The Obama administration appears poised to provide refiners with a way out of meeting part of the federal ethanol mandate, an idea that originated a decade ago with Oklahoma Republican Sen. Jim Inhofe, and one that the biofuels industry says would stunt its growth.
At issue is an expansion of the reasons refiners could use to secure a waiver from blending ethanol and other biofuels into gasoline, as is mandated under the Renewable Fuel Standard.
The Environmental Protection Agency proposed nearly a year ago that refiners could receive a waiver if there were shortages in “distribution capacity.” That refers to gasoline pumps, tankers and pipelines that distribute ethanol blends higher than the standard 10 percent ethanol mixed with gasoline.
The industry is concerned that allowing the waivers could put an artificial ceiling on the amount of biofuels that get blended into gasoline. Gas stations could simply refuse to install the necessary infrastructure to carry higher ethanol blends, such as E85, which has 85 percent ethanol, even if the EPA continues to propose annual increases between now and 2022 as required under the mandate.
That the idea for the waiver first surfaced in a 2005 bill written by Inhofe, who has called climate change a hoax and has taken repeated stabs at the biofuel programs in Defense Department bills, adds insult to injury, wrote Brooke Coleman, executive director of the Advanced Ethanol Council. He said that could have consequences for next-generation biofuels that are struggling to secure investments because the potential waiver has clouded the mandate’s future.
“The biofuel industry knew that adding a ‘distribution capacity’ waiver allowance to the RFS in 2005 was nothing more than an invitation for oil companies to lie down on the program. In a non-competitive marketplace, that’s a pretty big deal for advanced biofuel investors,” Coleman wrote in industry publication Biofuels Digest.
One of the main problems for the ethanol industry is that motorists simply don’t use much of the higher blends of ethanol, which the refiners must provide so they can meet the mandate’s annually increasing targets. While the number of vehicles that can use E85 is “substantial,” said Paul Winters, a spokesman with the Biotechnology Industry Organization, he noted that each only uses about 16 gallons of the fuel each year — basically, one tank.
The industry contends the low use stems from the fuel not being widely available, which they attribute to petroleum refiners edging biofuels out of the market.
But refiners say the biofuel industry’s criticism is misplaced.
Refiners cannot simply add new E85 pumps at filling stations because they own less than 5 percent of all stations, said Brendan Williams, senior vice president of advocacy with the American Fuel and Petrochemical Manufacturers. The rest are split between independent business owners and franchisers who sign agreements for supplies and marketing with a specific refining company.
Williams called the biofuels industry’s argument a “red herring,” noting that infrastructure outside of gas pumps — such as storage tanks underneath filling stations, tankers to carry the fuel and cars that can actually run on blends with a higher than 10 percent ethanol concentration — also count as distribution constraints.
“This seems to be their argument du jour and they know they don’t have much of a factual basis,” Williams said.
Refiners also say the stations don’t have E85 because drivers don’t want to use it.
Biofuel groups are fighting to ensure the waiver doesn’t go forward, though they’re not encouraged by the current state of affairs. Ten months into the year, the White House is still reviewing the final blending targets that were supposed to finished months ago.
“We’ve never had any indication that they are going to back off,” Winters said. “The fact that they haven’t done a rule … that has essentially left the [refiners] to use the proposed rule as their guidance. [EPA] legally can’t back off.”
