Rumors continue to swirl about 2014 renewable fuel targets

Source: Amanda Peterka, E&E reporter • Posted: Sunday, October 13, 2013

The rumor mill is swirling around a set of numbers that appear to show U.S. EPA’s plans for next year’s renewable fuel targets.

Some in the biofuels industry have speculated that the numbers originated from members of the oil industry in an attempt to discredit ethanol. One biofuels industry representative said that in a meeting about a month ago, an EPA official indicated that the agency was not considering putting a cap on the conventional ethanol target next year.

Others expressed doubts that the agency would cut so deeply into the advanced biofuel target and raised questions of the possible proposal’s legality.

“This speculation certainly sounds like wishful thinking on the part of groups opposed to the RFS, because it is tough to imagine that EPA would actually propose such a woefully inadequate target,” said Michael McAdams, president of the Advanced Biofuels Association. “The agency recognizes that our country requires a diverse and secure energy future that includes advanced biofuels.”

According to the numbers being circulated, EPA would require refiners next year to blend about 15.2 billion gallons of renewable fuel into petroleum-based fuel next year. Of that, 13 billion gallons would be conventional corn ethanol and 2.21 billion ethanol-equivalent gallons would be advanced biofuel.

The target for cellulosic biofuel, an advanced fuel made from plant-based materials like agricultural residues and switchgrass, would be 23 million gallons, while biodiesel would be held at 1.28 billion gallons (Greenwire, Oct. 9).

Greenwire first reported the rumors Wednesday; Reuters and Bloomberg yesterday reported obtaining an agency document that confirmed EPA was leaning toward a proposal that would require 15.21 billion gallons of renewable fuel next year, 13 billion of which would come from conventional ethanol.

According to the text of the document, the proposal is one of three that EPA is considering, but it is the one that the agency is leaning toward. The proposal cites “inadequate domestic supply” as a reason for cuts and says EPA would use its waiver authority to make the changes to both conventional ethanol and advanced biofuels.

EPA, which is largely closed due to the government shutdown, publicly has been mum about its plans for renewable fuels next year; it’s likely the agency will not release the numbers until after the government opens again. The agency did not respond to a request for comment about the set of numbers that is circulating among stakeholders.

If the proposal is true, it would represent a recognition by the agency of what critics term the “blend wall,” or the 10 percent technically feasible limit to the amount of ethanol that can be blended into today’s fueling infrastructure. It would also be the first time the agency has scaled back the overall advanced biofuel target; in previous years, EPA has reduced its cellulosic target below what the statute directs but left the advanced biofuel number intact.

McAdams, who represents 45 companies in the advanced biofuel sector, said the numbers would represent a “devastating blow” to his nascent industry. The Energy Independence and Security Act of 2007, which created the most recent RFS, requires 3.75 billion gallons of advanced biofuel production next year.

“To support an industry that’s both here today and investing for tomorrow, EPA should be increasing the advanced biofuel targets from year to year — not cutting them by 20 percent,” McAdams said.

The biodiesel industry says it is on track to meet 1.7 billion gallons of biodiesel production this year and hopes that EPA’s proposal would reflect the growth in the industry.

EPA sets conventional ethanol targets through “total renewable fuels” volumes; the year-by-year corn ethanol requirement is essentially the amount left over in the RFS after advanced biofuels, including cellulosic biofuel and biodiesel, are subtracted.

The numbers floating around indicate that EPA would lower its conventional ethanol target for next year 1.4 billion gallons below the timeline laid out by the Energy Independence and Security Act. While the agency is required to abide by the numbers, it has the authority upon request to waive the law’s requirements if they are harming states or regions.

Although EPA received a waiver request from oil industry groups to lower the overall renewable fuel standard for next year, Bob Dinneen, president and CEO of the Renewable Fuels Association, warned in a blog post yesterday that the rumored targets would be “patently unlawful” because of the high bar Congress established for EPA to grant a waiver.

“There is no basis to suggest that the strict criteria for a general waiver are met today,” Dinneen said. “There can be no showing that the statutorily-mandated renewable fuel volumes ‘would severely harm the economy or environment’ of a state, region, or the country, or that there is an ‘inadequate domestic supply’ of total renewable fuel that would prevent the oil industry from meeting its total renewable volume obligations.”

Growth Energy today called on the Justice Department and the Commodity Futures Trading Commission to investigate whether the physical document was leaked to manipulate corn futures, ethanol futures and renewable fuel credit markets. The rumors have jolted markets, according to ethanol groups and traders.

“Obviously, someone was irresponsible in leaking such market-sensitive information,” said Tom Buis, CEO of Growth Energy.

The American Petroleum Institute and American Fuel & Petrochemical Manufacturers have requested that EPA lower its total renewable fuel target to 9.7 percent of next year’s expected gasoline demand, or 14.8 billion gallons — compared with the 18.15 billion gallons required by statute. According to the White House Office of Management and Budget, oil industry representatives met with EPA’s Office of Air and Radiation on Sept. 23 and 26 to press for approval of their waiver request.

EPA’s 2014 proposal is currently at the Office of Management and Budget for review.

Yesterday, American Fuel & Petrochemical Manufacturers filed a lawsuit against EPA over its 2013 renewable fuel targets, which in total mandate that obligated parties like refiners blend 16.55 billion gallons of biofuels into motor fuel. The oil industry group questioned the agency’s data and methodology for setting cellulosic biofuel targets and complained about consistently missed deadlines for advancing the yearly biofuel targets.

By statute, EPA is required to finalize its 2014 targets by Nov. 30 of this year; it’s likely that the agency will miss that deadline. In issuing its final targets for 2013, the agency said it will “propose to use flexibilities” in the renewable fuel standard to reduce the 2014 volume requirements for advanced biofuel and total renewable volumes.