API says White House seeking to raise RFS volumes to stimulate E85, E15 sales

Source: By Platts • Posted: Friday, September 12, 2014

Washington (Platts)–11Sep2014/333 pm EDT/1933 GMT

The American Petroleum Institute on Thursday said it has gotten indication from the Obama administration that it intends to raise the Renewable Fuel Standard biofuels mandate in order to push production and sales of higher ethanol blends, such as E85 and E15.

Bob Greco, the API’s downstream director, said the push for higher ethanol blends appears to be coming from the White House and not the Environmental Protection Agency, which administers the RFS.

“In our conversations with the administration, … there’s a lot of interest in stimulating or incentivizing sales of E85 and E15,” Greco said in a conference call with reporters. “There are real obstacles to this. You’ve got the administration trying to force fuels into the market the consumers aren’t asking for.”

Greco’s comments came as the White House Office of Management and Budget is reviewing the EPA’s final 2014 RFS rule. The White House, which did not respond to a request for comment, has not said when the rule will be publicly released.

EPA Administrator Gina McCarthy last month, citing higher gasoline consumption than originally projected, indicated that the final rule may include a somewhat higher biofuels blending requirement than the proposed rule that was issued in November.

The proposed rule, met with much dismay by the biofuels industry, had called for the first time a cut to the mandate to 15.21 billion gallons, down from 16.55 billion gallons in the 2013 rule. The 2014 proposal included a corn ethanol mandate of 13.01 billion gallons.

Tim Cheung, an analyst with ClearView Energy Partners, said he expects the EPA could raise the corn ethanol volume up to 13.6 billion gallons, based on a projected 180 million gallons of E85 consumption.

“Volumes beyond that would likely require a higher E85 consumption estimate or a methodological change,” he said. “We think the total ethanol requirement is likely to fall below 13.6 billion gallons.”

Greco said API, which has sought to repeal the RFS and has called the law “unworkable,” has yet to meet with OMB over the final rule, and he suggested that the White House may raise the ethanol mandate to help Democratic Representative Bruce Braley in his close election against Republican Joni Ernst for the open Iowa Senate seat.

Greco added that API members have seen increased demand for E0, or gasoline without any ethanol, due to ethanol’s lower energy content. He urged the administration to keep the percentage of ethanol blended in US gasoline supplies to below 9.7%.

Anything above 10% would breach the so-called blend wall, he said, which given consumers’ reluctance to embrace higher ethanol blends could force refiners to blend more ethanol than they can sell.

“All these conversations with the administration show is that they’re going to try to push the blend wall as far as they can,” Greco said. “That doesn’t work from a compliance standpoint.”

Biofuels advocates countered that the original intent of the RFS was to encourage E85 and E15 production, and they accused the oil industry of blocking ethanol sales in order to maintain market share in transportation fuels.

Keeping the 2014 RFS rule at the proposed levels “basically signals that [the Obama administration is] sticking with the flawed methodology that guarantees the oil industry can control 90% of the fuels market,” said Brent Erickson, executive vice president of the Biotechnology Industry Organization. “It was designed to get us over the blend wall. It was not intended to codify the blend wall.”