API files suit against US EPA for 2013 biodiesel usage increase

By Ron Kotrba | November 27, 2012

The American Petroleum Institute filed a lawsuit in the U.S. Court of Appeals for the District of Columbia Nov. 26 against the U.S. EPA for its decision to mandate the use of 1.28 billion gallons of biodiesel in 2013, a 28 percent increase from the 2012 requirement of 1 billion gallons, the statutory minimum. The institute also filed a petition with EPA to reconsider the biodiesel increase, as did the American Fuel & Petrochemical Manufacturers last week. 

“EPA’s overzealous 2013 biodiesel mandate is unworkable, could raise the costs of making diesel fuel, and should be reduced,” said Bob Greco, API group downstream director. In EPA’s announcement about the 2013 increase, which came out in September, the agency said, “Producers of biodiesel, the largest contributor to biomass-based diesel, have significantly greater production capacity than will be required by to­day’s final rule. Moreover, many facilities that are producing volume currently are underutilizing their capacity, and can ramp up production relatively quickly. Finally, the biodiesel industry is already producing at a rate consistent with an annual volume of about 1.3 billion gallons which is enough to meet our established standards.”  

“In its final rule, EPA admitted the costs of increasing the biodiesel volume requirement for 2013 outweighed the benefits by as much as $425 million,” Greco said. In its final rule, however, EPA stated, “We estimate the cost of producing this increment in biomass-based diesel would range from $253 to $381 million in 2013. Adding the estimate of 2013 costs to the total 2013 fuel pool would suggest a diesel fuel cost increase of less than 1 cent per gallon.”

In addition to $41 million in energy security benefits, EPA listed other benefits from the boosted mandate, including “GHG emissions reduction benefits and both direct and indirect employment benefits in rural areas due to increased biodiesel production. Impacts on water quality, water use, wetlands, ecosystems and wildlife habitats are expected to be directionally negative …”  

Greco continued, however, saying, “Furthermore, fraudulent biofuel credits that have plagued the system since last year and have yet to be resolved could inhibit industry’s ability to meet EPA’s higher biodiesel mandate.”

EPA has uncovered more than 140 million invalid renewable fuel credits, known as RINs, generated by three biodiesel companies, representing between 5 and 12 percent of the biodiesel market.

“The fraudulent RIN problem is having, and will continue to have, significant impacts on the biodiesel marketplace that make it more difficult for companies to comply with EPA’s mandate,” Greco said. 

On a Nov. 27 media call with API, Biodiesel Magazine asked Greco why API has not acknowledged the recent progress made in addressing the RIN issue through EPA’s early release of draft Quality Assurance Plan guidelines for RIN verification programs, as the agency nears issuance of a proposed rule to restructure the RIN program.

“We have not overlooked that,” Greco said. “In fact, we have pushed EPA to move faster on this, and as you mentioned, EPA is now close to releasing a proposed rule, hopefully we will see a final rule by middle of next year. But that doesn’t get to the underlying problem of accepting fraudulent RINs, the need for some certainty of how those will be treated by EPA, and also how it’s going to provide assurance until the final rule comes out. We will not have one by Jan. 1. We are working with EPA to get some assurance on that, but we haven’t gotten that yet.”

The oil refiners and importers, referred to as “obligated parties” under the RFS, have been pushing for an “affirmative defense” with EPA, meaning they will not be punished with fines, penalties and notices of violation, as they have this year under EPA’s “buyer beware” stance for the good-faith purchase of what might later turn out to be invalid RINs.

Speaking to EPA’s increase of the biodiesel mandate to 1.28 billion gallons next year, a decision EPA considered for more than a year, Greco said, “It was completely discretionary. EPA did not need to increase the mandate beyond the 1 billion gallons in the statute … EPA should not have gone beyond the statutory minimum of 1 billion gallons in 2013.”  

“It’s disappointing that the petroleum industry continues to fight advancements toward clean, renewable fuels—even as it embraces alternative energy in its marketing,” said Anne Steckel, vice president of federal affairs for the National Biodiesel Board. “The EPA clearly determined, in an independent analysis, that increased biodiesel production is good for the country. Last year alone, our industry supported more than 40,000 jobs, and next year the RFS is projected to save U.S. consumers $120.25 million at the pump. Going forward it will help consumers even more by expanding fuel options so that we’re not so dependent on imported oil and so vulnerable to this endless cycle of price spikes.” 

Greco also told reporters on the call that the RFS in its entirety should be eliminated because “it is not working well” and because it will require higher blends of ethanol in gasoline “that could harm vehicles,” he said. “We believe the renewable fuel standard is unworkable and should be repealed. Despite repeated and ongoing efforts to address the program’s shortcomings—through regulatory petitions, legal actions and suggested solutions to implementation concerns—little has been done to make the program workable, and sometimes actions have been taken that make matters worse. There is a fundamental flaw in the enabling statute so the only way to fix it is to scrap the law and start over if Congress believes such a program is necessary.”

Greco said the RFS program was enacted at a time when the U.S. energy landscape was far different than what it is today. “With the current boom in domestic oil and natural gas development, we are steadily reducing our foreign energy dependence, well beyond what the RFS program has achieved,” Greco said. “The notion that we need a renewable fuel standard to promote energy independence and security, as the 2007 statute is named, has been turned on its head by the tremendous growth in domestic oil and natural gas.”  

Steckel said, “We would encourage the oil industry to drop these lawsuits and work constructively toward improving our energy security with a mix of traditional and renewable fuels.”

Last week, the American Fuel and Petrochemical Manufacturers petitioned EPA to scale back its 2013 biodiesel mandate, to which Steckel responded, “The EPA was well aware of all of the issues AFPM has raised as it made its independent analysis and, ultimately, the agency made the right decision.”

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