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Biodiesel Industry Fights Back Against
Proposed 2014 RFS Volumes
On Friday, November 19th, the U.S EPA formally issued its 2014 volumes and requirements in its Renewable Fuel Standard (RFS) Notice of Proposed Rulemaking. Of major concern is that the proposal keeps biomass-based diesel at its 2013 level of 1.28 billion gallons. This unacceptably low volume is an effective cut, given our industry's expected production this year of at least 1.7 billion gallons and would strike a huge blow to our industry and the investment that supports it.
The following Tuesday, as part of a very well informed and well organized national effort led by the National Biodiesel Board (NBB), California industry representatives met with a targeted list of staffers for Senators Boxer and Feinstein, the House Committee on Energy and Commerce (Rep. Henry A. Waxman of Beverly Hills is the ranking member) and the Senate Committee on Environment and Public Works (Senator Barbara Boxer is the chairman). Our contingent included Jennifer Case, CEO, New Leaf Biofuel; Celia DuBose, Executive Director, CBA; Christina Borgese, Principal and Senior Engineer, PreProcess; J.W. Hackett, Director, Federal Affairs & Policy, REG; and Lindsay Fitzgerald, Director, Regulatory Affairs, NBB.
Our team gave a brief overview of California's biodiesel industry stressing that success for our state's Low Carbon Fuel Standard requires increasing RFS volume requirements. Our arguments were stated most succinctly by Jennifer Case, who simply said she's not sure how she will keep her plant open, having calculated that she would have to sell biodiesel at a 16 cent per gallon loss -- not even accounting for overhead. Writ large, here's what we are looking at (from an NBB handout on the impact of cutting biodiesel from 1.7 to 1.28):
Troubling to the biodiesel industry is that the EPA's proposed rule is focused on addressing the ethanol blend wall issue, and not based on any problems with biodiesel. EPA staff has stated that opposition to RFS from livestock groups and environmentalists is not directed at biodiesel. Adding to that frustration is that, despite a concerted and persistent effort by NBB's DC staff over many months, which provided detailed recent studies and updated documentation supporting our position, the EPA, in setting the proposed 2014 volumes, used the exact same numbers they used when they set their 2013 numbers, in what some are calling a "cut and paste job."
EPA has called for comment on this proposed rulemaking, and a 60-day comment period will open up once the proposal is published in the Federal Register.
LCFS Upheld by U.S. Ninth Circuit Court
Major Victory for California
On September 18th, in a major victory for California, the U.S. Ninth Circuit Court of Appeals reversed a 2011 district court ruling that the state's Low Carbon Fuel Standard (LCFS) violates the dormant Commerce Clause of the U.S. Constitution by discriminating against interstate commerce. The decision in the case Rocky Mountain Farmers Union v. Corey rejected the arguments of LCFS opponents that the full lifecycle analysis used under LCFS to assign carbon intensity scores of transportation fuels (including where and how fuel is produced and transported) discriminates against out-of-state ethanol.
The court used strong language in support of the need for the program for California (and beyond), our state's special right to establish it, and the validity of the science behind it:
"Congress of course can act at any time to displace state laws that seek to regulate the carbon intensity of fuels, but Congress has expressly empowered California to take a leadership role as to air quality. If GHG emissions continue to increase, California may see its coastline crumble under rising seas, its labor force imperiled by rising temperatures, and its farms devastated by severe droughts.
California should be encouraged to continue and to expand its efforts to find a workable solution to lower carbon emissions, or to slow their rise. If no such solution is found, California residents and people worldwide will suffer great harm. We will not at the outset block California from developing this innovative, nondiscriminatory regulation to impede global warming. If the Fuel Standard works, encouraging the development of alternative fuels by those who would like to reach the California market, it will help ease California's climate risks and inform other states as they attempt to confront similar challenges."
Regarding the subtleties of the dormant Commerce Clause, the court held that LCFS neither facially discriminates against out-of-state ethanol nor does it result in unequal treatment between states that is not facially discriminatory:
"Each factor in the default pathways is an average based on scientific data, not an ungrounded presumption that unfairly prejudices out-of-state ethanol, whether it is an average value for the use of coal in a boiler or for the shipment of raw corn from the Midwest to California.
The Fuel Standard performs lifecycle analysis to measure the carbon intensity of all fuel pathways. When it is relevant to that measurement, the Fuel Standard considers location, but only to the extent that location affects the actual GHG emissions attributable to a default pathway. Under dormant Commerce Clause precedent, if an out-of-state ethanol pathway does impose higher costs on California by virtue of its greater GHG emissions, there is a nondiscriminatory reason for its higher carbon intensity value. See id. Stated another way, if producers of out-of state ethanol actually cause more GHG emissions for each unit produced, because they use dirtier electricity or less efficient plants, CARB can base its regulatory treatment on these emissions. If California is to successfully promote low carbon-intensity fuels, countering a trend towards increased GHG output and rising world temperatures, it cannot ignore the real factors behind GHG emissions."
The case is not yet completely settled as the court did send the question of whether LCFS discriminates against out-of-state ethanol, in purpose or actual effect, back to the district court. However, experts are pointing to the strong language in the Ninth Circuit Court's opinion as an indication that the California Air Resources Board (CARB), the state agency that runs the program, and has successfully defended it against more than one lawsuit, will again prevail. To that point, the Ninth Circuit Court also removed the lower court's injunction against LCFS, but CARB had previously appealed that ruling and won.
LCFS, which is a huge economic driver for the biodiesel industry, has been a great success, with over-compliance and excess credits generated from its first year in 2011, even while under threat from repeated challenges.
Whether the U.S. Supreme Court would agree to hear the case is, of course, unknown. We will definitely keep you informed.
Rapid Developments in Alternative Fuels Surpassing Expectations
New report analyzes recent developments in fuels sector;Sacramento, Calif. - June 13, 2013 - Industry leaders and investors are heartened by faster-than-expected developments in alternative fuels, according to an industry report released today. A new report by industry leaders and investors shows the alternative fuels market has evolved much faster than anticipated and the Low Carbon Fuel Standard is exceeding expectations. Developed by a coalition of investors, utilities and makers of alternative fuels, the report analyzes recent developments in the transportation sector and presents three scenarios that ratchet down the carbon intensity of transportation fuels 10 percent, to meet the goal of California's Low Carbon Fuel Standard by 2020. All three projections point to an increasingly diverse fuel supply, with more innovation leading to more renewable fuels and advanced vehicles.
Diesel replacements biggest surprise
"We know now that the Low Carbon Fuel Standard is exceeding our expectations and driving us towards a clean fuels future," said Eileen Tutt, executive director of the California Electric Transportation Coalition (CalETC). "The standard is doing exactly what it was designed to do - open the way for new fuels and technologies to compete fairly in the marketplace."
To download the full report and the press release visit the the California Electric Transportation Coalition's website at: http://www.caletc.com/LCFSReport.
AB 118 FUNDING
Biodiesel is an advanced biofuel made from waste or virgin vegetable oils or animal fats. It is a sustainable, cleaner-burning, diesel fuel replacement that meets strict quality specifications. Biodiesel derived from waste can reduce greenhouse gas emissions up to 80%.