Advanced Energy Perspectives

FEDERAL: Biofuels Dialed Back, Tax Reform Inching Forward

Posted by Tom Carlson

Nov 21, 2013 10:41:00 AM

    

RenewableFuelStandardRepresentatives of the biofuels industry expressed disappointment after the EPA proposed to lower renewable fuel requirements in 2014. EPA also wrapped up 11 listening sessions on its plan to regulate greenhouse gas emissions from existing power plants, which could provide a massive opportunity for advanced energy businesses. Meanwhile, Senate Finance Chairman Max Baucus began rolling out proposals to move the tax reform discussion forward.

 

In the Agencies:

EPA has ruffled the feathers of the biofuels industry with its plan to trim requirements under the Renewable Fuel Standard (RFS). The RFS requires refiners to blend 36 billion gallons of biofuels a year into the motor fuel supply by 2022. On Friday, the EPA proposed using its waiver authority for the first time to reduce the 2014 total renewable volume obligation (RVO) to 15.21 billion gallons from the 18.15 billion gallons required by the 2007 Energy Independence and Security Act. The rule also sets volumetric and percentage standards for three categories of renewable fuels: cellulosic biofuels (derived from non-edible biomass), biomass-based diesel, and advanced biofuels (which includes the former two categories and other non-ethanol advanced biofuels). EPA will accept comments for 60 days once the proposal is published in the federal register; a final rule is expected in the spring of next year.

 

EPA cited two main reasons for reduction: constraints on the percentage of ethanol blended into gasoline (sometimes referred to as the "blend wall") that some vehicles can use and limits on the amount of qualifying renewable fuels being produced.

 

The Renewable Fuels Association published comments on the RFS earlier this year, arguing that the E10 blend wall could be overcome with modest investments by oil refiners and downstream suppliers to allow for sales of E15 (approved for cars built in 2001 or later) and E85 (approved for flex-fuel vehicles). An RFA fact sheet argues that lower use of ethanol could increase demand for gasoline, resulting in higher prices, and set back efforts to reduce our dependence on petroleum.

 

The Advanced Ethanol Council (AEC), which is part of the Renewable Fuel Association (RFA), also announced disappointment in the proposed rules. The proposed cellulosic biofuel standard was “in the right ballpark,” AEC said in a statement, but back-pedaling on the standard could undermine the confidence of advanced biofuel investors as they looked at the “big picture.”

 

House Energy & Commerce Committee Chairman Fred Upton (R-MI) and Ranking Member Henry Waxman (D-CA) released a joint statement offering praise for EPA’s proposed RFS rules and promising to work together on a “longer-term solution.” The members approached the issue differently, however, with Upton focusing on the “pressure of a looming blend wall” and Waxman encouraging EPA to implement the RFS in a way that encourages lower-carbon biofuels. While there may yet be congressional action on the RFS, it’s also worth noting that tax credits for advanced fuels are set to expire at the end of this year.

 

On November 8, EPA held the last of its 11 listening sessions across the country to elicit input on their design of greenhouse gas regulations for existing power plants. The agency’s proposed rules are due to be released in June 2014. AEE and its state and regional partner organizations attended several of these events, noting the value that advanced energy technologies can provide states as they ultimately implement rules to reduce emissions from power generation. We plan to stay actively engaged to ensure that advanced energy businesses are firmly seated at the table as EPA develops rules and the states prepare implementation plans.

 

Heather Zichal officially left her position as Deputy Assistant to the President for Energy and Climate Change on November 8. Just days before leaving, she spoke at a breakfast organized by AEE, where she encouraged advanced energy companies to “connect the dots” and show how the industry can address environmental issues and create economic growth at the same time. 

 

On the Hill:

A variety of tax matters were raised in and around Capitol Hill recently, but none seemed ready for resolution.

 

Senate Finance Chairman Baucus moved the tax reform discussion forward Tuesday by releasing a proposal to revise the tax laws governing foreign earnings. He is expected to release further proposals over the coming weeks. But prospects for real movement in tax reform seem dim.

 

In the near-term, tax reform has been derailed by ongoing budget issues, with a bicameral budget conference committee working to fund the government past January 15. Senate Finance Ranking Member Orin Hatch (R-UT) walked away from tax reform discussions with Chairman Baucus earlier this year, but said he hoped “that once the budget conference negotiations have concluded that we can renew our discussions.” In the House, Ways and Means Chairman Dave Camp (R-MI) has held off on releasing his own proposals under urging from House leadership.

 

Meanwhile, the Governors’ Wind Energy Coalition released a letter to House and Senate leaders on November 6 signed by 11 Republican and Democratic governors urging an extension of the Federal wind production tax credit. As reported in our last federal update, discussion of tax extenders is unlikely to take place before the PTC and several other tax provisions expire at the end of this year.

 

Also, Bloomberg Government report that the Joint Committee on Taxation announced its estimate that the Master Limited Partnership (MLP) Parity Act (S. 795) will cost $1.3 billion over 10 years. The estimate allows backers, which include bipartisan supporters in each chamber, to identify an offset for the cost of the bill, which would open up this tax-favored ownership structure, now limited to fossil fuel and pipeline projects, to renewable energy installations. A spokesman for the bill’s sponsor, Sen. Chris Coons (D-DE), said the legislation could generate up to $10 billion in private investment in advanced energy “right away.”

 

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Topics: Federal Policy Update

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