EPA pushing renewables more than industry realizes — economist

Source: Marc Heller, E&E reporter • Posted: Thursday, June 2, 2016

The Obama administration may be doing more to help renewable fuels than the industry realizes, a new analysis from an agricultural economist suggests.

Despite industry criticism that U.S. EPA let petroleum companies off easy in its proposed fuel-blending requirements for 2017, the agency appears to be pushing hard toward ethanol blends greater than 10 percent — the so-called blend wall that shapes much of the debate over the policy — said Scott Irwin, an agricultural economist at the University of Illinois, Urbana-Champaign.

The blend wall is a metaphorical description with real-life influence on the future of the renewable fuel standard. Critics of the RFS say it could encourage stronger ethanol blends that might damage certain small engines in boats, for instance, and are encouraging Congress to abolish or revamp it.

Debate over the mandate’s future has also worked its way into the presidential campaign, with Republican Donald Trump facing potential backlash after one of his advisers cast doubt on the RFS.

Irwin said yesterday that the gap between EPA’s ethanol mandate and conventional ethanol use could reach 746 million gallons in 2017 based on the agency’s own assumptions about gasoline consumption. EPA has proposed 14.8 billion gallons of conventional ethanol for 2017.

“What are you going to fill that gap with?” Irwin said.

The answer, he said, is a combination of higher-ethanol blends of 15 percent or 85 percent; more non-ethanol biofuels such as biodiesel; and drawing down on EPA’s stock of renewable fuel credits, estimated at 1.72 billion gallons’ worth.

That’s how EPA pushes the alternative fuel mix, Irwin said. Right now, he said, markets seem to indicate that biodiesel — which doesn’t count toward the blend wall because it isn’t ethanol — could benefit even as the agency pushes the E10 blend wall for conventional ethanol.

In a May 26 column on a University of Illinois website, Irwin said his research “suggests the EPA is continuing to provide a substantial push above the E10 blend wall for conventional biofuels.”

That interpretation is too rosy for higher ethanol blends, said Geoff Cooper, senior vice president of the Renewable Fuels Association. Companies could easily meet EPA’s proposed conventional biofuel volume of 14.8 billion gallons without mixing in any more E15 or E85 ethanol, Cooper said.

The RFA expects existing ethanol demand and conventional or renewable biodiesel will account for 14.85 billion to 15.05 billion gallons of consumption in 2017, Cooper said.

“The proposal may scratch the blend wall, but it certainly does not break through it,” he said.

In time, the fight about the blend wall may crumble, Irwin said, as a new gap grows in the mandate for nonconventional, or advanced, biofuels.

The RFS itself is probably secure for a while, lobbyists say, even as it goes through a political rough patch.

The National Farmers Union and North Dakota Farmers Union wrote a letter yesterday to Rep. Kevin Cramer (R-N.D.), an adviser to Trump who has suggested the RFS should expire in 2022 — the year the mandates set by Congress in the RFS law are supposed to give way to EPA directives.

“Now, with low commodity prices crippling the farm economy and EPA reluctant to live up to its statutory duty, your advice to presumptive Republican presidential nominee Donald Trump is especially harmful and troubling,” they wrote.