Shimkus, Flores release discussion draft to reform biofuel laws

By Ron Kotrba | November 21, 2018

Reps. John Shimkus, R-Illinois, and Bill Flores, R-Texas, released a discussion draft of their “21st Century Transportation Fuels Act” on Nov. 21.

The legislation would reform the Renewable Fuel Standard through 2022 and provide a pathway to regulations of federal renewable fuels requirements through 2032.

“I’ve been engaged in the biofuel debate my entire career in Congress,” Shimkus said. “In this Congress—through three stakeholder roundtables, five subcommittee hearings, and countless other meetings and conversations—my goal was to look beyond just the RFS to comprehensively reshape federal transportation fuel policies in a way that could provide more value to consumers and more certainty to industry stakeholders.”

The RFS legislates volumes through 2022 and does not “expire” come 2023, as some have suggested. Rather, the legislation, passed in 2007, puts the responsibility of setting annual volumes of ethanol and advanced biofuels such as cellulosic ethanol and biomass-based diesel beyond 2022 on the U.S. EPA without any future set points established by Congress.

“That’s been the norm for biodiesel since 2013,” said Paul Winters, the director of public affairs and federal communications at the National Biodiesel Board. “We’ve been following that process for years.”

Unlike the conventional, cellulosic and overall advanced biofuel categories in RFS, which were provided annual volumes in the statute, the biomass-based diesel category included rising biodiesel levels through 2012, when it hit 1 billion gallons. Thereafter, the annual volumes have been at the discretion of EPA, setting up annual information battles between NBB and Big Oil to influence the agency’s final volumes. Also unlike conventional, advanced and cellulosic biofuels, the biomass-based diesel renewable volume obligation (RVO) is set 13 months in advance of the year in which the RVO goes into effect, whereas the other biofuel RVOs are set a month before the volumes go into effect.

The Shimkus-Flores discussion draft suggests significant changes to the timing of, and methodology behind, when and how the biomass-based diesel RVOs are set.

From 2020-’22, the legislation, as proposed in the draft, would require the EPA to set biomass-based diesel RVOs no later than Feb. 28 of the calendar year in which the rule is to go into effect. From 2023-’32, the RVOs would be set no later than March 1. Whereas now the biomass-based diesel standard is set 13 months before the calendar year in which the regulation would go into effect, under this legislation it would be set two months after the start of the calendar year the RVO would go into effect.

The draft legislation would also set calendar year 2020-’32 RVOs for biomass-based diesel based directly on the prior year’s “actual production” according to EPA’s EMTS data. There is no language, however, that specifies “domestic” production, and given that RFS-registered foreign volumes of biomass-based diesel can generate RINs and take part in the program, it remains unclear what EMTS data the “actual production” clause in the legislation will reference.

To some, the fact that this legislation appears to provide at least marginal security for biomass-based diesel in federal policy through 2032 while delineating a method to EPA for setting future year volumes could be considered certainty. This may be skewed as reassuring considering the uncertainty surrounding the fate of the program in recent years, coupled with the looming RFS reset that EPA will soon undertake. Furthermore, given that the biodiesel industry has steadily grown production over time and consistently outperformed its RVOs year after year, this could be perceived as an opportunity to solidify consistent annual growth volumes in future RVOs through 2032 since these would be set on the prior year’s production output. If history is any predictor, this would indicate RVO growth year over year.

“The biodiesel and renewable diesel industry’s rapid growth is a success story for the RFS,” said Kurt Kovarik, NBB’s vice president of federal affairs. “EPA recognizes that biomass-based diesel is the most widely used advanced biofuel and can readily achieve higher volumes, even though the agency continues to set the RFS levels below achievable levels.”

Furthermore, in a mid-year review clause of the Shimkus-Flores discussion draft, it states that the EPA can review any increases in production and by Sept. 1 the agency can revise, ostensibly upward, the given RVO for that year. Thus, it is conceivable some industry stakeholders may perceive this new methodology of using the previous year’s actual production, along with a mid-year review and opportunity to revise the RVO upward, as progress given the chaotic nature in which current annual biomass-based diesel volumes are set—some years the agency stalls volumes or even suggests cuts (fall of 2017), while in others it proposes growth.

“Set volumes down on paper would be preferable,” Winters told Biodiesel Magazine. “Besides, if we have a production disruption in any given year, this would impact the next year’s volumes. This proposal does not provide enough certainty in measurable growth year over year, which is something we wanted. But there is still an opportunity to engage in this, as it is still a discussion draft.”

Much of the draft discussion focuses on ethanol by capping conventional biofuel (i.e., ethanol) RVOs at 15 billion gallons from 2020-’22, and replacing this in 2023 with high-octane fuel requirements. The nation’s ethanol groups are obviously not happy with the draft discussion.

“While we welcome any improvements to octane standards nationwide, this bill would turn back the clock on our nation’s commitment to renewable biofuels,” said Emily Skor, CEO of Growth Energy. “It is only through coupling a stable RFS with improvements to octane standards that consumers can continue to reap the increased engine efficiency, environmental benefits, and cost savings that ethanol provides.”

Brook Coleman, executive director of the Advanced Biofuels Business Council, said, “Oil companies have been pitching so-called ‘reforms’ since the RFS was adopted, but even they acknowledge that Congress is not going to gut the market for homegrown biofuels. This is just another in a long line of dead-end proposals to phase out renewable fuels. The only mystery is why anyone would expect biofuel or farm supporters to be fooled by bait-and-switch octane standards that are no higher than today’s premium fuel. All the bill does is free oil companies to come up with new ways to avoid using biofuel, even if means higher fuel prices and more toxic, petroleum-based additives. This is a zero-growth proposal for the renewable fuels industry, and farmers know it.”

Winters said if this legislation does not get voted on in the 115th Congress by end of this year, it will have to be reintroduced to the 116th Congress next year.

With EPA’s final 2020 biomass-based diesel RVO and the 2019 conventional, advanced and cellulosic RVOs set to come out any day now, along with the pending, perhaps overlapping reset process and an official introduction of the Shimkus-Flores legislation this year or reintroduction next year—not to mention how the legislation will fare in session—much of any discussion at this point is speculation.

“We’ve pushed EPA to make the RFS program work better,” Winters said. “They are already planning to launch a reset of volumes for 2020-’22, coinciding with next year’s annual rule, so that’s an opportunity to provide more certainty for setting volumes for biomass-based diesel—and we would have preferred to see that in the Shimkus bill.” Winters said the annual RVOs set to come out by end of November are not subject to the reset process.

“We appreciate Congressmen Shimkus’ and Flores’ effort to improve the program,” Kovarik said. “However, the proposal does not provide enough certainty to support the continued growth of biomass-based diesel, especially beyond 2032. We will study the draft legislation carefully and continue to engage in the discussion started by the congressmen.”

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