EPA slashes this year’s cellulosic targets

Source: Emily Yehle, E&E reporter • Posted: Wednesday, August 7, 2013

U.S. EPA has backed down from an ambitious target for cellulosic biofuel production, releasing a final rule today that requires refiners to blend 6 million gallons into the nation’s supply of gasoline this year.

That 2013 requirement is far lower than EPA’s initial proposal of 11 million gallons of cellulosic biofuel, or the equivalent of 14 million gallons of ethanol. The final rule — which sets the volume requirements under the renewable fuel standard — puts the target for cellulosic biofuel at the equivalent of 6 million gallons of ethanol.

Cellulosic biofuels are those made from plant-based materials; they are considered the next generation of fuels after ethanol.

“These standards reflect EPA’s updated production projections, which are informed by extensive engagement with industry and a thorough assessment of the biofuels market,” the agency said in a statement today.

Today, the renewable fuels industry characterized the adjustment as a smart move in tune with the marketplace.

Brian Jennings, executive vice president for the American Coalition for Ethanol, applauded the new targets as “realistic to reach this year,” while Brooke Coleman, executive director of the Advanced Ethanol Council, said EPA “has done its homework.”

Bob Dinneen, president of the Renewable Fuels Association, was similarly enthusiastic.

The new cellulosic requirement, he said, “has totally obliterated Big Oil’s myth that the RFS is inflexible and unworkable. As in years past, the finalized annual requirements are a testament to the inherent flexibility that is the backbone of the RFS.”

The rule comes more than six months after a federal court ordered the agency to revise its 2012 cellulosic requirement of 8.65 million gallons, finding the agency’s methodology in calculating it was not accurate enough. The oil industry, which brought the challenge, had argued that the number was too aggressive, given the actual production of cellulosic fuels last year of about 22,000 gallons.

But EPA declined to lower the requirements for overall advanced biofuel, of which cellulosic fuels are a subset. The final rule keeps the proposed rule’s requirement of 2.75 billion gallons of ethanol-equivalent volume.

That is bound to stir controversy over the “blend wall,” or the technically feasible amount of ethanol that can be blended into motor fuel. In a statement today, EPA acknowledged industry worries over the issue and said it would extend the deadline to comply with the 2013 standards by four months, to June 30, 2014.

EPA also announced that it will “propose to use flexibilities” in the renewable fuel standard to reduce the 2014 volume requirements for advanced biofuel and total renewable volumes. Those numbers are expected to be released soon.

But Stephen Brown, vice president for federal affairs at Tesoro Corp., said the agency may have to do more to address the issue.

“While it is progress that the administration now recognizes the blend wall dynamic as real and clearly wants to avoid the consequences of hitting it head on, the promise of the cavalry coming in the 2014 RVO [renewable fuel volume obligation] may not be enough to calm the waters,” Brown said in an email. “Certainly, the signal has been sent to Congress to do something comprehensive in the RFS space — let’s hope the Hill is listening.”

In a statement, the American Petroleum Institute said the targets are still too high and the flexibilities insufficient.

“While the administration acknowledges that higher ethanol mandates are unworkable by suggesting a new approach for the 2014 standards, EPA missed an opportunity to fix the problem this year,” API President Jack Gerard said. “Now it’s up to Congress to exercise leadership and move quickly to end this dangerous mandate before it hurts consumers, damages vehicles, and harms our economy.”

Sen. Tom Carper (D-Del.) said today’s rule — and the fact that EPA has signaled that it will reduce targets for 2014 — “sends a strong signal to our refineries that the EPA is listening to their concerns and working responsibly to address them.”

“By giving refineries more time to comply to the standard, and by signaling that the EPA will likely address blend wall issues in the upcoming 2014 targets, I’m hopeful that today’s rule will settle the Renewable Identification Number (RIN) markets, which have been volatile over the past year and are a big concern for smaller refineries like the one in Delaware City,” said Carper, who heads the Senate Environment and Public Works Committee subpanel on Clean Air and Nuclear Safety. “I encourage the EPA to move quickly on the 2014 targets and look forward to working with the agency to ensure we have a stable and transparent RIN market.”