October 15, 2013. The Renewable Fuel Standard (“RFS”) obligates gasoline producers to meet certain statutorily defined guidelines concerning the use of biofuels and advanced biofuels in the production of gasoline. The RFS program was created under the Energy Policy Act (EPAct) of 2005 and was substantially expanded in 2007 with the passage of the Energy Independence and Security Act (EISA) of 2007. The RFS mandates that refiners utilize 18.15 billion gallons of renewable fuels in 2014; however, the EPA is evaluating whether to proceed with a proposal to modify this statutorily mandated Renewable Fuel Obligation (“RVO”) to 15.21 billion gallons for 2014.
The primary argument of refiners in support of a proposed modification to the RFS for 2014 is that strict adherence to the current requirements of the RFS would require refiners to blend fuels in excess of 10% ethanol, which they argue is not a feasible course of action. The argument is that the reduction in the RFS is needed to continue to provide gasoline blends that contain no more than 10% ethanol.
The debate over the proposed changes centers on the administrative authority of the EPA to make the proposed changes to the RFS for 2014. One of the key additions to the RFS in 2007 was the introduction of provisions concerning the production of advanced biofuels and cellulosic ethanol. Ethanol industry supporters argue that the EPA’s authority under the RFS is limited by the statutory langue of the law and that the EPA lacks the authority to adjust the RFS requirements based off issues related to a 10% gasoline/ethanol blend.
Further complicating the current discussion regarding the 2014 RFS is the fact that financial markets are reacting adversely to the uncertainty the continued debate is generating. Most notably, recent media reports suggest that the EPA has formally submitted the proposed changes to the 2014 RFS. However, the EPA states that they have yet to reach a conclusive decision regarding blending requirements for the 2014 RFS. The continued uncertainty surrounding the 2014 RFS has the potential to result in subsequent litigation.
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