WASHINGTON -- The U.S. Environmental Protection Agency (EPA) announced its proposed biofuel volume requirements for 2014, 2015 and 2016 on May 29, and also proposed biodiesel volumes for 2017. In doing so, it was attempting to better align the aim of the Renewable Fuel Standard (RFS)—reduce greenhouse gas emissions and increase energy security by growing the share of domestic, renewable fuels—with market realities.
But based on the reaction from industry groups, not many are satisfied with the results.
In its newest proposal, the EPA is basing the 2014 Renewable Volume Obligations (RVO) on the actual amount of biofuels produced and used that year—15.93 billion gallons. And it is increasing the volumes for 2015 and 2016 in recognition of biofuels’ part in addressing the chief aims of the RFS. The proposed total renewable fuel standard for 2016 is around 9%, or 1.5 billion gallons, higher than the actual 2014 volumes.
Corn ethanol volumes would be set at 13.25 billion gallons for 2014, and then 13.4 billion and 14.0 billion gallons for 2015 and 2016, respectively.
This marks EPA’s second attempt at setting the 2014 RVOs, after proposing to exercise its waiver authority and for the first time lower the original RFS volumes set by Congress, out of concerns that the country was close to hitting the maximum amount of ethanol that could be absorbed into the gasoline supply, and because of a steep lag in production of cellulosic biofuels. Biofuel groups rose up in protest at the proposed lower standards, arguing they would hamstring the development of the industry. EPA scrapped the original proposal and attempted a "re-do" with the new one.
“This proposal marks an important step forward in making sure the Renewable Fuel Standard program delivers on the Congressional intent to increase biofuel use, lower greenhouse gas emissions and improve energy security,” said Janet McCabe, the acting assistant administrator for EPA’s Office of Air. “We believe these proposed volume requirements will provide a strong incentive for continued investment and growth in biofuels.”
The Clean Air Act requires the EPA to set the annual RFS ethanol mandates by November 30 of the preceding year, but the agency missed these deadlines for the 2014 and 2015 requirements. After being sued by the American Petroleum Institute (API) and American Fuel & Petrochemical Manufacturers (AFPM) for not meeting its congressional mandated RFS deadlines, the EPA had agreed to propose the 2015 RFS mandate by June 1, 2015, and to finalize the 2014 and 2015 RFS mandates by Nov. 30, 2015.
Reaction was mixed from industry groups on both sides of the biofuels divide.
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In a conference call Friday morning, Jack Gerard, president and CEO of the American Petroleum Institute (API), credited the EPA for again deciding to exercise its waiver authority in proposing the lower volumes; however, he criticized the increasing RVOs as a sign that the agency is out of touch with consumer demand and the RFS’ original objectives.
“One thing we’re still troubled by is the underlying assumption of how much ethanol is going to actually be blended,” he said. “Unfortunately what’s happening here is some of [EPA’s] rosy assumptions raises questions over how much more ethanol can be consumed while at the same time putting consumers at serious risk based on the cars they drive, and the equipment they use.”
He repeatedly slammed the belief that adoption of higher ethanol blends—E15 and E85 in particular—would help overcome the blend wall, arguing that consumer demand for these fuels is not strong and that E15, approved by EPA for use in 2001 model vehicle years and newer, could damage consumers’ vehicles. And he charged that EPA was ignoring growing demand for ethanol-free gasoline, citing a recent analysis by API of EIA data.
The reaction from the biofuels industry was equally lukewarm. Bob Dinneen, president and CEO of The Renewable Fuels Association (RFA), which represents the ethanol industry, credited the EPA for trying to get the RFS “back on track” by increasing the RVOs over time; however, he described the lower proposed volumes as “a step backward for the RFS.”
“EPA successfully enforced a 13.8-billion-gallon RVO in 2013. The industry produced 14.3 billion gallons of ethanol last year. There is no reason to promulgate an RVO rule that takes us backward,” he said. “All it will do is result in an ever-increasing supply of renewable fuel credits (RINs) that will further discourage private sector investment in infrastructure and technology. This doesn’t make sense."
He continued, “The EPA plan fundamentally places the potential growth in renewable fuels in the hands of the oil companies—empowering the incumbent industry to continue to thwart consumer choice at the pump with no fear of consequence for their bad behavior. That is not what the statute intended. And that is not what’s in the best interests of consumers—who will be denied greater access to the lowest cost liquid transportation fuel and octane source on the planet.”
For its part, the National Association of Convenience Stores (NACS) said it is still reviewing the entire proposal. But in a statement, Paige Anderson, director of government relations, credited the EPA with recognizing the original statutory targets were “infeasible,” and for using its waiver authority to reduce them to a “more realistic level.”
“NACS has long urged EPA to make sure that the renewable fuel obligations are in line with market realities,” said Anderson. “The fact that EPA has again proposed to exercise its waiver authority is a positive step in that regard.”
EPA is holding a public hearing on the proposal on June 25, 2015, in Kansas City, Kansas, and will accept public comments until July 27. It will finalize the 2014-2016 volume requirements by Nov. 30, 2015.
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