Biofuels decisions, costs piling up for new EPA chief

Record compliance costs driven by urgent and overdue fuel policy decisions will press newly confirmed US Environmental Protection Agency administrator Michael Regan from the first day on the job.

Pending decisions on how much renewable fuel to require refiners and importers to blend into the US transportation supply have helped drive costs associated with federal fuel blending mandates under the Renewable Fuel Standard (RFS)to their highest levels in the history of the program.

The former top environmental regulator of North Carolina, a state without any tilt toward refining or agribusiness-based biofuels, must give both those industries clarity on what — if any — adjustments the new administration will make to those requirements following a year of depressed global fuel demand.

Regan last month promised a Senate confirmation hearing that the agency would be transparent in its decisions. But the administrator did not pledge haste, noting the number of renewable fuels needs under litigation and market scrutiny.

"What I can promise you is we will take a no-surprise approach," Regan told the Senate Environmental and Public Works Committee.

EPA must set overdue minimum renewable fuel blending requirements for 2021, and by December set those requirements for 2022. The agency must also by December set blending requirements for 2023 as EPA for the first year takes greater authority over the RFS without specific Congressional targets.

And EPA remains dogged by past decisions and deferrals. Governors asked that the agency waive blending requirements for 2020 in light of the steep drop in fuel demand forced by global movement restrictions to limit the spread of Covid-19. Legal challenges to the former administration's use of mandate waivers for refineries processing less than 75,000 b/d of crude a year now stretch all the way to the US Supreme Court. EPA remains under court orders to find some way to add 500mn USG of blending requirements reduced in 2016 back into a future mandate. And a host of proposed advanced biofuels still wait for approval.

Costs to comply with the RFS have climbed over the past 13 months to surpass 16¢/USG, based on Argus assessments. That cost represents the price of the various credits needed to comply with the federal program for every gallon of gasoline and diesel added to the US road fuel supply. Those costs started last year at about 2.6¢/USG.

Regan may have little history with biofuels regulation, but President Joe Biden's administration also brings back prominent officials very familiar to program participants. Janet McCabe, nominated as deputy EPA administrator, from 2013 to 2017 was acting assistant administrator for EPA's Office of Air and Radiation — the office directly responsible for administering RFS. Gina McCarthy, former president Barack Obama's EPA administrator during that period, is Biden's national climate advisor.

By Elliott Blackburn