Oil trade groups urge EPA not to exceed current ‘blend wall’ 

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, May 5, 2015

Oil trade groups are asking U.S. EPA to recognize the “blend wall” in its forthcoming proposal setting renewable fuel requirements for 2014 and beyond.

In a letter, the American Petroleum Institute and American Fuel & Petrochemical Manufacturers asked EPA to hold strong to the approach the agency took in its controversial proposal in late 2013 to roll back renewable fuel requirements for refiners.

“EPA must recognize that exceeding the ethanol blend wall could restrict the availability of domestic transportation fuels,” the oil trade groups wrote.

The 2007 renewable fuel standard mandated that refiners use increasing amounts of renewable fuels, including advanced biofuels, each year in petroleum gasoline and diesel. Congress, however, gave EPA certain authorities to waive the annual mandates.

In its proposal in 2013, which would have set the mandates for 2014, EPA proposed to ratchet down the requirements for conventional ethanol for the first time based on “inadequate domestic supply,” arguing that expansion of more ethanol was not possible due to the infrastructure and market limitations known as the blend wall.

It also proposed to lower the targets for advanced biofuels on the grounds that the domestic advanced biofuels industry had developed more slowly than expected.

EPA ultimately withdrew the rule after receiving thousands of comments, many from the biofuels industry that questioned the legality of its approach. The legal questions centered on whether the agency could use its authority to waive the mandates based on inadequate supply because of distribution issues with ethanol.

In their letter, API and AFPM reiterated their support for EPA’s approach in the withdrawn rule.

“It is appropriate and necessary for EPA to utilize the waiver authority to protect consumers and the U.S. economy,” the groups wrote.

They added that the market has reached the 10 percent blend wall, “the maximum amount of ethanol that can safely be blended without posing risks to the vehicle fleet, refueling infrastructure and vehicle warranties.”

The oil groups also argued that E15 — gasoline containing 15 percent ethanol — and flex-fuel vehicle technology would not significantly expand the amount of ethanol in the marketplace.

API and AFPM also called on EPA to hold refiners’ biodiesel requirement steady at 2013 levels and to waive the RFS requirements for cellulosic biofuel, an advanced biofuel made from non-food plants.

“There is little risk in erring on the low side when setting the renewable fuel volumes, but substantial risk in setting them too high,” the groups wrote to EPA Administrator Gina McCarthy.

Friday’s letter comes after API and AFPM settled with EPA over the timing of the release of the RFS proposal. Under the court agreement, EPA would be required to issue a proposed rule setting both the 2014 and 2015 renewable fuel requirements by June 1 and finalize the rule by Nov. 30; the agency has said it would follow the same timeline for the 2016 mandates.

API and AFPM also sent the letter to all members of the Senate. In late April, 37 senators wrote a letter to EPA insisting that the agency set higher biofuel mandates that reflect the levels Congress intended when it wrote the renewable fuel standard into law in 2007 (E&E Daily, April 24).

Biofuel groups have argued that the 10 percent blend wall is fictional and have pushed back against oil industry concerns about adding more ethanol to gasoline.

They’ve also called on EPA to issue robust targets for both conventional ethanol and advanced biofuels, and to abandon the methodology that the agency used in its scrapped proposal. Biofuel groups had hinted they would have sued the agency if the 2014 proposal had been finalized.

A rollback would have especially hurt advanced biofuel producers, which are counting on the investment dollars that a stable RFS would bring, according to biofuel groups.

The “proposal changes how the RFS works at a fundamental level,” advanced biofuel producers last year wrote to President Obama, and would “effectively undercut advanced biofuel projects under development.”

EPA has already said that it would base its 2014 mandates on the amount of renewable fuel that was actually produced in the market.

At a recent ethanol industry conference, a top EPA official said that the agency was still wrestling with how to address the blend wall in the forthcoming rule (Greenwire, Feb. 20).