The ethanol industry will lay into the Environmental Protection Agency on Thursday for proposing a 2017 renewable fuel standard that it says is based on oil industry "hogwash."
The industry also will threaten continued litigation if EPA doesn't change the standard to the level outlined by Congress.
It's safe to say EPA will get an earful as it sits down with groups Thursday in Kansas City, Missouri, to discuss its biofuel requirements for next year.
Known widely as the RFS, the renewable fuel standard requires oil refiners to blend increasing levels of ethanol, with other renewable fuels derived from waste and other plant oils, into the nation's gasoline and diesel supplies.
In the presidential election year, presumptive GOP nominee Donald Trump has called for a phaseout of the standards, but that doesn't mean repealing it entirely. When he was in Iowa, Trump actually seemed to want the EPA to follow the law for the program. Meanwhile, congressional Republicans continue to ask for either repeal or reform of the RFS, but the debate over the program has quieted down in recent months.
Ethanol makes up about 10 percent of the nation's gasoline supply. But the oil industry has successfully argued that increasing the amount of ethanol in gasoline above that level would breach the so-called "blend wall," causing widespread vehicle engine failure, and placing oil companies on the hook for the liability charges.
Unfortunately for the ethanol industry, the EPA has bought into this idea, which has led to lower ethanol requirements since 2014 — as has less demand for gasoline.
Bob Dinneen, long-time president and CEO of the Renewable Fuels Association, the lead trade group for the ethanol industry, said he will tell EPA he is baffled and confused as to why the agency is ignoring Congress to buy into the oil industry's fiction.
"First, there is no magical marketplace limit or constraint on ethanol at 9.7 percent," says Dinneen, in prepared remarks obtained by the Washington Examiner. He says several oil and refiner groups "suggest exceeding that 9.7 percent threshold is somehow 'dangerous for consumers.' Hogwash!
"In fact, the marketplace has already demonstrated that it can handle much higher levels of ethanol," he says.
Dinneen throws the government's own data at EPA.
The Energy Information Administration, the Energy Department's analysis arm, shows that gasoline in 27 states contained more than 9.7 percent ethanol on average in 2014. Twenty-three of those states are blending above 10 percent as a result of higher 15- and 85-percent ethanol-to-gasoline fuel blends made available at gas stations.
EPA's 2017 standards requires 14.2 billion gallons of ethanol be blended in the gasoline supply, when it should be at least 15 billion gallons under the law, Dinneen says.
He concedes that the new proposal is an improvement over RFS requirements for 2014-2016, "but it ultimately falls victim to the same legal malady that plagued your last rulemaking."
The ethanol industry has taken the EPA to court over the issue, saying the EPA misinterpreted the law to lower the ethanol requirements. Dinneen says the agency can waive the corn ethanol requirement only if there is a shortage of ethanol.
But the blend wall issue is not a supply issue, as the U.S. is producing record amounts of the alcohol fuel. It's a distribution issue, he says.
"Simply put, EPA continues to allege that 'supply' somehow equates to the capacity to distribute or consume renewable fuels," he says. "However, the statute does not allow EPA to consider imagined constraints on distribution when deciding whether to utilize a general waiver of the volumes.
"The intent of Congress was abundantly clear: If the physical supply of renewable fuel exists to satisfy statutory volumes, then EPA must enforce the consumption of those volumes. And it is beyond dispute that the industry is providing an adequate supply to meet the statutory mandate for conventional biofuels."
Even if the ethanol standard were slightly less than 15 billion gallons, refiners worried about the blend wall would be able to satisfy the requirement by using the nearly 2 billion surplus RFS compliance credits available. The credits could be submitted to EPA by refiners instead of blending ethanol into gasoline.
"It continues to baffle us that EPA has ignored [renewable fuel credit] stocks in determining the proposed ... levels for 2017, and it is completely contradictory to past rulemakings and administrative actions where EPA has clearly viewed [credit] stocks as being part of the 'available supply' of renewable fuel," he says.