EPA Apologizes for RFS Delays

GRAPEVINE, Texas (DTN) -- Apologizing may be a good first step, but the director of the office of air quality and transportation with the U.S. Environmental Protection Agency told ethanol producers at the National Ethanol Conference in Grapevine, Texas, Thursday he hopes to back up his words by issuing a three-year Renewable Fuel Standard this spring.

Christopher Grundler stood at the same meeting one year ago in Orlando, Fla., and told the industry EPA would finalize the RFS volumes in 2014. However, the industry continues to wait for volumes for 2014, 2015 and 2016.

"I want to tell you how sorry I am we didn't get our work done," he told an audience of hundreds of industry officials. "I know words are cheap, but in this case they are sincere. There are consequences when government fails to act. This simply is not acceptable. Aside from you, there is no one more frustrated than I and my team is about the current state of affairs. We intend to get the RFS back on track this year."

Although the lack of final RFS numbers has created uncertainty in the biofuels industry, corn-based ethanol is coming off its most profitable year in history and continues to have market certainty up to E10. It is the future of second-generation cellulosic ethanol and other advanced biofuels that are hit hardest by the lack of an RFS.

Grundler said EPA will be looking to reset the RFS on cellulosic ethanol volumes come 2017, when the agency is allowed by law to do so.

"We have been wrong on our cellulosic ethanol projections every year," he said. "I'm not very happy about our record or about the information we have received."

Now that several plants across the country are in position to produce their first commercial volumes of cellulosic ethanol this year, Grundler said it may be possible to adjust later RFS volumes to reflect that production.

"What I believe now with seeing real volumes is largely because of the biogas sector," he said. "Precision required in the past (on setting cellulosic volumes) won't be as important because we will have so much volume."

On the bright side, Grundler touted EPA's efforts to hone the process to approve new fuel pathways. This was done because the agency was inundated with requests from companies across the country to perform analyses on whether particular fuels would comply with the RFS. Grundler said the agency managed to simplify the process to reduce wait times from many months to just a couple of months in most cases.

ANNUAL RFS VOLUMES

When it comes to annually setting RFS volumes, he said the process has become unworkable.

"You're painfully aware of the current situation, and obviously implementation of the RFS is proven to be very challenging for us," Grundler said. "...I'm not going to stand here and make excuses. We didn't get it done and that's a fact. I promise you it wasn't for a lack of effort.

"It is more than just a schedule. There's so much more at stake. To me it's mission critical that the RFS get back on track."

Grundler said while he and his 10-person staff understand the importance of the RFS, there will continue to be barriers to making sure the program runs as effectively as it can.

EPA is dealing with a number of "fundamental issues" that have stymied progress on the RFS, he said. How does the agency set future volumes in the face of flat gasoline demand? How does EPA overcome the blend wall? If volumes are reduced, what factors should play into those decisions?

"Our goal was to get the RFS back on track and provide for long-term growth of fuels in this sector," he said. "The most important thing EPA can do is to clear the way for new and innovative technologies to become available."

CONTINUED CHALLENGES

Grundler said his office faces challenging times with continued staff reductions, pending lawsuits including some from the oil and ethanol industries, expanding requests for EPA involvement in new fuel pathways, multiple petitions to wave the RFS and three large Freedom of Information Act requests to fill. In addition, he said EPA has a "constant need" to upgrade computer systems used to run the RFS program. All of the demands, Grundler said, often prevent his department from working on long-term strategies for biofuels.

"There are indeed barriers to entry for different fuels that we'd like to remove," he said. "We're going to keep grinding. That's what we do. Because of our mission, we care about the future. The RFS debate in Washington has become overheated. My hope is we can have civil discourse with everyone on this debate."

There has been concern raised by the oil industry and others that as the price of renewable identification numbers, or RINS, increase, consumers will pay more for the price of gasoline.

Renewable Fuels Association President and Chief Executive Officer Bob Dinneen said the actual data shows there is little or no correlation between the price of RINS and gasoline.

Grundler said he believes the federal government should just let the RINS market work.

"It is very dangerous for the government to interfere with markets like that," he said. "We have no interest in getting involved in the RINS market. Markets work best with EPA not mucking around in them. No one was surprised at EPA when RINS prices went up with the approaching blend wall.

"You don't have to be a rocket scientist to figure out what Congress intended with this market. We want the RINS market to work as intended."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow Todd on Twitter @toddneeleyDTN

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