The oil and biofuel industries are both expressing fears that the Environmental Protection Agency may be getting it wrong, as the agency prepares to issue its latest attempt to redesign its flagship renewable fuels program.
The Renewable Fuel Standard is slated to be re-proposed June 1 after months of delays that both biofuels and oil industry groups complain have led to extreme uncertainty.
In the case of the biofuel industry, the delay has caused plants to close. Oil refiners say the delays interfere with their business planning form one year to the next, as they need to purchase ethanol and other renewable fuels that EPA requires them to blend.
The EPA biofuel standard sets annual targets for blending renewable fuels that refiners must meet. The targets increase year to year, requiring the oil industry and refiners to blend ever-increasing amounts of fuels such as ethanol and biodiesel into the U.S. fuel supply.
At the center of most of the controversy are the obligations for 2014. The targets for that year were proposed back in 2013, but were never finalized because of protests by the biofuel industry that EPA’s cuts to the targets were unsubstantiated and effectively illegal under the Clean Air Act.
The EPA had cut the overall renewable fuel requirement for corn ethanol by nearly 1 billion gallons in an attempt to respond to the oil industry’s concerns over a so-called “blend wall,” or limit on the amount of ethanol that can be blended in the fuel supply.
The oil industry argues that blending increasing amounts of ethanol as required would lead to vehicle engine failure because engines are not equipped to handle fuel containing more than 10 percent ethanol, and wants the program significantly curtailed.
The EPA’s decision raised the ire of the ethanol industry and biofuel groups who pressed EPA to re-propose the rules, taking into account new information showing the market can absorb increasing amounts of renewable fuel.
The agency has rescinded the 2014 proposed rule for a regulatory do-over that further delayed the program’s implementation for a year in the hope that it could develop a plan that both industries could live with.
EPA said last month that it will re-propose the 2014 rule, while proposing the 2015 and 2016 target on June 1 in an attempt to rectify the program.
The biofuel industry, however, says it is already getting early indications from the EPA that there are problems with the new rules. The Biotechnology Industry Organization says EPA said in recent Enviroflash bulletin sent to stakeholders that it will be changing reporting deadlines for each corresponding year to account for the delays in the programs. But the changes could interfere with compliance by placing strain on the renewable fuel credit system that refiners use to comply. Renewable Identification Number (RIN) credits are generated from ethanol producers and can be bought and traded by refiners.
“EPA is stacking the 2013 and 2014 deadlines on the same day, likely shocking RIN markets as two years’ worth of obligations — some 28 billion RINs — are retired all at once,” said a BIO officials in an email. “If EPA kept the 2013 deadline on its scheduled day — Dec. 30, 2015, per the last rule and assuming they maintain the Nov. 30 [2015] deadline for finalizing the 2014 rule — they could get compliance deadlines back on track and avoid some of that shock.”
Meanwhile, the American Petroleum Institute is urging the EPA to stick with its original plan to reduce the renewable fuel targets under the 2014 proposal. It made the argument this week that a recent spike in demand for gasoline with zero percent ethanol, or E0, makes the case for EPA to cut the program.
The group’s downstream affairs director, Bob Greco, said Wednesday on a conference call with reporters that demand for E0 “is strong and growing, and EPA must take this into account as it prepares to release biofuel mandates for 2014, 2015, and 2016.” He says the new data shows E0 demand growing from 3.4 to 7 percent of gasoline demand.
The call was held with the National Marine Manufacturers Association, which has argued for years that the presence in ethanol in gasoline has caused engine damage and corrosion for boat owners. “Consumers want E0 for their boats, for lawn equipment, for recreational vehicles and for classic cars,” Greco said.
Still, they are concerned that the EPA may increase the ethanol requirements based on data from the biofuels camp that illustrates growing demand for higher ethanol blends such as 15-percent blends called E15, and 85-percent blends called E85.
“We remain concerned that EPA may raise ethanol requirements based on the specious reasoning that E85 … is a workable solution,” Greco said.
Greco argues that the EPA “should not try to mandate a market for fuels like E85 for which there is no demand while trying to eliminate fuels like E0 for which actual consumers have shown a substantial demand. … Consumers’ interest should come ahead of the ethanol interests.”
