By Timothy J. Rudnicki, Esq

As we approach the end of the 2017 RVP season for E15, we’re getting some suggestions from various quarters that RVP relief may be at hand.  Well yes, September 16 is almost here.  If, however, the suggestion is that the EPA and/or President Trump is prepared to make some authentic regulatory change, then let’s see the amendment or executive order. 

Quite frankly, I really wonder how the EPA could square a change with the RVP standard after it released the proposed RVO numbers just a few weeks ago.  The connection between the RVP and proposed RVO rule rests not with an explicit reference to RVP but rather the Agency’s tortured reasoning and clinging to the blendwall fiction so as to rationalize its perverted analysis of the market barriers to higher levels of biofuel use.

Here is what the EPA states in the Federal Register at 34231:

We continue to believe that the constraints associated with the E10 blendwall do not represent a firm barrier that cannot be crossed. Rather, the E10 blendwall marks the transition from relatively straightforward and easily achievable increases in ethanol consumption as E10 to those increases in ethanol consumption as E15 and E85 that are more challenging to achieve. However, we also recognize that the market is not unlimited in its ability to respond to the standards we set. This is true both for expanded use of ethanol and for non-ethanol renewable fuels. The fuels marketplace in the United States is large, diverse, and complex, made up of many different players with different, and often competing, interests. Substantial growth in the renewable fuel volumes beyond current levels will require action by many different parts of the fuel market, and a constraint in any one part of the market can act to limit the growth in renewable fuel supply.

Well, for sake of argument, let’s accept this faulty or incomplete premise for why E15 has yet to be the new regular fuel across Minnesota. The EPA tells us the fuels marketplace is complex, there are numerous actors with competing interests and that a barrier in one part of the market (e.g., the petroleum industry which has failed to make its own investment in infrastructure to make E15 available to consumers) can limit the growth in, for instance, E15. While the EPA analysis may have accurately identified some elements which are or could be constraints to greater use of biofuels, the EPA fails to state the most obvious reason for the 25 percent market shortfall in E15 sales at this point in time: the Reid Vapor Pressure (RVP) Standard.

In June, the first month of the RVP season, E15 sales in Minnesota fell 58 percent. Thanks to the outstanding field work being done by MBA’s fuel retail/wholesale supply chain marketing specialist, we have learned that some stations have even lost from 76 percent to 97 percent of their E15 sales. On our social media platforms, station managers have complained how their customers are confused by the RVP rule. And, based on our observations over the last few years, following the RVP season, it can take as long as 45 to 60 days for retailers to reach the same volume of E15 sales they had prior to the RVP season.

So, if the EPA really wants to know about a market constraint, look no further than the RVP. And unlike the other ambiguous problems the EPA identified above, the EPA actually has the authority to fix the RVP mess.

Meanwhile, until we see an RVP announcement (or any interest in addressing it) from the EPA, we will continue to explore new avenues for removing the RVP market constraint before the 2018 RVP season is here. Toward that end, while MBA continues to monitor and engage with stakeholders, where possible, on either a regional or nationwide basis, MBA is also taking an alternate pathway toward a possible solution.

MBA is preparing to launch a new campaign that calls for direct engagement with state regulators in other parts of the United States as well as with key state agencies in Minnesota to craft a pilot project. While the elements of the project remain fluid, we are exploring ways to leverage E15 to either halt the rise in PM2.5 or use E15 in an attainment zone where zip code zone air quality monitoring can be used to obtain real world data about the effects of E15 use during the summer. Our theory of the case is either E15 will have no adverse effect or the ozone level will drop.

Meanwhile, we hit a major milestone this month on Combined Heat & Power (CHP) issues. CHP and similar energy efficiency technology can produce the heat and some of the electricity used by an ethanol plant to produce biofuels. The enhanced energy efficiency from CHP is good for the environment and biofuel producers because the already favorable carbon index for ethanol gets even better.

MBA is working to obtain some tax credits to help stimulate the use of CHP. This effort also dovetails with various economic and environmental policies in Minnesota. Toward this end, MBA succeeded in crossing the first major threshold: bringing together a coalition of disparate interests to begin educating lawmakers about the role of CHP in stimulating economic growth, improving environmental quality and helping businesses meet corporate sustainability goals. Although much more work remains to be done, this project is indeed moving in the proper direction.

As always, I look forward to hearing from you.

By Timothy J. Rudnicki, Esq

In the realm of biofuels, it seems the threats from and chaos in Washington D.C. crop up at least monthly, if not weekly. The many threats and ongoing chaos cut to the core of the biofuel industry which has made significant investments in people and production facilities so as to meet its obligations under the RFS. Unfortunately, just when some of us thought the most recent RFS disaster may have been averted, we now learn, just days after the EPA Administrator finally acknowledged the rule of law, the petroleum industry is back hammering away at the Trump Administration to further undermine the RFS.

The most recent disaster that may have been averted for a few days or weeks is the now possibly defunct proposal to “offshore” the RFS by allowing exports to satisfy the RVOs rather than to put biofuels into the market in the United States. Such an action, we noted in the column for last month, would have been an outright repudiation of the RFS and its underlying congressional intent.

Suffice to say, thanks to President Trump’s intervention following pressure from lawmakers that included Senators Amy Klobuchar, Al Franken, Chuck Grassley and Joni Ernst, the spine of the RFS has been preserved at least for now.

Rather than rehash the political maneuvering and process machinations that led to saving the RFS a few days ago, the balance of remarks here are offered as a type of road map for the EPA to consider and perhaps use. First and foremost the law, that is, the statutes, rules and court cases, must transcend short-sighted political knee-jerk reactions.

The enhanced version of the RFS (Energy Independence and Security Act) has been with us for 10 years. Republicans and Democrats and all the interested stakeholders worked their way through an open and transparent democratic process to produce what we have accepted as and indeed is the law of the land, the RFS. Nothing in the RFS is a surprise to biofuel producers nor the petroleum industry but for the manner in which the EPA has devised ways to pervert and distort the simple application of the black letter law.

And, over the last 10 years, it should be apparent to all of us that the majority of the petroleum industry in and of itself has failed to make substantive and significant investments in fueling infrastructure so as to enable more consumers to have access to cleaner, renewable biofuels. Rather than helping to fulfill the spirit and the letter of the law, the petroleum industry has continuously worked to undermine the RFS and the petroleum industry seems to now be even more invigorated and aggressive in its attacks on the RFS as ethanol consumption has cracked through their fictitious “blend wall”.

We must remember that congress - Republicans and Democrats - expected the RFS would put us, as a People and Nation, on a truly renewable energy pathway. A host of energy security, consumer, economic and environmental benefits already are derived from the RFS, but the magnitude of those benefits becomes greater as the RFS is more fully implemented.

Under past administrations, lawmakers and stakeholders have had to come to the defense of the RFS especially with respect to the RVO determinations. But the most recent attack on the RFS (i.e., using exports to meet the RVOs) is unprecedented.

Stakeholders will certainly advocate for their positions with respect to implementing or changing the law, but there are reasons we have congress and agencies in the United States. The EPA Administrator is neither a member of congress nor a judge and the rules of administrative procedure govern the work of the agency rather than powerful interests from the fossil fuels industry.

As such the Administrator is charged with enforcing, for example, the Clean Air Act, the Clean Water Act, Toxic Substances Control Act, Safe Drinking Water Act and many other laws including the RFS. The Administrator should work to restore the credibility of the agency and follow the rule of law.

The road map for the EPA does include some guideposts along the way. There are of course the laws including those embodied in the RFS and the broader Code of Federal Regulations. Another important guidepost is science. Unless the Agency embraces science, particularly with respect to the emission of greenhouse gases and their effect on climate, ecosystems and human societies, the laws such as the RFS may be seen as simply giving favor to biofuels versus petroleum. That interpretation, however, flies in the face of the purpose and intent of the RFS and the science underlying biofuels.

Biofuels are a renewable fuel with a significantly lower lifecycle GHG emission compared to finite fossil fuel petroleum. Whether used in spark ignition engine powered vehicles in amounts of 10 percent, 15 percent (2001 and newer vehicles) or higher blends (flex fuel vehicles), biofuels can immediately help to lower GHG emissions in the transportation sector. It is the RFS that creates the opening for biofuels to enter the petroleum dominated marketplace so as to reduce GHG emissions.

Along this road, particularly with respect to the RFS, are many opportunities to fulfill the intent and vision expressed by Congress: to make America more energy independent with renewable biofuels.

The EPA has, for example, a special opportunity now to connect the dots between the RFS, the CAFE standards and GHG emission targets in the transportation sector. Under the law and based on science, the EPA can unleash the full potential of biofuels to fulfill the aims of the RFS and to improve environmental quality. By keeping strong and enforcing the RFS, maintaining the CAFE Standards and GHG emission targets and accepting the science supporting the use of mid-level blends of ethanol as a high-octane, low carbon fuel, the EPA can fulfill its charge and help usher in a new era for automobile manufacturers, biofuel producers and all of us who depend upon clean air and a life sustaining environment.

The EPA should use its collective energy and resources to work within the law and build a future that puts us further down the renewable energy pathway. It’s better for the economy, energy security, consumers and the environment.

The EPA Administrator should recall his role as the Administrator of the EPA. Or it won’t be too long before President Trump has to once again personally intervene to save the RFS.

By Timothy J. Rudnicki, Esq

Yes, Sen. Ted Cruz and his henchpeople are doing all they can to tear down the RFS as I write this piece. And we, along with other biofuel proponents, are doing all we can to bolster lawmakers’ support for the RFS. Toward that end, the facts, the evidence are unequivocal: the RFS continues to deliver substantive consumer, economic, energy security and environmental benefits.

These assertions are based on facts. We, as the trade association for Minnesota's ethanol industry, need to know whether the RFS is working as intended by Congress. If the RFS is not working, it should be modified to make it work. On the other hand, if the RFS is working, it should be allowed to fully perform as intended by Congress.

So what does the data and the evidence show?

The RFS is working.

To recap the facts: ethanol (1) provides consumers with a better value at the pump (higher octane at 5 to 15 cents less than regular unleaded), (2) has the potential to reduce annual GHG emissions by 1.07 million metric tons if all regular gasoline sales in Minnesota contained 15 percent ethanol, (3) comprises 12.4 percent of the transportation fuel in Minnesota with room to grow and (4) supports over 18,800 jobs in Minnesota.

Nothing fake here. The metrics are real numbers from the field and include data from the U.S. Energy Information Administration, Argonne National Laboratory, University of Illinois Chicago GHG specialist and the Minnesota Departments of Commerce and Revenue.

With respect to the most current analysis about the contribution of the Minnesota ethanol industry to the Minnesota economy and well-being of residents, we rely on subject matter experts to give us the facts. Upon reviewing, evaluating and analyzing the relevant data for 2017, a reputable economist reports that in addition to supporting 18,800 jobs, the Minnesota ethanol industry contributed $2.17 billion to the gross domestic product and $1.54 billion to household incomes and paid $192 million in state and local taxes.

Yes indeed, the RFS is working and most likely working better than the petroleum industry interests anticipated. Perhaps that’s why Sen. Cruz and his ilk are using Philadelphia Energy Solutions, a refiner that is failing due to its own mismanagement, as a tool to inflict harm upon and damage to the RFS. 

We encourage lawmakers to ask tough questions about petroleum’s ruse. And we ask lawmakers to have the facts when a party challenges the RFS. Please know the RFS is working as intended by Congress.  Ethanol is indeed displacing finite petroleum and moving us toward a more renewable and sustainable energy pathway. While we are making progress in displacing finite, carbon intensive petroleum, we have much more work to do. Therefore, to complete the transition to renewable energy in the transportation sector, we, as a state and sation, need to keep strong the RFS so we can collectively more fully decarbonize the transportation sector.

This takes me to the last point about the RFS - where do we go from here or in 2022?  For the immediate future, given the results delivered by the RFS, we should all work to keep strong the RFS.  To explore the longer term issues, MBA will be convening stakeholders in the next few months. To queue up the broader issues, I will close with a few points for the biofuel industry, lawmakers and other stakeholders to consider. At the root of all our efforts should be the drive to more fully decarbonize the transportation sector.  

What does this mean over a span of 10 to 15 years?  In the short term, that means making E15 available to all consumers with a spark ignition powered vehicle that was built after 2000. While we celebrate the sale of approximately 20 million gallons of E15 during 2017 in Minnesota, we need to displace at least 150 million gallons of petroleum gasoline each month!  Providing RVP parity for E15 will help to further accelerate this transition. Perhaps the next rung to decarbonizing the transportation sector is the use of mid-level blends of ethanol.

The infrastructure is moving into place so a growing number of fuel retailers can actually offer to consumer, for example, 25 percent ethanol blends for use in EPA-approved vehicles. This will require the proper research and testing so as to obtain approvals similar to what was done for E15. Meanwhile, in my humble opinion, we should also embrace EVs powered by a green electrical grid, a grid filled with electrons moving from wind energy conversion or solar arrays. Europe is making the transition as evidenced by various policies and the vehicle line-up for a growing number of manufacturers. My hunch is this: if we embrace a broader renewable vision and put the focus on decarbonizing the transportation sector, we will discover new and expanded opportunities for biofuels.

In closing, all of us must continue to work to keep strong the RFS. Let’s put the focus on getting E15 fully deployed across the entire fuel supply chain in the United States. 

By Timothy J. Rudnicki, Esq

On July 24, the new acting administrator for the EPA, Andrew Wheeler said the agency is open to changes sought by the biofuel industry, but only if we make concessions with Big Oil. 

“When everyone is complaining about the program, we need to look at ways to change the program,” he said.

Let’s be clear here. There are legitimate complaints from the biofuel industry because Wheeler’s predecessor turned over the agency to Big Oil. How else can you explain the 2.25 billion gallons of ethanol that were lost via the EPA’s RVO waivers to refineries in the last two years?

But more importantly, it’s not Wheeler’s job to set policies and promulgate laws. That responsibility lies with Congress. So with respect to the RFS, his sole job is to implement the law.

Simply put, that means increasing the RVOs to push biofuel producers to make more biofuels, including from greater amounts of cellulosic biomass, and for petroleum refiners and the entire fueling infrastructure to blend increasingly greater amounts of biofuels. That’s his job.

Perhaps he’s doing just what his boss wants: advance the use of more fossil fuels. While the President gives mixed signals as to whether he actually supports the use of ethanol, the White House Energy Plan is crystal clear - promote fossil fuels with no mention of renewable energy or biofuels. 

But regardless of what the White House Energy plan states, the RFS is the law of the land.

Wheeler might, however, be challenged to get more biofuels into the marketplace. One of the simplest first steps to rectify that problem is to give E15 RVP parity with E10. While I recognize some thought leaders have already weighed in on this matter, here are a few general ideas about how the RFS actually supports the EPA in granting an RVP waiver to E15.

Starting with 42 USC § 7545, Regulation of Fuels, there is a pathway for the E15 RVP waiver. Subsection (h)(4) specifically addresses the RVP waiver for E10 and has three subparts the EPA uses to determine whether “a distributor, blender, marketer, reseller, carrier, retailer, or wholesale purchaser-consumer shall be deemed to be in full compliance.” One of those parts, (B), goes to the blend of ethanol not exceeding its waiver condition.

What is that singular waiver condition? In 2012, the EPA granted a partial waiver for E15 whereby it was approved for use in all cars 2001 and newer. Keep in mind, approval for E15 was issued seven years after the RFS became law. 

Another pathway to obtain RVP parity for E15 is through a Congressional act - an amendment to only the Clean Air Act provision dealing with RVP.  Although one party in Washington controls all three branches of government, the Consumer and Retailer Choice Act (Senate 517 and House Resolution 1311) appears to be stalled.

Lastly, the EPA could initiate a rulemaking process. An agency has at least nine factors it may consider to do so and here are a few factors:

• New technologies or new data on existing issues: E15 is new relative to E10 when the RFS was signed into law.

• Petitions from interest groups, corporations, and members of the public: Ethanol trade associations fall into this category. The rulemaking, however, should be narrowly tailored to specifically address RVP parity for E15. This could be the opportunity to also “fix” section (h)(4) so as to include anticipated higher blends going forward. 

• Presidential directives: The President could direct the EPA to begin rulemaking. While efforts may have been made in this direction, perhaps this avenue should be reviewed and pushed more aggressively.

By failing to comply with and enforce the law, the EPA has weakened the RFS and created unnecessary confusion and uncertainty for the biofuels and agriculture industries. The agency must take immediate steps to get the RFS back on track. That means holding Big Oil accountable for compliance as well as fixing the RVP problem so greater volumes of ethanol can be used by consumers throughout the year.