API pushing for repeal, changes to Renewable Fuel Standard

The Environmental Protection Agency Monday issued final regulations that ease the annual requirements for ethanol in gasoline, a response to market restraints and other conditions that are preventing the Obama administration from meeting goals laid out in a 2007 law.

Similar changes also were made by the EPA in advanced biofuels – which includes cellulosic ethanol made from grasses, corn stalks, wood chips and other materials – with 3.61 billion gallons mandated for next year, an increase from the 3.4 billion previously proposed and about half of what Congress intended.

The agency is two years behind in crafting the quotas, putting the agency in the awkward position Monday of issuing the rules retroactively for 2014 and 2015 as well as establishing the mandate for 2016. With approximately 2 billion surplus RIN credits already available for refiners to use for compliance in 2016, and with another 900 million RINs potentially becoming available from 2015 over-compliance, the EPA’s decision to lower the 2016 RVO below the statutorily imposed level of 15 billion gallons is simply unnecessary.

The RFS does increase the level of so-called advanced biofuels by about 1 billion gallons from 2014 to 2016.

The EPA has set 2014 and 2015 RVOs at levels reflecting actual biofuel use during those years. As Donald Carr put it earlier on Grist, the Renewable Fuels Standard is “a government handout for those turning corn into fuel”.

The EPA justified its increase partly on robust predictions that higher ethanol blends such as E15 and E85 would gain traction and there would be scant demand for ethanol-free gasoline prized by boaters and some equipment owners.

This rule finalizes higher volumes of renewable fuel than the levels EPA proposed in June. But it accused the EPA of bowing to pressure from the biofuels lobby in making its final decision and said it believes the RFS program is dysfunctional and should be repealed. The Proposed Rule called for 1.63 billion gallons in 2014, 1.7 in 2015, 1.8 in 2016 and 1.9 in 2017. “But it’s disappointing that they have chosen not to follow the law as it was originally designed”.

The volumes established by EPA will provide some certainty to biodiesel producers and feedstock providers and will continue to generate many benefits for consumers and the environment. “If EPA doesn’t get serious about encouraging biofuels – as the law requires – the agency’s inaction and unambitious targets will hamper North Dakota job growth and reduce energy security”.

Dinneen added, in a unusual convergence with messages from the oil industry, that the ruling would limit consumer choice.

Pacific Ethanol Inc., a U.S. West Coast producer, surged 21 percent to $4.99, in its steepest one-day gain since March, in Nasdaq composite trading.

Jack Gerard, president of API, said the EPA needs to do more to protect consumers from unreasonably high ethanol mandates, predicated on higher ethanol blends that can not be used in most cars and that have been largely rejected by motorists. “Unlike Big Oil, the ethanol industry does not receive billions in tax subsidies and the RFS is our only means of accessing a marketplace that is overwhelmingly and unfairly dominated by the petroleum industry”.

While the requirements represent an improvement, “they still fall short of what we had hoped and what the American people deserve”, an ADM spokesman said in an emailed statement. But those numbers are based on 2007 fuel consumption forecasts, and in the eight years since, gasoline demand has grown more slowly than anticipated. That has angered oil industry groups and consumers who are concerned about pushing past the “blend wall”, or the point at which a vehicle engine is damaged by burning too much ethanol.

“Increases in both corn and ethanol yields and efficiencies have turned the RFS into a cap on what we can produce instead of an incentive to grow America’s renewable fuel sector”.