressure from stakeholders mounted after the proposed 2014 RFS requirements were leaked in October of last year. He sees the delay as a sign there’s going to be some changes.

RFS supporters and opponents agree that uncertainty benefits no one. “This is very big issue that we’ve got to get some certainty on,” Chairman James Lankford told McCabe during the hearing. Lankford is moving to the Senate next year, and vowed that lawmakers won’t let the RFS go.

While McCabe wouldn’t give a date, she did say that final rules would be issued for 2014, 2015 and 2016 in one package sometime next year. Based on the EPA’s regulatory tracking website, however, the overdue announcement is expected sometime in March 2015.

Morning Consult