EPA draft rolling back mandate doesn’t go far enough — oil industry

Source: Amanda Peterka, E&E reporter • Posted: Friday, October 25, 2013

A U.S. EPA draft proposal that would significantly scale back the 2014 ethanol-production mandate doesn’t go far enough, the oil and gas industry’s lobby said today.

The proposal would set ethanol production at 13 billion gallons next year, lower than this year’s 13.8-billion-gallon target and well below the 14.4-billion-gallon level anticipated in the 2007 statute that created the most recent renewable fuel standard.

But the American Petroleum Institute argues that any ethanol level above 12.9 billion gallons — what API proposed in a recent petition — would be unacceptable.

“If correct, it suggests that EPA’s moving in the right direction. It would be an acknowledgement of the ‘blend wall’ that is a reality and in fact should be a major factor in setting the RFS mandates,” Bob Greco, API’s director of downstream activities, said of the draft proposal. “However, we don’t think EPA’s going far enough.”

The ethanol mandate each year is the total amount of renewable fuels that refiners are required to blend into petroleum-based fuel minus the target for advanced biofuel.

By setting the ethanol target at 12.9 billion gallons, EPA would be requiring refiners to replace 9.7 percent of the nation’s petroleum-based fuel supply with ethanol. That level would alleviate concerns about the blend wall, or 10 percent saturation of the fuel market, Greco said.

Even though EPA has approved fuel containing 15 percent ethanol for use in cars newer than model year 2001, API says refiners are confined to the 10 percent level because of the current fueling infrastructure and concerns that E15 will damage car engines.

In its draft, EPA acknowledged concerns about the blend wall and said it would use its general waiver authority under the RFS to lower the level. The proposal to require 13 billion gallons would replace about 9.8 percent of the petroleum-based motor fuel supply.

But requiring 100 million gallons more than the amount requested by the oil industry does not allow refiners enough wiggle room, given the uncertainties over what gasoline demand will actually be next year and how much Brazilian sugar cane ethanol will be imported, Greco said today.

“I think the concern is that they’re trying to shave this so close,” he said. “Why can’t they lower it another 100 million gallons?” he added.

EPA’s proposal for the 2014 renewable fuel standard volumes is currently at the Office of Management and Budget. It’s not clear whether the draft circulated a couple weeks ago is the same as the version that the agency sent to OMB; EPA Administrator Gina McCarthy has said only that the agency has not made any final decisions.

According to the draft, EPA would also require 2.21 billion gallons of advanced biofuel. Of that, 1.28 billion gallons would come from biodiesel and 23 million gallons would come from cellulosic biofuel; the remainder would represent other advanced biofuels — including biodiesel production above the 1.28-billion-gallon target — and imports of Brazilian sugar cane ethanol (Greenwire, Oct. 9).

The American Petroleum Institute is urging EPA to lower advanced biofuels to a total of 1.92 billion gallons. EPA is expected to release its proposed rule within the next couple of weeks, according to industry observers.

But while the oil industry says the draft numbers wouldn’t go far enough, biofuels producers say that they would signal that EPA is effectively bowing to the oil industry’s demands (E&ENews PM, Oct. 15).

Producers have criticized all aspects of the draft, saying it raises concerns about the Obama administration’s commitment to biofuels. They’ve questioned its legality and called on federal agencies to investigate whether the proposal was leaked in order to influence market dynamics.

Biofuel backers respond

The Biotechnology Industry Organization today slammed the comments by API on the leaked 2014 draft.

“The RFS was designed to open the transportation fuel market and ensure that U.S. consumers would be able to use cleaner, renewable fuels,” Brent Erickson-, executive vice president of BIO’s industrial and environmental section. “The oil industry has used every means available to frustrate that goal.”

A coalition of biofuels, agriculture and national security groups and companies Tuesday told President Obama that scaling back requirements for renewable fuels next year would directly conflict with the administration’s Climate Action Plan because it would strand investments in advanced biofuels that provide greater emissions reductions than ethanol.

The draft proposal would also increase the price of gas as ethanol moves out of fuel, decrease employment in the renewable fuels sector and destabilize rural economies, the Fuels America coalition said.

“The proposal reportedly put forward by the EPA is a step backwards,” the coalition said. “It is a sign of a nation willing to cede its leadership role in moving toward low carbon transportation fuels, unwilling to stay on track with its statutory responsibilities when faced with opposition from incumbent industries — even opposition that is not grounded in fact.”