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PMAA WINS
REGULATORY RELIEF PROVISION IN FINAL RFS II RULE
The U.S. EPA released the final RFS2 rulemaking this week.
The rule is important to petroleum marketers because it
implements an ambitious national renewable fuel standard
that will affect motor fuel supplies for the next 12 years.
The final rule includes a provision requested by PMAA that
allows small biodiesel blenders to take RINs free product
for blending at their option. PMAA Regulatory Counsel, Mark
S. Morgan is analyzing the 548 page rule and is preparing a
comprehensive Regulatory Alert on this subject next week.
Until then, here are some of the key provisions of the RFS
II rule:
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RFS Volume: The 2010 RFS
volume standard is set at 12.95 billion gallons (bg).
The EPA is setting 2010 volume standards for new
categories of renewable fuels including cellulosic
renewable fuel 6.5 million gallons (mg) and biomass
based diesel 1.15 bg. The EPA estimates that by 2022 the
36 billion gallon renewable fuel volume will displace
about 13.6 billion gallons of petroleum-based gasoline
and diesel fuel and decrease gasoline costs by 2.4 cents
per gallon and reduce diesel
-
Lifecycle Greenhouse Gas
Emission Reductions: A key provision of the RFS2 is
the requirement that the lifecycle greenhouse gas
emissions (GHG) of a qualifying renewable fuel must be
less than the lifecycle GHG emissions of the 2005
baseline average gasoline or diesel fuel that it
replaces. Ethanol must meet a GHG reduction threshold of
20 percent for renewable fuel (corn) and 50 percent for
advanced biofuel (sugar cane). Bio-mass based bio diesel
(soy, waste oil, fat, greases) must meet a GHG reduction
threshold of 50 percent while cellulosic biofuels
(ethanol and biodiesel) must meet a 60 percent GHG
reduction threshold. The expanded use of renewable fuels
is expected to reduce greenhouse gas emissions by 138
million metric tons when the program is fully
implemented in 2022 or the equivalent to taking about 27
million vehicles off the road.
-
Biofuel Feedstock
Restrictions: New definitions under the RFS2 rule
require compliant renewable fuel to be derived from
renewable biomass feedstocks. The rule limits the types
of crops and land from which biomass may be harvested.
Restrictions are applied to two feedstock sectors: the
agricultural sector (planted crops and crop residues)
and the non-agricultural sector (planted trees and tree
residues, animal waste material and byproducts, slash
and pre-commercial thinnings).
-
Diesel Fuel: As required
by law the renewable fuel standard is expanded to
include motor vehicle, non-road, locomotive and marine.
Heating oil blends are assigned RINs but are not subject
to renewable volume requirements.
-
Dispenser Labels: The RFS
II rule drops proposed requirements for mid level
ethanol blend dispenser label warnings. This proposal
was meant to address concerns about the potential
misfueling of non-flex-fuel vehicles with E85. All
ethanol blends above ten percent per volume were included
due to the increasing industry focus on ethanol blender
pumps that are designed to dispense a variety of ethanol
blends (e.g., E30, and E40) for use in flex-fuel
vehicles. The EPA will wait until the agency makes a
decision on a possible waiver to allow an E-15 blend
before finalizing any dispenser labels.
-
Obligated Parties: The
RFS2 rule did not adopt an alternative proposal that
would move obligated party status from refiners to
downstream gasoline and diesel fuel blenders who supply
finished transportation fuels to retail outlets or to
wholesale purchaser-consumer facilities. PMAA opposed
this alternative because it would shift onerous
regulatory burdens from refiners to downstream blenders.
-
Upward Delegation of RINS:
The final rule adopted PMAA’s provision for blenders who
only blend a small amount of renewable fuel to allow the
party directly upstream to separate RINs on their
behalf. This provision will eliminate undue burden on
small blenders who would otherwise not be regulated by
under the RINS program. The provision applies to
blenders who blend and trade less than 125,000 total
gallons of renewable fuel per year (i.e., a company that
blends 100,000 gallons and trades another 100,000
gallons would not be able to use this provision) and is
available to any blender who must separate RINs from a
volume of renewable fuel.
PRESIDENT RELEASES $3.8 TRILLION FEDERAL
BUDGET
This week President Barack Obama submitted the
administration’s FY 2011 budget to Congress totaling $3.8
trillion. Last week, the President announced a three year
spending freeze on discretionary spending while also
highlighting that the budget would focus on putting
Americans back to work by providing $100 billion to the
middle class and small businesses to access credit.
There will be a $1.6 trillion gap between revenues and
expenditures in this year’s federal budget. The
Administration included revenue which would be collected if
Congress passes the controversial “cap-and-trade” global
climate change bill. However, the bill is unlikely to pass
this year due to dwindling support from moderate Democrats
and nearly all Republicans.
EPA’s FY 2011 budget requests ten billion dollars in
discretionary budget authority. Areas of interest to
petroleum marketers include $113.2 billion for the Leaking
Underground Storage Tanks which is approximately one million
dollars less than last year’s FY budget proposal. EPA will
also invest $60 million in the National Clean Diesel program
which helps to reduce particulate matter such as nitrogen
oxides and hydrocarbons from existing diesel engines. The
budget also provides $60 million to assist state efforts to
implement stricter EPA proposed National Ambient Air Quality
Standards (NAAQS) for smog and nitrogen dioxide (NO2). EPA
also requested $43 million to implement the greenhouse gas
reporting rule and to regulate large stationary sources of
CO2 emissions under the Clean Air Act.
The Small Business Administration (SBA) requested $994
million, a $170 million or 21 percent, increase over the
2010 enacted level. Specifically, the FY 2011 Budget
provides $165 million in subsidy costs to support $17.5
billion in 7(a) loan guarantees and also proposes to
increase the maximum 7(a) loan size from two million dollars
to five million dollars.
The budget provides $3.3 billion for the Low Income Home
Energy Assistance Program (LIHEAP) while creating a new
trigger mechanism to provide automatic increases in energy
assistance whenever there is a spike in energy costs. The
administration expects the trigger to provide roughly two
billion dollars in additional assistance in 2011 and $6.5
billion over ten years. The budget also provides the
Northeast Home Heating Oil Reserve with 11.3 million.
The Commodity Futures Trading Commission (CFTC) could get a
much-needed funding boost, something PMAA and its Commodity
Markets Oversight Coalition partners have called for, as
part of a larger effort to increase transparency in the
derivatives markets. The comprehensive financial reform
package includes $261 million for the CFTC. That includes
$45 million to expand regulation of the over-the-counter
(OTC) market and data collection as prescribed in the
legislation. The budget would also fund an additional 214
full-time employees and pay for new technology to improve
oversight and transparency of trading activities.
To help pay for his FY 2011 budget, President Obama is
including new taxes on the petroleum industry and the repeal
of the last in, first out (LIFO) accounting method. PMAA
sent a letter last year to Senate Finance Chairman Max
Baucus outlining its concerns with the proposed repeal of
LIFO.
COTA JOINS
SENATOR AND COALITIONS TO URGE CONGRESSIONAL ACTION ON
FUTURES MARKET REFORM
On Wednesday, PMAA Vice-Chairman
Sean Cota stood with Senator Maria Cantwell (D-WA) and representatives of the
Americans for Financial Reform and the Commodities Markets Oversight Committee
to call on Congress to bring greater transparency to the energy markets.
Under current law, certain kinds of complex financial transactions and trading
in commodity markets occur with no oversight or transparency. The lack of
oversight and transparency has led to excessive speculation and, in turn,
dramatically higher gasoline, diesel, and heating oil costs. In his remarks Cota
said, “one of the main factors that caused oil prices to rise so dramatically is
excessively leveraged speculators in the energy derivatives marketplace who have
distorted market fundamentals and led to the oil price bubble in 2008 and the
price surge seen in the last few months.” He went on to say, “for every one cent
per gallon change in gasoline price, it is worth one billion dollars to the
American consumer.”
Cota called on Congress to restore position limits to prevent extreme price
movements and implement centralized clearing for all market players and
aggregate position limits on all speculators. He said, “These measures will
eliminate the rigged gambling casino that energy markets currently are. It’s as
simple as that.”
HOUSE BILL TO PREVENT EPA FROM
REGULATING GHG
Three House Leaders introduced legislation on Tuesday that
would amend the Clean Air Act to prohibit EPA from regulating greenhouse gases (GHG)
based on their effects on global climate change.
Agriculture Chairman Collin Peterson (D-MN) and Missouri Representatives Ike
Skelton (D) and Jo Ann Emerson (R) introduced the bill which would also block
EPA from considering GHG emissions from international "indirect" land-use
changes when implementing the renewable fuel standard or RFS.
This follows efforts that are still
in play by Senator Lisa Murkowski (R-AK) who is working to seek a vote next
month on a disapproval resolution that would veto EPA's determination that
greenhouse gases threaten human health and welfare, as well as a house bill by
Representative Earl Pomeroy (D-ND) whose legislation would strip EPA of its
authority to regulate GHG emissions unless it receives Congressional authority
to do so.
The Supreme Court ruled in 2007 that EPA has the authority to regulate GHG under
the Clean Air Act and EPA is preparing to begin regulating GHG next month with
its final tailpipe standard. That rule will trigger stationary source
regulations, and the agency is expected to continue crafting GHG standards for
other sectors.
In a statement issued Tuesday,
President Obama acknowledged that the Senate may pass an energy bill this year
without a cap-and-trade bill.
REGULATORY REPORT FOR THE WEEK
PMAA published one Regulatory
Report this week. It describes the new OSHA Injury and
Illness Posting Requirement.
For copies of regulatory
reports, please contact
Brandon Wright at 703-351-8000 or visit our
website.
JANUARY PAC CONTRIBUTORS
PAC
co-chairs Sam Bell and Gary Harris are grateful for the
PMAA Small Business Committee (SBC) PAC contributions
from the following individuals during the January 1-31
timeframe:
Illinois: Allen Bocker, Janet Dauparas, Todd
Davis, Steven Dickerson, Vance Dickerson, Paul Hines
Jr., Ronald Kruep, Michael Lanman, Charles MacDonald,
John Parkin, Amy Ridley, Jon Stewart, Angela Tureskis,
Paul Torstrick, Kyle Vaubel, Gail Wade, Gerald Wagahoff,
Gene Wright, Thomas Wuller
Missouri: Mark Abel, Robert Abernathy, Rachel
Andreasson, Steve Ayers, Newell Baker Jr., Wayne Baker,
John Blanton, David Braddock, John Cook, Anthony Gier,
James Greer, Scott Hays, Doug Henderson, Thomas Kolb,
Gary Krueger, Gary Litzsinger, Steven Madras, David
Mangelscorf, James Maurer, Stewart McIntyre, Donald
McNutt, David Milligan, Chris Patterson, Craig Taylor,
Lynn Wallis, Robert Wilson Jr., Steve Wood, Laura
Younghouse
Vermont: Sean Cota
PMAA
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