WASHINGTON -- Refiners will need to blend in a record 19.28 billion gallons of biofuels into transportation fuels in 2017, with 15 billion gallons from “conventional” biofuels—mainly corn-based ethanol. This matches the 15-billion-gallon blending cap for conventional biofuels that Congress set 11 years ago under the expanded Renewable Fuel Standard (RFS2).
The Environmental Protection Agency (EPA) has announced 2017 renewable volume obligations (RVO) under the RFS2 at levels higher than it proposed in May. At that time, the agency proposed 18.8 billion gallons of biofuels, with 14.8 billion from conventional fuels. The final standards represent a 6% or 1.2-billion-gallon increase in total renewable fuel volumes from 2016.
The EPA also announced a 19% increase in advanced biofuel blending from 2016, to hit 4.28 billion gallons in 2017. This includes a 100-million-gallon increase in biodiesel and a 81-million-gallon increase in cellulosic biofuel blending.
Response to the higher-than-expected blending volumes was predictably mixed, with biofuels groups largely cheering the increases.
“By signaling its commitment to a growing biofuels market, the agency will stimulate new interest in cellulosic ethanol and other advanced biofuels, drive investment in infrastructure to accommodate E15 and higher ethanol blends, and make a further dent in reducing greenhouse-gas emissions,” said Bob Dinneen, president and CEO of the Renewable Fuels Association (RFA), in a statement. Dinneen was referring to E15, the 15% ethanol blend that has debuted at some of the c-store industry’s largest chains over the past year, including RaceTrac, Sheetz and Thorntons.
Michael McAdams, president of the Advanced Biofuels Association (ABFA), praised the EPA for releasing its RVOs ahead of schedule, and for increasing biomass-based diesel volumes. “And we welcome increases in both the advanced and cellulosic pools," McAdams said. "Those are truly the fuels of the future that deliver the most significant contribution to sustainability.”
Petroleum industry groups were joined by some environmental and food-industry groups in denouncing the increase in corn-based ethanol.
“We are disappointed that EPA has taken a step backwards with this final rule,” said Frank Macchiarola, downstream group director for the American Petroleum Institute, in a statement. “The RFS mandate is a bad deal for the American consumer. Today’s announcement only serves to reinforce the need for Congress to repeal or significantly reform the RFS.”
“The agency’s decision to increase the 2017 RFS volumes is completely detached from market realities and confirms once again that Congress must take immediate action to remedy this broken program,” said Chet Thompson, president of the American Fuel and Petrochemical Manufacturers.
Petroleum-industry opponents of the RFS point to concerns about breaching the “blend wall,” or the total amount of biofuels that the current fueling infrastructure can absorb by blending in up to 10% ethanol into gasoline. According to a research note from FBR & Co., the 2017 blending quotas would actually push the total amount of conventional and nonconventional ethanol blended into fuel past 11%.
Some merchant refiners have also opposed increased blending as costs of renewable identification numbers (RINs)—credits obligated parties use to prove their compliance to RFS blending quotas—continue to increase. The EPA recently announced plans to deny petitions from many of these refiners to move the point of obligation downstream. Just a few days after the EPA released the 2017 blending quotas, the RFA welcomed its newest member: Valero Renewable Fuels Co. LLC, the biofuels subsidiary one of the point-of-obligation petitioners, Valero Energy Corp.
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