FOR more than 12 hours on Dec. 5, the Environmental Protection Agency held a public hearing that offered a platform for interested parties to present data, views and arguments on the agency's proposal to lower the mandated volume obligations under the renewable fuel standard (RFS) for 2014.
Nearly 150 people testified to a panel of EPA staff tasked with finalizing the rule. EPA officials were able to ask questions of panelists, commonly requesting a more detailed analysis in written comments of the claims made by those who testified. The comment period opened Nov. 29 and goes until Jan. 28, 2014.
In mid-November, EPA proposed significantly lower RFS levels for 2014, with a total renewable fuel range of 15.00-15.52 billion gal. The proposal would cut conventional biofuels from 14.4 billion to 13 billion gal. per year. This year, 13.8 billion gal. of ethanol were produced.
In testimony, the oil industry said 13 billion gal. — which allows roughly 10% of the domestic fuel supply to be supplied with biofuels — isn't low enough. Instead, they continue to call for a lower level of 9.7%, as was sought in their waiver request earlier this year. EPA asked for clarification — and ethanol advocates challenged — that this assumes no use of E15 or E85 ethanol blends and provides no headroom for increased usage.
Major livestock groups such as the National Chicken Council and National Cattlemen's Beef Assn. continued their call for a "level playing field" for corn use and welcomed EPA's move but still called on Congress to fully repeal the RFS.
Something widely criticized in the public hearing was a proposal to freeze the biodiesel level at 1.28 billion gal., down sharply from the industry's production rate of about 2 billion gal. since July. Many testifying called for an increase to 1.7 billion gal. and said there is no "blend wall" issue with the diesel market, which EPA took into consideration within the conventional ethanol category.
EPA's draft proposal is particularly challenging for biodiesel because excess biodiesel production from this year's record volume can be carried over and used for RFS compliance in 2014. As a result, the 1.28 billion gal. proposal could effectively mean a market closer to 1 billion gal. Additionally, it holds the biodiesel volume at 1.28 billion gal. for two years, in both 2014 and 2015, essentially freezing the industry.
Mike Cunningham testified on behalf of the American Soybean Assn. that soybean oil would be a drag on demand for soybean meal protein if not for the biodiesel market.
"There has been increased soybean production to meet global protein demand, and at the same time, soy oil is being displaced from food markets due to the move away from trans fat," he said.
At the center of the RFS discussion was whether to set policy that incentivizes future adoption and use or set levels more pragmatically in line with current infrastructure and demand projections.
Iowa Gov. Terry Branstad testified, along with others, about the state's overwhelming adoption and acceptance of ethanol, including higher ethanol blends.
"The fact is that everywhere higher blends have been offered, consumers have responded positively. Recent sales data found the average ethanol content for Iowa blender pump operators was around 25%," said Grant Menke, policy director at the Iowa Renewable Fuels Assn.
Growth Energy director of regulatory affairs Chris Bliley testified that while some have claimed that the infrastructure is not in place to dispense ethanol blends above 10%, that is simply not the case.
"The vast majority of gasoline dispensing equipment made since 2008 is warranted for ethanol blends as high as E15, and underground storage tanks made in the last 20 years are equipped to handle blends up to 100% ethanol," he testified.
Today, 80% of the vehicles are approved for E15 use, and there are more than 16 million flex-fuel vehicles that can take higher blends of up to E85.
Testimony from those at the retail level revealed that the biggest challenge is consumer awareness of these blends and countering "information that E15 and E85 is bad," noted Paige Anderson, director of government relations at the National Association of Convenience Stores, which represents 149,000 convenience store operators.
"The majority of our stores are not seeing the demand that we're hoping they would see with higher blends of ethanol," Anderson said.
Tim Columbus, counsel for SIGMA, a trade association of 270 independent motor fuel marketers and chain retailers, said his organization has been supportive of the RFS and opposes a repeal. He said the waiver is important to avoid a "severe shock to the fuels market" as the "blend wall is a real threat."
He noted that his client members have not seen huge increases in sales of higher ethanol blends, with most E85 sales representing just 1.5-2.0% of sales at the retail level. He added that there are still regulatory problems perceived with E15 and E85 that EPA needs to address through education efforts.
At the end of the day, though, "nobody who is a consumer has to buy a drop of this," Columbus said. "We can build all the infrastructure we want, but if they don't use any great volumes, it leaves marketers out of compliance."