Ethanol Blendwall Will Remain at Play in Upcoming RFS Proposals

Source: By Rachel Gantz, OPIS • Posted: Wednesday, May 27, 2015

EPA will have to continue to factor in concerns with the ethanol blendwall — the point at which 10% ethanol blends are maxed — in its proposed 2014-2016 Renewable Fuel Standard (RFS2) proposal, one energy source told OPIS.

“The blendwall is definitely in, but at what percentage? That is the question,” the source said.

For example, earlier this week, the American Petroleum Institute reiterated that it would like EPA in its RFS proposal to call for no more than 9.7% ethanol blends in gasoline.

In EPA’s proposed 2014 RFS2 target — issued in late 2013 but never finalized — the agency called for nearly across-the-board targets, including 13.01 billion gal of conventional biofuel (mostly comprising corn-based ethanol), down from 14.4 billion gal as originally envisioned. For its cuts, EPA cited concern with the ethanol blendwall.

“Relying on its Clean Air Act waiver authorities, EPA is proposing to adjust the applicable volumes of advanced biofuel and total renewable fuel to address projected availability of qualifying renewable fuels and limitations in the volume of ethanol that can be consumed in gasoline, given practical constraints on the supply of higher ethanol blends to the vehicles that can use them and other limits on ethanol blend levels in gasoline,” EPA explained in its then- proposal.

EPA said it plans to base its new 2014 proposal on actual production, but the agency’s thinking for 2015 and 2016 are not yet clear.

Meantime, the White House’s Office of Management and Budget (OMB) has kicked off its stakeholder meetings on EPA’s 2014-2016 RFS proposals. On Thursday afternoon, OMB met with officials from the American Fuel & Petrochemical Manufacturers (AFPM) and some of its member companies to discuss the proposal. In an interview earlier on Thursday with OPIS previewing comments, AFPM President Chet Thompson said the group planned to reiterate that EPA should keep the ethanol blends below 10%.

Stephen Brown, vice president and counsel for the Federal Government Affairs division of Tesoro, was also at the Thursday afternoon meeting with AFPM and OMB. “The issues that have been discussed extensively with agency officials for months now are use of multiple waiver authorities to address the blendwall, how to calculate the proper percentage point for saturation of ethanol into transportation fuel supply and the role of a RIN [renewable identification number] bank (if any) in determining the RVOs [renewable volume obligations],” he said.

However, “[a]ll of these are not takeaways from the meeting yesterday which, while featuring a robust discussion of several key issues, still saw OMB (properly) taking the Mount Rushmore approach in terms of indicating any direction on the proposed rule,” Brown added.

Meanwhile, in recently submitted comments to EPA, the Renewable Fuels Association (RFA) “strongly urge[d] the agency to abandon the flawed waiver methodology it initially used for the proposed rule establishing 2014 RVOs. ” The statutory basis for granting a waiver based on an ‘inadequate domestic supply’ of ‘renewable fuels’ does not allow the agency to take into account ‘factors that affect the consumption of renewable fuels,’ as it did in the initial 2014 RVO proposal,” RFA wrote. “In short, the methodology previously used by EPA for the suspended 2014 RVO proposal ultimately rewards the intransigence of oil refiners to invest in renewable fuels infrastructure, protects their market share and thus blocks increased volumes of cleaner and more sustainable renewable fuels from entering the marketplace. Adopting the same methodology for RVOs in 2015 and beyond would continue to reward oil companies for their stubborn refusal to follow the spirit and intent of the RFS as adopted by Congress,” RFA added.