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Home > Issues > Fuels > Renewable Fuels Standard (RFS)/Biofuels Mandates |
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Renewable Fuels Standard (RFS)/Biofuels MandatesWhat's New
EPA set the RFS for 2008 at 4.66% (72 FR 66171; 11/27/07) based on the RFS requirement of 5.4 billion gallons in 2008 in the Energy Policy Act of 2005. This was increased by EPA to reflect the new RFS requirement of 9.0 billion gallons for 2008 in the new energy bill. The Agency announced that the revised RFS for 2008 is 7.76% (73 FR 8665; 2/14/08). Charles T. Drevna, NPRA's President, testified before the Subcommittee on Energy and Air Quality of the House Energy and Commerce Committee on May 6, 2008 sharing concerns with the state of the national biofuels mandate and calling attention to the numerous negative impacts associated with it. He asked Congress to repeal a well-intentioned but misguided mandate. Mr. Drevna repeated this recommendation before the Senate Energy and Natural Resources Committee on May 13, 2008. Charles T. Drevna, NPRA's President, testified before the Senate Energy and Natural Resources Committee on February 7, 2008 on implementation of the RFS provisions in the new energy bill. The use of biofuels creates challenges, including lower energy content compared to gasoline or diesel, food price and supply effects, and problematic emissions characteristics. In a letter dated 6/22/07, the Governor of Hawaii requested EPA's approval to opt-in to the RFS program. EPA approved this petition in a letter dated 7/30/07; the RFS program was effective in HI beginning on 1/1/08. NPRA Position NPRA’s members are dedicated to working cooperatively with government at all levels to ensure an adequate supply of transportation fuels. NPRA advocates a RFS program that is understandable, allows unambiguous enforcement, promotes adequate flexibility for refiners and gasoline importers, and is developed with full realization of its impact on energy supplies. NPRA also believes that the regulations should not be structured in a manner that would alter the current transportation fuels supply, distribution, or infrastructure system. Ethanol is currently used in more than half of U.S. gasoline. Biofuels will continue to be a strong and growing component of the nation’s transportation fuel mix. NPRA advocates that biofuels market penetration should be driven by the economics of the marketplace. The current and expanding patchwork of state biofuels mandates will have negative consequences for the motor fuel supply and will interfere with the smooth implementation of the federal Renewable Fuel Standard. The use of biofuels creates challenges, including lower energy content (compared to gasoline or diesel), food price and supply effects, and problematic emissions characteristics. The most notable economic challenge to the development of a viable, stand-alone biofuels transportation industry is the seemingly constant push to an ever-increasing mandate of these fuels. So long as sound, open and free marketplace dynamics and discipline are ignored through imposition of artificial and inefficient mandates, distortion of basic economic realities will continue. The goal of the biofuels industry, including both corn-based and/or cellulosic ethanol, should be economic parity, or better, with that of refined petroleum products. This situation will never be realized so long as the imposition of mandates over-rides basic economic fundamentals. Energy policy based on mandates is no recipe for success. Congress should suspend the tariff on imported ethanol. NPRA supports the EPA preemption review process and the expansion of the scope of this analysis in section 1541 of the 2005 energy bill. Clean Air Act section 211(c)(4)(C) was amended by the Energy Policy Act of 2005 to make it the joint responsibility of EPA and DOE to review motor fuel control choices by states and require that both agencies consider the regional supply implications of such requests. Before granting a waiver of federal preemption, the Administrator of EPA is required, after consultation with the Secretary of Energy and after notice and comment, to find that the fuel control choice will not cause fuel supply or distribution interruptions or have a significant adverse impact on fuel producibility in the affected area or contiguous areas. NPRA strongly supports this analysis of supply-side impacts. The federal preemption provisions in the Clean Air Act preserve a rational motor fuel supply by precluding states from unilateral adoption of unique specifications unless EPA grants a waiver. New state biofuel mandates are not currently subject to the requirement that they be examined by EPA for their impact on fuel production and the fuel distribution system. NPRA believes that they should be. If there is no mechanism to assess the impact of these state mandates on fuel supply and distribution, NPRA believes that the Clean Air Act should be amended by Congress explicitly to preempt these programs. Fact Sheets To view "Dispatch from Bali: Biofuels At the Bottom of List of Low-Carbon Technologies," click here Background Federal legislation and hearings The Energy Policy Act of 2005 (Public Law 109-58) includes a renewable content requirement for motor vehicle fuels, the Renewable Fuel Standard (RFS) provision (see section 1501). The RFS is administered by EPA and requires the increased use of ethanol or biodiesel in motor fuels. In a letter dated Feb. 3, 2006, from Energy Secretary Bodman to EPA Administrator Johnson, DOE concluded that the RFS will not have adverse impacts in 2006. This analysis was required by section 1501 of the Energy Policy Act of 2005. On February 1, 2007, Charles T. Drevna, Executive Vice President of NPRA, participated in the Senate Energy and Natural Resources Committee’s Transportation Biofuels Conference. While there is universal agreement that biofuels will continue to be a strong, growing part of the nation’s transportation fuel mix, NPRA has opposed and continues to oppose the mandated use of biofuels and supports market penetration that is driven by marketplace economics. As relatively new biofuels enter the market, increased transportation and logistical issues are likely to arise. Ethanol is not distributed through pipelines because of problems with water contamination and corrosion. Any significant increase in ethanol production will result in more stress on the distribution system. Congress should preempt state biofuels mandates. Biofuels should be developed with the full realization of their impact on air quality. Congress should avoid mandating increased volumes of biofuels or a hastened implementation schedule for biofuels beyond that of the existing federal RFS. On May 8, 2007, the Subcommittee on Energy and Air Quality of the House Energy and Commerce Committee held a hearing on alternative fuels: current status, proposals for new standards, and related infrastructure issues. NPRA’s Executive Vice President Charlie Drevna testified. The Administration’s proposal to increase the nation’s consumption of renewable fuels in the transportation sector would not appreciably reduce the nation’s dependence on foreign oil and could have an effect on refining capacity expansion plans. A fundamental policy question regarding the efficacy of exporting domestic supplies of transportation fuels under the guise of reducing domestic consumption of that same fuel under a continuing supply/demand imbalance must be addressed. Imported oil may very well have geo-political security concerns of its own, but transferring dependency on a commodity, such as corn production, that can be severely impacted by a number of uncontrollable events (drought, storms, heat waves, etc.) creates a new dimension of uncertainty to energy supply reliability. There are also several infrastructure challenges to meet the Administration’s target. On June 7, 2007, the Subcommittee on Energy and Air Quality of the House Committee on Energy and Commerce held a hearing on Discussion Draft legislation concerning alternative fuels, infrastructure, and vehicles. NPRA’s Executive Vice President Charlie Drevna testified. NPRA opposes alternative fuels mandates. There is a fundamental tension between increasing the alternative fuels mandate and the decreasing Low Carbon Fuel Standard. State and local biofuels mandates should be preempted. Click here to view NPRA’s press release. NPRA Executive Vice President Charlie Drevna testified at a hearing on renewable fuels infrastructure on July 31, 2007 before the Subcommittee on Energy of the Senate Energy and Natural Resources Committee. He reminded the Subcommittee that NPRA does not support the mandated use of renewable and alternative transportation fuels. The strain biofuels place on the nation's rail infrastructure and tank-car capacity and on refinery capacity expansion projects are of particular concern. State biofuels mandates should be preempted. Federal regulation and Executive Orders President Bush announced in his State of the Union speech on January 23, 2007 a plan to replace the RFS with an Alternative Fuel Standard of 35 billion gallons in 2017. On May 14, 2007, the President directed EPA to begin to develop regulations reducing greenhouse gas emissions from motor vehicles, implementing his "Twenty in Ten" (reduce gasoline consumption by 20% in ten years) program and completing this regulatory process by the end of 2008. EPA published a Direct Final Rule (70 FR 77325; 12/30/05) with a limited set of federal RFS standards for 2006 that included collective compliance, not individual refinery compliance. This DFR was effective on February 28, 2006. The 2005 energy bill requires that the RFS regulations be promulgated by August 2006; the Agency was not able to promulgate comprehensive RFS regulations by this date. On April 10, 2007, EPA released comprehensive RFS standards. They were promulgated on May 1, 2007 (72 FR 23900). The regulatory program began on September 1, 2007. The Renewable Fuel Standard for 2007 was 4.02%. EPA participated in a RFS workshop organized by NPRA and released the first RFS question and answer document on 5/10/07. The Agency released the second Q&A document on 8/29/07 and the third on 4/16/08. Click here for information from EPA on the RFS regulations. Click here to view NPRA's summary of the RFS rules promulgated in 2007. State activities Signed by the Governor of Oregon on 7/3/07, HB 2210 requires 10 vol% ethanol in gasoline and 2% biodiesel when local capacity or production levels are met. The ethanol mandate will be phased in in 2008. Signed by the Governor of New Mexico in April 2007 (Chapter 208), SB 489 requires 5% biodiesel after 7/1/10 for state agencies and after 7/1/12 for all diesel motor vehicles. In 2006, the Missouri General Assembly passed an ethanol mandate and the legislatures in Louisiana and Washington passed ethanol and biodiesel mandates. In 2006, the Portland (Oregon) City Council approved a citywide Renewable Fuels Standard requiring diesel with 5% biodiesel and gasoline with 10% ethanol that was effective later in 2007. Colorado Governor Bill Owens vetoed an ethanol mandate on May 26, 2006, because he viewed it as another intrusion on the free market and unnecessary given the federal Renewable Fuel Standard and the Denver-area winter oxygenated gasoline program. Minnesota and Portland, Oregon currently require ethanol in gasoline and biodiesel in highway diesel fuel. Hawaii and Missouri currently require ethanol in gasoline. States that require ethanol in gasoline and/or biodiesel in highway diesel fuel with effective dates in the future include Louisiana, Montana, New Mexico, Oregon and Washington. California is developing a Low Carbon Fuel Standard for transportation fuels with a goal to reduce the carbon intensity by at least 10% by 2020. It will be performance-based with averaging, banking and trading; market-based and fuel-neutral; and must reduce greenhouse gas emissions on a lifecycle basis. CARB conducted its first workshop on 9/13/07 and CARB staff projected a LCFS rule submitted to the Board by the end of 2008 or early 2009. In addition, there are a few state winter oxygenated gasoline programs for individual cities. Click here for an EPA summary. More information
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