US EPA officially maintains current RFS point of obligation

By Erin Voegele | November 28, 2017

The U.S. EPA has officially announced its denial of several petitions requesting the agency initiate rulemaking to change the point of obligation under the Renewable Fuel Standard. EPA Administrator Scott Pruitt previously indicated the agency would deny the petitions in an Oct. 19 letter he wrote to a group of senators.

In 2016, several groups petitioned the EPA, asking that the agency shift the point of obligation from refiners and importers. A notice released by the EPA notes that the petitioners differed somewhat in their suggestions for alternatives. Some requested the agency shift the point of obligation to parties that blend renewable fuel into transportation fuel. Others suggested it be shifted to parties that hold title to gasoline and diesel immediately prior to sales at the terminal, or to blenders and distributors. All petitioners argued that shifting the point of obligation would align compliance responsibilities with the parties best positioned to make decisions on how much renewable fuel is blended into the U.S. fuel supply. The EPA noted that some petitioners also claimed that changing the point of obligation would result in an increase in the production, distribution and use of renewable fuels in the U.S., and would reduce fuel costs for consumers.

The EPA published a proposed denial of requests to initiate a rulemaking process to change the point of obligation on Nov. 10, 2016. A comment period was opened, and later extended through Feb. 22. According to the EPA, more than 18,000 comments were filed on the proposal.

Explaining the decision to deny the requests, the EPA said its “conclusion reflects consideration of the alleged benefits that petitioners and some commenters have suggested would ensue from a change in the point of obligation, as well as negative impacts that the EPA believes would result from such a change.”

“In our judgement, it does not appear that the record before the agency indicates that a change in the point of obligation would result in net overall benefits to the program,” the EPA wrote. “In addition, however, we believe that changing the point of obligation at this time would be very disruptive to the program, and likely the fuels marketplace as well, undermining long settled expectations and the program stability and certainty that are critical to both short- and long-term success of the program. Thus, even if there were some marginal net benefits to changing the point of obligation, we believe that the disruptive effects of a change at this time would still warrant denial.”

The EPA also said that it does not believe petitioners have demonstrated that changing the point of obligation would likely result in increased use of renewable fuels. In addition, the agency noted that changing the point of obligation would not be expected to address challenges associated with commercializing cellulosic biofuel technologies and the marketplace dynamics that inhibit the increase of fuels containing higher levels of ethanol, which are two of the primary issues that limited the rate of growth in the supply of renewable fuels today.

According to the agency, it believes that chancing the point of obligation would make the RFS program more complex, which could negatively impact its effectiveness. The agency also said it has not been persuaded that merchant refiners are disadvantaged under the current regulations in comparison to integrated refiners in terms of costs of compliance, nor that other stakeholders, such as unobligated blenders, are receiving windfall profits. Finally, the EPA noted that it does not interpret the Clean Air Act as authorizing it to place the point of obligation on distributors position holders who are neither refiners nor blenders.

Additional information is available on the EPA’s website

 
 
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