RFS levels rolled back

RFS levels rolled back

EPA says blend wall limits corn-based ethanol blending to 13 billion gal.

THE Environmental Protection Agency moved forward Nov. 15 with proposing significantly lower renewable fuel standard (RFS) levels for 2014, with a total renewable fuel range of 15.00-15.52 billion gal. (Table).

The proposal would cut conventional biofuel requirements from 14.4 billion gal. to 13 billion gal. per year. This year, 13.8 billion gal. of ethanol were produced. The proposal also freezes the biodiesel level at 1.28 billion gal. and reduces cellulosic biofuels from 1.75 billion gal. to 17 million gal.

In a release, EPA said the proposal seeks to put the RFS program "on a steady path forward — ensuring the continued long-term growth of the renewable fuel industry while seeking input on different approaches to address the E10 blend wall."

The proposal discusses a variety of approaches for setting the 2014 standards and includes a number of production and consumption ranges for key categories of biofuels covered by the RFS program. The proposal seeks comments on a range of total renewable fuel volumes for 2014 and proposes a level within that range of 15.21 billion gal., which was the level previously leaked in October (Feedstuffs, Oct. 14).

Jeff Lautt, chief executive officer for POET, the nation's largest ethanol producer, said, "The proposed reduction from EPA is troubling as it not only cuts grain ethanol use below the levels set by Congress, (but) it cuts them to a level below the 13.8 billion that was met in 2013."

Lautt added, "America is looking at a possible record corn crop, and the opportunity to offer more affordable fuel options to consumers has never been better. At the same time, cellulosic ethanol capacity is coming on line in a large part thanks to significant investment from grain ethanol producers such as POET."

The biodiesel industry is on track to produce at least 1.7 billion gal. of biodiesel in 2013 and can match or surpass that production level in 2014, according to American Soybean Assn. president Dan Murphy.

Jack Gerard, president and CEO of the American Petroleum Institute, said the 17 million gal. proposed volume for cellulosic biofuels is problematic considering that only 435,000 gal. of the fuel will be produced this year, creating the "same old problem of phantom fuels with high in the sky expectations."

This is a proposed rule, not a final rule, although in the past, the proposed levels were never changed in the final ruling. Both sides of the issue plan to make their case heard and are considering litigation.

The petroleum industry may sue the agency because the numbers will not be finalized until sometime in the first quarter of 2014, yet the industry is supposed to comply with the RFS immediately upon final EPA action, which occurs well into the new production year.

The Renewable Fuels Assn., on the other hand, contends that EPA doesn't have the statutory authority to lower the total RFS requirement by more than the total reduction in advanced and cellulosic levels because severe or economic harm or an inadequate domestic supply of renewable fuels are not present.

 

Infrastructure

The central argument for EPA's change is the recognition of the "blend wall," especially if total gasoline use continues to slide, as it has in recent years, and use of higher ethanol blends remains stagnant.

EPA said the 2014 proposal seeks input on what additional actions the government and industry could take to help overcome current market challenges dealing with infrastructure and to minimize the need for adjustments in the statutory renewable fuel volume requirements in the future.

In a new paper, Bruce Babcock of Iowa State University's Center for Agricultural & Rural Development demonstrated a scalable model that shows that a $325 million investment in E85 infrastructure would reduce compliance costs by $1.75 billion.

"Obligated parties have turned to the EPA and asked for relief rather than create their own relief through expansion of E85 infrastructure, which is the intent of RFS. Stand firm on higher mandates, and the market will be opened to E85, and consumption levels will rise. Lower the mandate significantly, and it is a signal that the federal government is not committed to expanded consumption of biofuels as envisioned in the RFS," Babcock and Sebastien Pouliot wrote in their paper, "The Economic Role of RIN Prices."

EPA said looking forward, the proposal clearly indicates that growth in capacity for ethanol consumption would continuously be reflected in the RFS standards set beyond 2014.

EPA said it "looks forward to further engagement and additional information from stakeholders as the agency works in consultation with the departments of agriculture and energy toward the development of a final rule."

In a statement, Agriculture Secretary Tom Vilsack said the Administration remains committed to biofuels, "but I also believe that improved distribution and increased consumer use of renewable fuels are critical to the future of this industry. I am pleased that EPA is requesting comments on how we can help the biofuels industry expand the availability of high-ethanol blends, and I hope the industry uses the comment period to provide constructive suggestions."

 

EPA seeks comment on the following proposed volumes:

 

-Billion gal.-

Category

Proposed volume*

Range

Cellulosic biofuels

0.017

0.008-0.030

Biomass-based diesel

1.28

1.28

Advanced biofuels

2.20

2.00-2.51

Renewable fuels

15.21

15.00-15.52

*All volumes are ethanol equivalent except for biomass-based diesel, which is actual.

 

Volume:85 Issue:48

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