Refiners to Obama: Keep renewable fuel quotas down

Source: by Jennifer A. Dlouhy, Houston Chroncile • Posted: Thursday, October 16, 2014

WASHINGTON — Refiners on Tuesday implored President Barack Obama to hold firm on plans to scale back renewable fuel quotas for 2014, warning that if the administration gives in to Corn Belt demands for higher mandates, it could cause gasoline prices to spike.

“Now is not the time to backtrack on a proposal to avoid economic disruption,” 31 refining executives said in a letter to Obama.  “Technological and market limitations exist, and consumers — not the federal government — should determine what goes in their cars.”

Spearheaded by the American Fuel and Petrochemical Manufacturers group, the letter’s signers included Valero Energy Corp. CEO Joseph Gorder and Tesoro Corp. CEO Gregory Goff. Under a 2008 law, all of them are required to blend renewable fuels — primarily ethanol made from corn and other materials — into gasoline.

The Environmental Protection Agency last year proposed slashing the amount of renewable fuel required for 2014 to 15.2 billion gallons, some 3 billion gallons below the amount prescribed in federal statutes. Under the EPA proposal, up to 13.01 billion gallons of the required renewable fuel could come from traditional corn-based ethanol with 2.2 billion gallons of advanced biofuels.

But Obama administration officials have hinted that they could boost the final targets, justified in part because gasoline consumption has also risen since the proposal was first unveiled last year. One floated plan would raise the quota for ethanol, or conventional renewable fuel, to 13.6 billion gallons. The EPA also could boost the overall target and hike the individual quotas for other categories, including cellulosic biofuels.

Both refiners and biofuel producers have been lobbying the Office of Management and Budget, which is now reviewing the EPA’s final plan.

Renewable fuel supporters, including political leaders from corn-growing states, say the government should push the mandates higher, which would help lift low prices for the grain. They argue that the EPA should not chip away at a renewable fuels law Congress imposed to help the United States diversify its transportation fuels.

Oil industry leaders, meanwhile, say the EPA’s initial proposal still puts refiners uncomfortably close to a “blend wall,” a point where they would be forced to mix a higher proportion of ethanol into fuel than the 10 percent approved for use in all cars and trucks. Some car manufacturers say warranties are voided if a higher blend, such as E-15, is used in their vehicles.

In their Tuesday letter, the refining executives stressed that the final quotas should give them enough room to keep producing ethanol-free gasoline for boaters, motorcyclists and old car enthusiasts who demand the product.

“Renewable fuels already have a place in the fuel supply,” they said. “The federal government should not force consumers to use certain fuels — and particularly those that cannot be safely integrated into existing vehicles, small engines and retail infrastructure.”

The refiners also said they were worried about the cost to comply with the 2014 mandates, which are already 10 months late.

“If EPA raises the volume requirements, the supply chain is unable to retroactively generate additional compliance credits for the first nine months of 2014,” they said. If the EPA boosts its earlier proposed quotas, it “could send a signal to the market that EPA is willing to push the fuel supply past the blend wall, which could adversely impact consumers in the form of higher costs.”