EPA Delay of 2014 RFS Rule Increases Potential for Congressional Activity

On November 21, 2014, the Environmental Protection Agency (EPA) announced that it would further delay finalizing the 2014 Renewable Fuel Standard (RFS) volumetric blending requirements until 2015. This announcement put the controversial program back in the spotlight with federal legislators, increasing the likelihood of legislative activity when Congress reconvenes in January. Meanwhile, supporters and detractors of the program were left trying to understand what this latest action means for the future of the program.

Congress most recently considered reforms to the program in 2013, when the House Energy & Commerce Committee initiated a series of white papers looking at different aspects of the program and then formed a working group to consider reform proposals. Those efforts stalled and were eventually abandoned when the EPA issued its 2014 proposed rule, which would have reduced the renewable fuel volumes below statutorily required volumes. This draft proposal was met with serious concern by renewable fuel producers who have made substantial commercial investments based on the long-term requirements of the program. Refiners and other obligated parties welcomed the proposed reductions, arguing that infrastructure limitations made fulfilling the statutorily prescribed volumes impossible.

The EPA has missed numerous deadlines in issuing regulations for this program in recent years. Final volume obligations are required, by law, to be released the November before the compliance year to give industry certainty as to what volumes they will be required to blend into the transportation fuel pool. In the case of biomass-based diesel, final volumes are to be released 14 months prior to the compliance year. At this point EPA has not only punted on finalizing the 2014 regulations but they have also missed the deadline for compliance year 2015. 

RFS Forecast for 2015

As we move toward 2015, both sides of Capitol Hill will be actively reviewing the RFS program. The landscape of Congress has shifted dramatically, with Republicans retaking control in the Senate. The Environment & Public Works Committee, which has jurisdiction over the program, will be chaired by Sen. Inhofe (R-OK), a long-time opponent of the program who, in light of this announcement, has already renewed his calls to reform the program. Similarly, the House Energy & Commerce Committee leadership has indicated its intentions to consider energy legislation early in 2015, and RFS reform proposals will certainly be considered.

However, reforming the RFS will not be an easy task. Many states, particularly in the Midwest, still benefit from the increased demand on agricultural products, making the politics of this issue very complicated. As we get closer to 2016, Senate Republicans will be defending a large number of seats, many from states where the RFS is still supported. In addition, 2016 presidential candidates will begin shifting their attention to Iowa, which has become the hotbed for support for the renewable fuels program. These factors will make outright repeal of the program unlikely, and enacting significant reforms will require a delicate balance.