The Renewable Fuels Standard (RFS) is tremendously important to our nation's energy security, economic vitality and environmental quality. The RFS was first established by the Energy Policy Act of 2005, the passage of which was an important step toward energy independence, as well as providing economic and environmental benefits.
By expanding the RFS ("RFS2"), the Energy Independence and Security Act of 2007 (EISA) capitalizes on the substantial benefits that renewable fuels offer to reduce foreign oil dependence and greenhouse gas emissions, and to provide meaningful economic opportunity across this country.
However, for the potential benefits of the RFS2 to be realized, it is imperative that the regulation is implemented in a way that both satisfies Congress' intent and is guided by sound science, transparent analysis and economic modeling that stands up to scrutiny.
To that end, we have several major concerns with the RFS2 Notice of Proposed Rulemaking:
- Lifecycle greenhouse gas analysis. One of our primary concerns with the RFS2 proposal is the tremendous amount of uncertainty and speculation associated with the lifecycle GHG analysis of biofuels, including emissions from indirect land use change. We are concerned by several specific elements of EPA's lifecycle analysis, as detailed below:
Inclusion of international indirect land use change emissions. The EPA's analysis of international land use changes simply does not comport with the statute's requirements and undermines Congress' intent. The RFA does not dispute that indirect emissions should be considered, but they must be significant and related to biofuel production. There is simply no evidence that biofuel production in the U.S. has significant influence over land use decisions in other countries, and we have deep concerns regarding the EPA's methodology. According to EPA's own analysis, typical corn ethanol reduces GHGs 61% compared to gasoline when all the emissions directly related to the supply chain are accounted for. But when "guesstimated" international indirect land use change emissions are tacked on, EPA suggests that same gallon of ethanol only offers a 16% GHG reduction.
Model integration. One reason for our discomfort with the inclusion of indirect effects in EPA's lifecycle analysis is that there is no general or scientific consensus on how to predict and measure the indirect effects of any fuel type. The EPA is using no less than nine separate models and data sets to conduct its full fuel cycle analysis. Many of these models were not initially designed to conduct this type of analysis, nor were they intended to work together in parallel. While each model has been peer-reviewed independently, the EPA amalgamation of models has not peer-reviewed as arrayed for the RFS2 analysis. Each model has its own inherent uncertainty and, when combined, that uncertainty is not just additive — it is multiplicative.
Model validation. Large-scale models must be validated against real-world data whenever possible. It is not clear whether EPA has performed this validation or back-casting with its modeling framework. As an example, EPA's model predicts every 1 million gallons of new corn ethanol production results in roughly a 3,000-ton reduction in U.S. corn exports. Real-world empirical data from the last five years shows that for every 1 million gallons of new corn ethanol production, the U.S. increased corn exports by an average of 6,600 tons. This example highlights the need for rigorous validation against real data.
Transparency of analysis. Based on the information currently provided in the NOPR, Regulatory Impact Analysis, and supporting and related materials posted to the docket, third parties are unable to replicate the results of EPA's biofuels lifecycle modeling. One of the primary models used by EPA, the FAPRI/CARD model, cannot actually be properly "run" by anyone outside of the CARD system. While certain inputs, outputs, and documentation for independent models are made available on the docket, stakeholders are unable to assemble these disparate components in a way that would reasonably allow replication of the EPA modeling process.
Peer review. We understand several elements of EPA's lifecycle analysis are being peer reviewed by independent reviewers. This is encouraging and we look forward to those reviews being made public. However, we strongly encourage that the reviewers are also provided with other independent studies and analyses that will help place the EPA lifecycle analysis in context and provide a holistic view of the debate over indirect effects.
- Petroleum baseline. EPA's analysis for RFS2 compares new ethanol gallons to 2005 average gasoline gallons. By anchoring baseline petroleum fuels in the year 2005, EPA does not properly take into account the fact that ethanol is reducing and delaying the need for gasoline from marginal, high carbon sources of crude oil, such as Canadian tar sands and Venezuelan extra heavy crude. So, while a specific gallon of ethanol may not be directly replacing a gallon of gasoline derived from marginal oil, it is displacing the need for that high carbon gasoline at the margin of the fuels supply. Therefore, additional GHG emissions from higher carbon oil sources are avoided. So far this effect is being overlooked in EPA's analysis, which assumes a gallon of biofuels replaces a gallon of 2005 average gasoline or diesel fuel.
- No indirect GHG emissions considered for oil. While biofuels are penalized for purported indirect GHG emissions under EPA's lifecycle analysis, it appears indirect GHG emissions related to the oil supply chain are not considered in the calculation of the 2005 petroleum baseline. Accordingly, EPA is using asymmetrical boundaries for its analysis and fails to make an apples-to-apples comparison between the lifecycle GHGs of biofuels and petroleum.
- Renewable biomass definition. The RFS2 proposal requires ethanol producers to obtain documentation verifying that their renewable biomass feedstock came from "existing cropland" and not from land cleared or cultivated after enactment of EISA. Because grain is highly fungible and commodities markets involve many distributed buyers, sellers and intermediaries, this provision and the alternative approaches posed by EPA would be overly burdensome and costly to both ethanol producers and farmers. It is highly unlikely that cultivation or clearing of new land will be necessary to meet the industry's feedstock requirements.
- Grandfathering. EPA's draft rule solicits comments on several alternatives to the proposed grandfathering provision. While we are generally supportive of EPA's basic grandfathering approach, we are strongly opposed to alternatives that set an expiration date of the grandfather period for existing facilities.