Wednesday, January 30, 2013

Ruling on RFS Likely to Have Minimal Long-Term Impact on Biofuels

AgFax.Com - Your Online Ag News Source


The Energy Independence and Security Act of 2007, commonly referred to as EISA, amended the Federal Renewable Fuel Standard (RFS) by mandating specific quantities and types of renewable transportation fuels for each year–known as the yearly “applicable volume.”

The applicable volume for a particular fuel (conventional biofuel, advanced biofuel, cellulosic biofuel, biomass-based diesel) determines the quantity fuel refiners, importers and blenders much purchase each year.




The graph below illustrates the statutory legal requirements for renewable transportation fuels under the RFS.
fig1.jpg

The legislative standard, however, is only the first step in setting the actual yearly renewable transportation requirements.

Because the volumetric requirements established by Congress in EISA assumed significant innovation in the cellulosic biofuel industry, Congress created an escape hatch in which the Environmental Protection Agency (EPA) can reduce the mandated quantity of advanced and cellulosic biofuel based on the projected production by the nascent industry.

If the projected production volume of advanced and cellulosic biofuel for a year is less than the statutorily mandated volume, the EPA is required to reduce the applicable volume that fuel refiners, importers and blenders much purchase each year. The rationale behind this safety valve is that petroleum refiners are dependent upon the biofuel industry to produce advanced and cellulosic biofuels for them to purchase and blend into their product. If there is no biofuel to purchase, the refiners in essence have no option other than to miss the mandate and pay the accompanying penalty.

As illustrated below, for each year of the RFS, the EPA has reduced the cellulosic biofuel applicable volume due to a lack of production capacity.

tab1.jpg

The Court Challenge to the 2012 Cellulosic Biofuel Mandate

The issue in the American Petroleum Institute (API) litigation is the EPA’s mandate of 8.7 million gallons of cellulosic biofuel for 2012. Specifically, API challenged the process EPA used to reach the 8.7 million gallon applicable volume.

EISA requires EPA to determine the projected volume of cellulosic ethanol based on an estimate created by the Energy Information Administration (EIA). The EIA projected 6.9 million gallons of cellulosic biofuel production in 2012–significantly less than the 8.7 million established by EPA as the applicable volume.

The chart below illustrates the difference between EIA and EPA projections from 2010 to 2012.

tab2.jpg

API claimed that the EPA’s projection derived from a methodology biased toward overstatement in an effort to promote growth in the cellulosic biofuel industry–a methodology that is not based on a strict reading of the statute. The Court of Appeals for the District of Columbia in API vs. EPA , (Jan. 25, 2013) agreed.

In reaching its 8.7 million gallon projection, EPA considered EIA’s projection, general progress made by the cellulosic biofuel industry, the EPA’s own assessment of the industry’s progress, and public comments submitted in response to the draft version of the rule. In large part, the court accepted EPA’s technical approach to projecting industry capacity (slip opinion at page 8-9). It found fault, however, in EPA’s acknowledged “tilt” towards “promoting growth” in the cellulosic biofuel industry in which the risk of overestimation of production volumes is set to deliberately outweigh the risk of underestimating cellulosic production (slip opinion at page 10). This effort by EPA to boost the cellulosic biofuel industry, although acknowledged by the court as Congress’ intent in creating the RFS mandates, exceeded the agency’s power. As a result the court vacated the cellulosic–and only the cellulosic–portion of the 2012 RFS rule.

Projected Impact on Future RFS Mandates

Although the court rejected EPA’s approach favoring overestimation of projected cellulosic biofuel production, the RFS itself, and EPA’s general methodology of establishing both advanced and cellulosic biofuel projections, both survived the API challenge. As a result, regulated parties under the RFS (refiners, importers and blenders) can expect EPA to establish a final applicable volume for 2013 and beyond perhaps more in line with EIA projections, but the agency retains significant flexibility to justify deviations, even substantial deviations, from EIA estimates so long as the methodology does not have an explicit bias toward overestimation.

The real question going forward with the cellulosic biofuel industry, however, will not be EPA projections, but the technical ability of the industry to develop capacity to meet RFS mandates in the future.


Tags: , , , , , ,


Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.

Sunbelt Ag News

    Grain TV: Unable to Sustain Yesterday’s Gains10-24

    DTN Livestock Close: Cattle Futures Move Lower10-24

    Doane Cotton Close: Strong Stock Market Keeps Prices Up10-24

    AFB Grain-Soybean Close: Markets Decline Across the Board10-24

    AFB Cotton Close: Higher in Middle of Day’s Range10-24

    AFB Rice Close: Nearby Contracts Slightly Higher10-24

    DTN Cotton Close: Jumps Ahead as Volume Improves10-24

    DTN Grain Close: Markets Pull Back, End Week Higher10-24

    Cleveland on Cotton: Market Keeps Spinning the Same Record10-24

    USDA: Peanut Price Highlights10-24

    Georgia Pecans: Very Light Deliveries, Season Still Running Late10-24

    Soybean Cyst Nematodes: Soil Sampling, Resistant Varieties Are the Best Defense – DTN10-24

    Farm Finances: Prepare Now for Rising Interest Rates – DTN10-24

    Mississippi Pumpkins: Heavy Rains Damaged Crop, Delayed Harvest10-24

    DTN Livestock Midday: Live Cattle Futures Turn Lower10-24

    Louisiana Soybeans: Headed for Another Record Year10-24

    DTN Grain Midday: Corn, Soybeans Move Lower10-24

    Dried Distillers Grains Eyed as Fish Food — DTN10-24

    DTN Cotton Open: Slightly Higher on Light Volume10-24

    DTN Livestock Open: Cash Cattle Values Surge10-24

    DTN Grain Open: Futures Extend Gains10-24

    Keith Good: EPA’s Water Rule Approved by Internal Review Board10-24

    Grain TV: Soybean Exports Double Expectations10-23

    Livestock: Country Of Origin Labeling Debate Marches On – DTN10-23

    Small Scale Organic Farming a Good Way to Branch into Ag – DTN10-23

    U.S. Grain Transportation: Higher Soybean Shipment Boosts Inspections10-23

    Advances in Farming Technology Continue to Aid Mother Nature — DTN10-23

    Ethanol Production Profits Hit the Wall — Why Did it Happen?10-23

    U.S. Energy: Crude Exports, Re-Exports Continue to Rise10-23

    Gasoline Prices: Show 9-Cent Decrease10-23

    Propane Stocks: Increase by 0.2M Barrels10-23

    Diesel Prices: Average Drops 4 Cents10-23

    Alabama: Recent Weather Radar Oddity Was Mayfly Swarm10-22

    Soybean Harvest: Prioritize Shatter-Prone Fields – DTN10-22

    Ethanol: Court Tosses E15 Labeling Lawsuit – DTN10-22

    Georgia: 2 Counties Declared Natural Disaster Areas10-22

    Arkansas: 2 Counties Designated Natural Disaster Areas10-22

    AgFax Grain Review: More Lawsuits Against Syngenta; Harvest Well Behind Pace10-22

    2 Families, 2 Approaches to Building Ranch Tourism — DTN10-22

    Don’t Just Piggy-Back on Others’ Prices in Ag Commodity Markets10-22

    National Cotton Council Commends Timely APH Announcement10-22

    Wheat Growers to Seek Inclusion in APH Yield Exclusion for 2015 – DTN10-21

    Farm Shop Dream Requires Thoughtful Planning – DTN10-21

    USDA: Weekly National Peanut Prices10-21

    USDA to Implement APH Yield Exclusion for 2015 Spring Crops10-21

    Arkansas: USA Rice Outlook Conference Set Dec. 7-9 in Little Rock10-21

    AgFax Cotton Review: Lower Acres May Close Mill; Australia Acres Up10-21

    DTN Fertilizer Trends: High Costs May Alter Growers’ Tactics for 201510-21

    Herbicide Resistant Weed Summit’s Slides, Webcast Available Online10-20

    Rice and Sugar: Thailand’s Quest for World Domination10-20

    AgFax Peanut Review: NM Down 6M Pounds as State Celebrates 100 Year Crop10-20

    Livestock: WTO Rules Against U.S. in COOL Dispute — DTN10-20

    Wheat Scientists, Breeders Advocate Biotech Crop — DTN10-20

    Sunbelt Ag Events

     

    About Us

    AgFax.Com covers agricultural trends and production topics, with an emphasis on news about cotton, rice, peanuts, corn, soybeans, wheat and tree crops, including almonds, pecans, walnuts and pistachios.

      

    This site also serves as the on-line presence of electronic crop and pest reports published by AgFax Media LLC (formerly Looking South Communications).

        

    Click here to subscribe to our free reports.

      

    We provide early warnings and confirmations about pests, diseases and other factors that influence yield. Our goal is to quickly provide farmers and crop advisors with information needed to make better and more profitable decisions.

         

    Our free weekly crop and pest advisories include:

    • AgFax Midsouth Cotton, covering cotton production and news in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Missouri.

    • AgFax Southeast Cotton, covering cotton production and news in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.

    • AgFax Southwest Cotton (new for 2013!), covering cotton production and news in Texas, Oklahoma, Kansas and New Mexico.

    • AgFax West (formerly MiteFax: SJV Cotton), covering California cotton, alfalfa, tomatoes and other non-permanent crops in California's Central Valley.

    • AgFax Rice covering rice production and news in Arkansas, Louisiana, Mississippi, Missouri and Texas.

    • AgFax Peanuts, covering peanut production in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

    • AgFax Southern Grain: covering soybeans, corn, milo and small grains in Southern states.

    • AgFax Almonds, covering almonds, pistachios, walnuts and other tree crops in California's Central Valley.

    • AgCom 101, providing guidance to ag professionals involved in social media.

    Our newsletters are sponsored by the following companies: FMC Corporation Chemtura Dow AgroSciences.

          

    Mission statement:

    Make it as easy as possible for our community of readers to find and/or receive needed information.

              

    Contact Information:

    AgFax Media. LLC

    142 Westlake Drive Brandon, MS 39047

    601-992-9488 Office 601-992-3503 Fax

    Owen Taylor Debra L. Ferguson Laurie Courtney

          

    Circulation Questions?

    Contact Laurie Courtney