EPA unveils three-year ethanol mandate

The Environmental Protection Agency (EPA) released its three-year proposed ethanol mandate on Friday, increasing the amount of the biofuel it wants mixed into the gasoline supply but at levels still below those set by law.

The blending targets are overdue and EPA waived the goals Congress set in 2007 for the Renewable Fuel Standard (RFS). Officials said market pressures are limiting their ability to increase the renewable fuel levels as quickly as they would like.

{mosads}”We’re balancing two dynamics: Congress’s clear intent to increase renewable fuel over time to address climate change and increase energy security, and the real-world circumstances that have slowed progress toward these goals,” Janet McCabe, the EPA’s air pollution regulator, told reporters Friday.

Gasoline refiners said the proposal moves more quickly than the market can support. But many in the ethanol industry also oppose the standards and want more aggressive targets to get their product into the fuel supply

Renewable Fuel Association President CEO Bob Dinneen said the EPA had “created its own slower, more costly, and ultimately diminished track for renewable fuels in this country,” by adopting oil industry concerns.

The Iowa Renewable Fuels Association, which represents producers in the nation’s biggest ethanol state, said that “for conventional biofuels, this is a path to nowhere.”

“Today’s RFS proposal gives in to Big Oil lies and turns its back on consumers, fuel choice, and the environment,” Executive Director Monte Shaw said. 

The National Biodiesel Board was more measured, calling the proposal a “significant step in the right direction.” 

But, “more can be done, and we particularly look forward to working with the administration on strengthening biodiesel volumes for 2016 and 2017 during the comment period in the coming weeks,” CEO Joe Jobe said. 

One of the primary drivers behind the low ethanol targets is the so-called blendwall, the maximum volume of ethanol that can be blended into the fuel supply if all gasoline consumed in the U.S. is no more than 10 percent ethanol, which is as much as most vehicles can handle.

When Congress expanded the RFS in 2007, only about half of the gasoline used in the U.S. was at that 10 percent mark. Today, EPA said in its rule, nearly all of it is. Since overall gasoline demand has fallen and there aren’t many vehicles that can use more than 10-percent ethanol fuel, the demand for ethanol has flattened as well.

The EPA released three years’ worth of blending goals on Friday. It set its overdue 2014 requirements at the actual level of production — 15.93 billion gallons of biofuel — increasing that total to 16.3 billion gallons this year and 17.4 billion gallons in 2016. The statutory requirement for 2016 is 22.25 billion gallons.

“We do think that is an ambitious but responsible approach to the numbers, and we don’t think that the statutory volumes are reasonably achievable in the timeframe that we’re talking about here in this rule,” McCabe said.

“In that timeframe, we think that these volumes represent more than gradual growth,” she added. “They represent ambitious growth and are appropriate in light of Congress’s intent.”

Gasoline refiners opposed the proposal, arguing the market can’t support the high-ethanol fuel that would be required under the EPA’s production targets.

“Unfortunately what’s happening here is some of their rosy assumptions raise questions of how much more ethanol can be consumed, while at the same time putting consumers at serious risk, based on the cars they drive, the equipment they use,” American Petroleum Institute CEO Jack Gerard said.

The lower-than-mandated blending targets are likely to fuel the congressional debate over the future of the renewable fuel standard.

API, refiners, some green groups and a handful of members of Congress want to repeal the mandate, and they repeated that call on Friday. 

“Today’s announcement makes abundantly clear that the only solution is for Congress to repeal or significantly reform the RFS,” Gerard said.

Sen. Jim Inhofe (R-Okla.), chairman of the Senate Natural Resources committee, said the RFS is “a mismanaged program in need of rigorous oversight.”

“EPA’s announcement adds to the building evidence of how poorly the agency has managed the renewable fuel standard, and how the mandate is in need of significant reform and oversight,” he said.

The mandate’s defenders say the EPA needs to do a better job implementing the standards Congress passed. 

“It’s Christmas in May for Big Oil,” Sen. Chuck Grassley (R-Iowa) said. “President Obama’s EPA continues to buy into Big Oil’s argument that the infrastructure isn’t in place to handle the fuel volumes required by law. Big Oil’s obstruction and the EPA’s delays and indecision have harmed biofuel producers and delayed infrastructure developments.“

Under EPA’s proposal about 4.7 billion gallons of renewable fuel in 2015 is expected to be advanced forms of biofuel, such as cellulosic ethanol — made from plant material — or biomass-based diesel. The rest is expected to be corn-based ethanol. 

Beyond the blendwall, EPA said slower than expected development of cellulosic ethanol has also hampered the growth of renewable fuel. EPA calls for a tripling of cellulosic ethanol between 2014 and 2015, and nearly doubling it again in 2016.

The administration also said there is a lack of infrastructure available for delivering ethanol to consumers. In a corresponding move Friday, the U.S. Department of Agriculture announced a plan to spend $100 million on new blender pumps that can deliver more ethanol to consumers who use higher-blend fuels.

EPA officials said they intend to finalize their rule by November and, after years of delays, hope to release 2017 standards on time next year.

—This post was updated at 1:25 p.m.