EPA Proposes Lower RFS Volumes for 2014

EPA says decision is based on 'blend wall' situation, asks for stakeholder input

Published on: Nov 15, 2013

The EPA Friday released its proposed volumes for the 2014 Renewable Fuel Standard, calling on industry stakeholder to also comment on options for addressing the E10 "blend wall."

The proposal discusses a variety of approaches for setting the 2014 standards, and includes a number of production and consumption ranges for key categories of biofuel covered by the RFS program. The proposal seeks comment on a range of total renewable fuel volumes for 2014 and proposes a level within that range of 15.21 billion gallons.

Specifically, EPA is seeking comment on the following proposed volumes:

EPA Proposes Lower RFS Volumes for 2014

EPA says decision is based on blend wall situation, asks for stakeholder input
EPA says decision is based on 'blend wall' situation, asks for stakeholder input

EPA said the range of standards are due to the "blend wall," which the agency explains as a market saturation of 10% ethanol due to falling gasoline consumption and thus, inability to blend ethanol into the available fuel supply without raising blend levels.

If gasoline demand continues to decline, as currently forecast, EPA said, continuing growth in the use of ethanol will require greater use of higher ethanol blends such as E15 and E85.

Aside from raising ethanol blends, the EPA said a number of steps have been taken to avoid the blend wall, like approval of E15 for certain vehicles in 2010, and USDA's availability of funding for blender pumps in 2011.

The 2014 proposal seeks input on what additional actions could be taken by government and industry to help overcome current market challenges, and to minimize the need for adjustments in the statutory renewable fuel volume requirements in the future, EPA said.

The agency further noted that the proposal indicates that growth in capacity for ethanol consumption would continuously be reflected in the standards set beyond 2014.

"EPA looks forward to further engagement and additional information from stakeholders as the agency works in consultation with the Departments of Agriculture and Energy toward the development of a final rule," a statement said.

In a separate action, EPA is also seeking comment on petitions for a waiver of the renewable fuel standards that would apply in 2014. EPA expects that a determination on the substance of the petitions will be issued at the same time that EPA issues a final rule establishing the 2014 RFS.

Ethanol interests displeased

Ethanol groups were disappointed in the EPA's decision to propose lower mandated fuel production in 2014, with the National Corn Growers Association going so far as to call their reaction "outrage."

"This recommendation is ill-advised and should be condemned by all consumers because it is damaging to our tenuous economy and short-sighted regarding the nation's energy future," commented NCGA President Martin Barbre.

"Agriculture has been a bright spot in a failing U.S. economy, but current corn prices are below the cost of production," Barbre said, delivering an overarching message that many groups also suggested: "EPA's ruling would be devastating for family farmers and the entire rural economy."

Tom Buis, Growth Energy CEO, and Debbie Stabenow, D-Mich., chairwoman of the Senate Ag Committee, pointed to "big oil" as the driver of the decision.

"We are only five years into a 15-year policy that is working and has saved Americans billions of dollars at the pump," Buis argued. "Now is not the time to turn back on the progress we have made and ask Americans to pad big oil's already record profits."

Similarly, Stabenow said the blend wall is a "crisis manufactured by the oil industry" and would pull the rug out from underneath a growing renewables sector.

Some groups similarly suggested the proposal would shrink the market share ethanol and advanced fuel has garnered over the past several years, and would send negative signals to ethanol investors while failing to keep pressure on fuels markets to accept growing levels of biofuels.

Lower investments, along with the potential for less production and therefore fewer jobs, remained a key argument from the National Biodiesel Board.

"This proposal, if it becomes final, would create a shrinking market, eliminate thousands of jobs and likely cause biodiesel plants to close across the country," NBB Vice President of Federal Affairs Anne Steckel said.

However, USDA Secretary Tom Vilsack was quick to point out that just because the proposal indicates lower volumes, industry can still provide input to the EPA on the future of biofuels' distribution and goals for expanded consumer use.

"I am pleased that EPA is requesting comments on how we can help the biofuels industry expand the availability of high-ethanol blends, and I hope the industry uses the comment period to provide constructive suggestions," Vilsack commented.

AAA Motorclub, a group that says it supports development of renewable fuels, but not "unreachable" RFS targets, applauded the decision.

"The vast majority of cars on the roads today are not designed to run on gasoline containing more than 10% ethanol," explained Bob Darbelnet, AAA CEO. "While ethanol has the potential to support the economy and reduce the reliance on fossil fuels, it is irresponsible to mandate more ethanol than cars can safely use."

Comments from the American Petroleum Institute were also negative toward the proposal, though the group feels EPA did not go far enough.

"While the agency took a step in the right direction, more must be done to ensure Americans have the choice of ethanol-free gasoline for boats and small engines, and to bring their mandates closer to reality on cellulosic biofuels, which do not exist in commercial quantities," API President and CEO Jack Gerard said.

"For the first time, EPA has acknowledged that the blend wall is a dangerous reality that must be addressed to avoid serious impacts on America’s fuel supply and would be harmful for American consumers," he added.

Comments on the proposal will be open for 60 days following its submission to the Federal Register.

More information on the standards and regulations, click here.