The EPA, in Federal Register, Volume 83, No. 132, July 10, 2018, (Hereinafter “FR”) at page 32057, states with respect to this docket public participation, “We request comment on all aspects of this proposal.” Toward that end, the Minnesota Bio-Fuels Association (MBA) offers comments on various aspects of the EPA’s proposed rule set forth at FR 32024. Our comments state the issue of concern, offer specific suggestions for changes which need to be made to the proposed rule and, where possible, include supporting rationale, data and analysis.
MBA, a nonprofit biofuels trade organization, is based in Minneapolis, Minnesota. The MBA is dedicated to supporting and representing the renewable fuels industry in Minnesota, providing consumers with greater access to renewable fuels and promoting biofuels for a greener and more energy independent Minnesota and America.
To actualize these aims, MBA, for example, works extensively and directly with biofuel producers, fuel wholesalers, fuel retailers, state and federal regulators and retail fuel customers. Given the totality of MBA’s engagement with biofuel producers, the fuel supply chain and related market factors, MBA offers the following suggestions to more fully inform EPA’s rulemaking process with respect to Renewable Fuel Standard Program: Standards for 2019 and Biomass-Based Diesel (BBD) Volume for 2020.
1. Issue presented
Whether under the proposed rule, and given the availability of at least 2.25 billion carryover RINs, EPA actually requires the petroleum industry to make available at least 15 billion gallons of conventional renewable fuel in the transportation fuel market sector.
“Relative to the levels finalized for 2018, the 2019 volume requirements for advanced biofuel and total renewable fuel would be higher by 590 million gallons. Approximately 90 million gallons of this increase would be due to the increase in the projected production of cellulosic biofuel in 2019 relative to 2018. We are also proposing to establish the volume requirement for BBD for 2020 at 2.43 billion gallons. This volume is 330 million gallons higher than the volume for 2019.” FR, 32025. The accompanying footnote 6 goes into some detail regarding the prescribed statutory requirements for total volumes of renewable biofuel and specifically notes the implied number of conventional renewable fuel is 15 billion gallons.
"While EPA cannot predict how obligated parties will comply in 2018 or the amount or the amount of additional small refinery hardship exemptions that may be granted in the future, the 2016 and 2017 exemptions have directly increased the number of carryover RINs that will likely be available for compliance with the 2019 standards.” FR 32030.
With respect to small refineries and small refiners, EPA states it “has granted exemptions pursuant to this process in the past. However, at this time no exemptions have been approved for 2019, and therefore we have calculated the percentage standards for 2019 without any adjustment for exempted volumes.” (Emphasis added) FR 32057.
a. Suggestion
Revisit the assumptions EPA uses to force the implication in footnote 6. Rather than backing into the conventional renewable fuel volume of 15 billion gallons, take into consideration, for purposes of buttressing the 15 billion gallon RVO, the exemptions (waivers) which have already been granted to small refiners over the last two years.
b. Supporting Rationale
i. Based on EPA’s current assumptions regarding statutorily required volumes of biofuel, it leads to the questionable implication regarding the conventional renewable fuel applicable volume of 15 billion gallons is the difference between the total renewable fuel and advanced biofuel applicable volumes. While on its face and under different circumstances it may be reasonable to make certain assumptions and essentially back into the 15 billion gallon number, the underlying assumptions which lead to the implication are flawed absent some recognition of the carryover RINs.
The flaws in EPA’s assumptions are especially pronounced given the Agency’s statement at RF 32030. Based on EPA’s assertion that the carryover RINs amount to approximately 15 percent of the total renewable fuel volume, if those RINs are applied just to the conventional renewable fuel, that means at least 2.25 billion gallons of renewable fuel could be in the form of paper and electronic transactions rather than actual gallon volumes of renewable fuel displacing finite, carbon intensive petroleum. In short, the actual or potential effect of the carryover RINs could have a profound negative impact in the push to make greater, not lesser, amounts of renewable fuel available to customers in the marketplace.
The flawed assumptions and implications further reveal themselves at other points in the proposed rule. See, for example, the Agency’s stated implication at FR 32026: “As for advanced biofuel, we are proposing the maximum reduction permissible under the cellulosic waiver authority. We are proposing that the reduction in total renewable fuel would be the same as the reduction in advanced biofuel, such that the resulting implied volume requirement for conventional renewable fuel would be 15 billion gallons.”
See, also, the reliance upon the assumption and implication in the “Total Renewable Fuel” section at FR 32026, the justification for the waiver authority and implied volume allowance for conventional biofuel in the text and footnote 11 at FR 32028 and the reference to the “implied volume of 15 billion gallons of conventional fuel” in the text at FR 32048.
To be clear, on its face it may seem reasonable to accept the implication the EPA sets up for the reader, but the implication contains a huge gap based on incomplete information, faulty assumptions and a cramped interpretation of the RFS which prevents the EPA from incorporating its own conclusions about the carryover RINs in the final RVO. This gap in reasoning with respect to how to handle the 15 billion gallon conventional renewable fuel and the small refiner waivers appears to undergird the Agency’s reasoning all of which flies in the face of the clear congressional intent to substantively displace liquid fossil fuel petroleum with renewable fuel rather than accounting and bookkeeping transactions which serve the petroleum industry rather than retail fuel customers and the environment.
Failure to account for the refinery exemptions and waivers could create a situation whereby refiners simply opt to “cash-in” their RINs rather than make the distribution system changes they should have been making since 2005 so as to comply with the RFS. If EPA fails to recognize the actual or potential effect of the 2.25 billion carryover RINs with respect to the implied 15 billion gallon conventional renewable fuel, the proposed rule, as it now stands, could have a significant adverse effect on biofuel producers while thwarting the Congressional intent underlying the Renewable Fuel Standard. That intent is to move the United States to a more sustainable transportation fuel pathway while reducing oil usage and imports and decreasing greenhouse gas emissions, all of which help to make the Nation more resilient in the face of international threats to energy reserves and climate change.
ii. Congressional Intent – Members of Congress and the President, with respect to the energy policy in the United States, intended for the RFS to be the driver for substantive, dramatic and systemic change. In fact, President George W. Bush called for moving beyond a petroleum-based economy. Similarly, based on statements in the Congressional Record, Rep. McCollum expected the RFS would provide a new direction for energy policy in the United States.
Still other Members of Congress, for example, expressed their intent for biofuels to be the energy change agent; i.e., the means by which to move beyond petroleum.
Failure by this EPA to account for the small refiner waivers (i.e., at least 2.25 billion carryover RINs) can put a damper on biofuels, from production to distribution to the use of biofuels throughout the transportation sector, and thereby prevent biofuels from serving as the energy change agent envisioned by Congress.
EPA, on the other hand, can and should follow the Congressional intent with respect to implementation of the RFS by making adjustments to the conventional renewable fuel RVO such that the additive effect of RINs alone will not suffice to assist in attaining the 15 billion gallon RVO requirement. By preventing any backsliding from the need to ensure at least 15 billion gallons of conventional renewable fuel is available in the marketplace, EPA can help keep the RFS on track and thereby more closely fulfill the Congressional intent to move the Nation to greater use of renewable biofuels.
To more fully substantiate our point regarding Congressional intent, we offer the following excerpts taken from the White House archives and the Congressional Record. It is clear that Congress intended for the RFS to be enforced (i.e., to drive greater amounts of renewable fuel into the market so as to displace finite petroleum gasoline) so as to attain the policy objectives which have been expressed by Members of Congress.
(1) Excerpt from President George W. Bush, State of the Union Address 2006:
“Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, [Emphasis Added] which is often imported from unstable parts of the world. The best way to break this addiction is through technology. . . .
By applying the talent and technology of America, this country can dramatically improve our environment, move beyond a petroleum-based economy, [Emphasis Added] and make our dependence on Middle Eastern oil a thing of the past.” – State of the Union Address by the President, United States Capitol, Washington, D.C., January 31, 2006.
(2) Excerpts of speech of Rep. Betty McCollum of Minnesota in the House of Representatives, Thursday, December 6, 2007: “Mr. Speaker, I rise today in strong support of the Energy Independence and Security Act. With this legislation, the new Democratic Congress is leading America in a new direction on energy policy. [Emphasis Added]. This is the most significant energy bill in a generation. The House is taking a major step toward ending our dependence on foreign oil by increasing efficiency standards for cars and trucks for the first time in over 30 years. . . .
Moreover, Minnesota farmers will benefit from its historic commitment to homegrown biofuels [Emphasis Added]” – replacing Middle East crude with Midwest crops. It is time to make America more secure, more prosperous and more environmentally sustainable. I urge my colleagues to join me in supporting a new direction in energy policy. [Emphasis added]. Congressional Record, 110th Congress, 1st Session, Issue: Vol. 153, No. 190 (Referring to Extensions of Remarks - December 12, 2007, regarding the Energy Independence and Security Act of 2007).
(3) Excerpts from Rep. Barbara Lee of California in the House of Representatives, December 6, 2007: “The passage of the Energy Independence and Security Act will help these grass-roots efforts expand and grow through Federal initiatives designed to put the United States on a path to energy sustainability [Emphasis added].” Congressional Record, Energy Independence and Security Act of 2007.
(4) Excerpts from Sen. Jeff Bingaman of New Mexico, December 6, 2007: “On balance, I believe the energy legislation we have before us deserves the support of my colleagues. It is not perfect in every respect. Legislation of this size and complexity obviously cannot be. However, it represents an opportunity to make significant steps forward in a number of key areas of energy policy. With the passage of this legislation, we can reduce our dependance on oil, we can increase our consumption of homegrown fuels, [Emphasis added] we can provide substantial savings to consumers, and we can create many new jobs. I think it is a real step forward, also, in curbing greenhouse gas emissions.” Congressional Record, December 7, 2007, 110th Congress, 1st Session, Issue: Vol. 153, No. 187 (regarding the Energy Independence and Security Act of 2007).
Sen. Amy Klobuchar: “I believe legislative policy works best when it is stable, predictable and provides businesses the ability to make long-term investments. We need to provide the certainty farmers and biofuel producers need to make plans and investments. That is why I will continue to fight to get a long-term Farm Bill done and why we must work together to fix the proposed rule and preserve the integrity of the Renewable Fuel Standard.” Position Statement regarding the RFS (commenting on the EPA proposed rule in 2014 and having relevance today in 2017).
In addition to these explicit expressions of intent by Members of Congress, there is indeed the reality on the ground with respect to the biofuel producer side of the equation, at the site of production. As many Senators, including Sen. Klobuchar, have noted, investments have been and continue to be made by the biofuel industry so as to meet and exceed the RVOs set forth in the RFS.
The danger here, today, with the proposed rule, is that the small refiner waivers, the 2.25 billion carryover RINs, will allow backsliding. In other words, rather than 15 billion gallons of conventional renewable fuel being available in the market place, it could be some lesser amount due to the total number of waivers which have already been granted to refiners.
Finally, the explicit expressions of intent by Members of Congress make clear the EPA must enforce the RVOs, such as the 15 billion gallons for conventional renewable fuel, and thereby prevent any backsliding which might occur as the result of the small refiner waivers which have been granted over the last two years by the EPA. The RVO targets for advanced and cellulosic biofuel must be aggressive so as to send a clear signal to producers to continue making investments in equipment and processes. When the EPA sets aggressive RVOs it will send a powerful message to all essential stakeholders, including farmers, biofuel producers and the entire fuel production and supply chain. And that message is simple: the RFS continues to be the law of the land and stakeholders should continue their individual and collective efforts under the law. The evolving result will serve to move the Nation toward the use of significantly more renewable biofuel for all the reasons as intended and explicitly articulated by Congress.
2. Issue Presented
Whether EPA has properly considered estimates of costs of producing a “representative” renewable fuel compared to cost of petroleum fuel. FR 32051.
a. Suggestion
EPA should draw upon its vast collection of GHG emission data and information from the late 1990's to the present since that data and information can be used to provide a reasonable estimate of the avoided costs associated with displacing finite, carbon intensive petroleum with renewable biofuels. The study of externalities has matured since the 1990's and the knowledge base exists for the Agency to provide a more accurate and reasonable assessment of the avoided costs associated with using a less carbon intensive transportation fuel. If the Agency insists on using the “Annual Increase in Overall Costs” associated with any biofuel, including the advanced, FR 32051, those numbers should be juxtaposed with externalities of fossil fuel (i.e., ongoing degradation of air quality and increasing concentrations of carbon dioxide and other GHG emissions in the atmosphere).
b. Supporting Rationale
i. Additional supporting rationale with respect to GHG emissions.
The scientific literature is replete with sound, valid facts, information and analyses with respect to the costs associated with greenhouse gas (GHG) emissions and the benefits associated with using biofuels. While EPA is fixated on an unexplained assumption regarding the switching of feedstock for the production of biofuels, EPA overlooks the social, economic and environmental costs associated with the continued use of petroleum gasoline.
(1) By its own accounting, EPA determined the failure to curb GHG emissions could cost the United States, in this century, $180 billion in economic losses. See, U.S. EPA, Climate Change in the United States: Benefits of Global Action (2015). The report, which was peer reviewed in scientific literature with a summary report reviewed by external experts, examines, for example, the costs to human health, infrastructure, water resources, agriculture and forestry and ecosystems.
(2) While EPA appears to wrestle with biofuel costs and the GHG benefits associated with biofuels, it may actually be understating the GHG benefits stemming from biofuels. In Minnesota, for instance, even an additional hundred million gallons of biofuel can indeed make a major impact in the reduction of GHG emissions as demonstrated by the analysis for using E15 rather than E10 to fuel vehicles powered by spark ignition engines.
(a) Greenhouse gas benefits in Minnesota – E15 Would Reduce 358,000 Tons Of CO2 Emissions Annually In Minnesota – Minneapolis, Feb 16 - Making E15 (gasoline with 15 percent ethanol) the new regular unleaded fuel in Minnesota would eliminate 358,000 tons of CO2 annually, according to a technical analysis by the University of Illinois at Chicago.
In response to a query by the Minnesota Bio-Fuels Association, Dr Steffen Mueller, principal research economist at the University of Illinois at Chicago, said a gallon of E15 saves 1.26 g of CO2 equivalent (CO2e) per megajoule over regular E10 (gasoline that contains 10 percent ethanol). CO2e includes carbon dioxide, nitrous oxide and methane.
Annual gasoline consumption in Minnesota averages 2.4 billion gallons. Should all 2.4 billion gallons be converted to E15 from E10, CO2e savings in the state would total 358,000 metric tons annually, Mueller said.
Using the U.S. Environmental Protection Agency's (EPA) greenhouse gas equivalencies calculator, this would amount to eliminating 75,368 passenger vehicles from Minnesota's roads annually.
The reduction in CO2e in Minnesota from using E15 is on top of the amount of CO2e already eliminated by using E10. By comparing E15 to gasoline that contains no ethanol, the CO2e savings would total 1.07 million metric tons annually in Minnesota, Mueller said.
This, according to the EPA's greenhouse gas equivalencies calculator, is the same as removing 225,895 vehicles from Minnesota's roads annually.
Dr Mueller's analyses were based on a life cycle basis which includes emissions incurred during the production of ethanol including fuel feedstock origination (corn growing), feedstock conversion at refineries and combustion in a vehicle.
Included in the analysis were land use change (LUC) requirements for feedstock production. In his analysis, he said published studies on LUC emissions have shown a significant reduction in the predicted magnitude of carbon emissions over time and the downward trend is due to:
1) An evolving understanding of the elasticity of land transition and yield-price relationships
2) Better understanding of ethanol co-product substitutions in animal feed markets
3) Better understanding and data availability of global land types
4) Carbon adjustments during land transitions
Dr Mueller's analysis on E15 was arrived at using Argonne National Laboratory's GREET (greenhouse gases, regulated emissions, and energy use in transportation) model which incorporates detailed carbon stock factors for different ecosystems that enable an exhaustive analysis of carbon emissions and sequestration from LUC. – Argonne National Laboratory is managed by the UChicago Argonne LLC for the U.S Department of Energy.
(3) EPA cost savings due to the potentially avoided use of advanced biofuels is left unexplained. FR 34049. While the EPA attempts to more fully explain its costs estimates, the rationale and overly simplistic calculations ignore the much more complicated and critical values. While the EPA goes out of its way to state the costs do not include, for example, storage infrastructure for higher blends of biofuels, the EPA fails to even remotely consider the costs associated with the GHG emissions which are not offset by displacing petroleum with biofuel.
Arguably this is a very complex set of issues and beyond the scope of analysis conducted by the Minnesota Bio-Fuels Association. Again, however, some very significant analyses have been conducted in the realm of costs associated with GHG emissions. See, for example, a report prepared by Citigroup.
According to Energy Darwinism II: Why a Low Carbon Future Doesn’t Have to Cost the Earth (2015) (the “Report”), two energy scenarios were examined to provide an objective view of the economic situation. One scenario is inaction (similar to the apparent basis for the EPA estimated cost savings by not using biofuels) and the other involves an energy mix with lower carbon alternatives (e.g., including biofuels).
In brief, the Report offers some metrics for each scenario. The projected lost global Gross Domestic Product (GDP) from the impacts of climate change are pegged at $44 trillion over approximately the next 40 years.
Alternatively, the Report sets forth an action scenario based on a low carbon pathway (e.g., renewable biofuels). The avoided costs of climate change under this scenario range from one percent to four percent in the early years and between three percent and 10 percent in later years.
Said another way, there is no cost savings or cost avoidance by using fewer gallons of renewable conventional or advanced biofuels. The overly simplistic methodology EPA uses to derive a cost savings by avoiding the use of biofuels overlooks the much greater cost associated with a business as usual petroleum fuel scenario.
3. Issue presented
Whether the EPA can release its outdated notion of a “blendwall” and instead embrace the present “regular” fuel which is 15 percent ethanol and 85 percent petroleum gasoline.
The EPA uses the “E10 blendwall” in a disincentive argument and as an element to justify a conservative push for advanced fuel ethanol.
a. Suggestion
The EPA should continue to reorient itself to the new “real-world” situation and, rather than making E10 a reference point, use “E15" as the new regular fuel for a reference point and floor or benchmark in assessing the market potential for renewable fuel.
b. Supporting Rationale
Substituting E15 for E10 in the Agency benchmarking would demonstrate the Agency has reoriented itself. This reorientation and focus on E15, rather than E10, as the new regular fuel would more appropriately align with the intent of Congress and further pave the way for the shift in energy policy as envisioned, and intended, by Congress.
While the EPA at least acknowledges the availability of E85, EPA remains shackled to the notion that the floor for RVOs is linked to E10 as some percent of total fuel consumed in the transportation sector rather than using E15 as the new baseline. Using an E15 floor more accurately reflects the capability of the current rolling stock (which includes vehicle model years greater than 2000) to use E15 and thereby better indicate the actual market potential for the use of greater amounts of biofuels.
With respect to the biofuel consumer market in Minnesota, blends such as E15 and E85 are indeed increasing ethanol's percentage of the transportation fuel market. Based on the most current data from the Energy Information Administration, ethanol's percentage of the market in 26 states was above the oil industry's blend wall. Minnesota led the way with ethanol comprising 12.4% of total transportation fuel consumed.
In conclusion, based on the increasing amount of renewable, locally produced biofuel currently in the Minnesota spark ignition transportation fuel, it is clear the RFS continues to produce the effects Congress intended: use greater amount of renewable biofuel to reduce GHG emissions and provide energy security. To further satisfy the letter of the law as embodied in the RFS as well as the Congressional intent surrounding the law, the EPA should increase the RVO’s by at least seven percent and also properly account for the carryover RINs with respect to conventional renewable fuel. The aim of the EPA, in accordance with the RFS, should be to displace greater amounts of finite, carbon intensive petroleum with significantly more renewable biofuels. The EPA should take a more aggressive approach to the RVOs so as to more rapidly move us as a People, State and Nation closer to the renewable energy path set forth by Congress.