EPA, energy data agency far apart on fuel projections

Source: Marc Heller, E&E reporter • Posted: Thursday, June 23, 2016

Americans’ consumption of fuel made without ethanol will have to fall sharply in the next few years to meet U.S. EPA’s assumptions in its renewable fuel directives, government estimates of fuel supply and demand suggest.

The U.S. Energy Information Administration and U.S. EPA appear to be far apart in their assessments of consumer demand for so-called E-0 fuel, according to figures discussed yesterday at a House Energy and Commerce subcommittee hearing on the renewable fuel standard.

The EIA said the total supply of E-0 was 5.3 billion gallons in 2015, far more than the 200 million gallons EPA projects for next year and beyond. EPA made the projection in its proposed renewable fuel levels for 2017.

Higher-than-expected demand for ethanol-free fuel could give ammunition to opponents of the RFS who say the public doesn’t want high-ethanol blends that may damage certain types of small engines.

That difference caught the eye of Rep. Pete Olson (R-Texas), a critic of ethanol mandates, who asked EPA acting Administrator for Air and Radiation Janet McCabe at the hearing whether the agencies share information and whether demand for E-0 is likely to tumble.

McCabe, who runs the RFS program, told the Subcommittee on Energy and Power that EPA relies on information from the EIA in setting alternative fuel but that the latest E-0 assessment is from a “very recent report” and didn’t offer an explanation.

“We do our best to project into the future,” McCabe said.

The EIA bases its statistics on amounts of fuel produced and exported, said Howard Gruenspecht, deputy administrator of the EIA, in response to Olson’s questions. For 2015, the figure of 5.3 billion gallons assumes excess supplies of ethanol will be blended with some E-0 to produce E-10 fuel, the EIA said in a May 4 posting on its website.

If demand for E-0 remains around 5 billion gallons in 2017, EPA is overestimating the amount of ethanol that will be consumed by at least 500 million gallons, Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, said in testimony to the panel.

McCabe and industry representatives were called to testify in the latest of a series of congressional hearings on the RFS, which mandates volumes of renewable fuels, including biodiesel and advanced biofuels in motor fuel, heating fuel and jet fuel. Congress updated the RFS law in 2005, mandating levels through 2022.

After 2022, EPA has sole authority to set the fuel levels.

Lawmakers continue to talk about revamping the RFS or perhaps repealing it, although lobbyists on both sides of the issue say big changes are unlikely this year. The RFS is also caught up in industry lawsuits, from both supporters and opponents.

On the supportive side, Renewable Fuels Association President Bob Dinneen told the panel the RFS has done exactly as intended by fostering a more diverse fuel mix. Lawmakers from ethanol-producing states continue to stand behind it; Rep. Dave Loebsack (D-Iowa) said the standard has brought competition to fuel markets and reduced U.S. reliance on foreign oil.

On the other side, Rep. Joe Barton (R-Texas) asked McCabe what would happen if the RFS mandate were repealed.

“Wouldn’t we still use a lot of ethanol?” Barton asked.

“There’s already a lot of investment” in ethanol, McCabe said.

One point of potential change is in refiners’ — rather than fuel blenders’ — responsibility to meet the RFS standard. EPA faces several petitions asking to switch the so-called point of obligation, and the issue is “very much on our minds,” McCabe said, although she said she didn’t have a time frame for settling the question.

“We’re looking at that, we’re talking to people across the board,” she said.