EPA proposes lowering congressional RFS requirement

By Derrick Cain

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Nov. 15, 2013 - The EPA issued a proposed rule today to lower the Renewable Fuels Standard (RFS) requirement for 2014 below the congressional mandate to 15.21 billion gallons of ethanol and biodiesel for blending into gasoline. 

Congress initially called for an 18.15 billion gallon mandate. The proposed rule immediately drew strong reactions, in support and opposition, from lawmakers and several organizations. The decision to move to lower the requirement was not unexpected though, because an earlier leaked draft of the rule contained similar numbers.

EPA administrator Gina McCarthy said despite the proposal to lower the RFS requirement, the administration continues to support the goal of increasing biofuel production and usage.

“Biofuels are a key part of the Obama administration's ‘all of the above' energy strategy, helping to reduce our dependence on foreign oil, cut carbon pollution and create jobs,” McCarthy said. “We look forward to working with all stakeholders to develop a final rule that maintains the strength and promise of the RFS program.”

After the proposed rule is published in the Federal Register, which may happen next week, it will be open to a 60-day public comment period.

EPA said 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 biofuel.

Specifically, EPA is seeking comment on the following proposed volumes:

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  • Cellulosic biofuel at a proposed volume of 17 million gallons with a range of 8-30 million gallons.
  • Biomass-based diesel at a proposed volume of 1.28 billion gallons with a range of 1.28 billion gallons.
  • Advanced biofuel at a proposed volume of 2.20 billion gallons with a range of 2.0-2.51 billion gallons
  • Renewable fuel at a proposed volume of 15.21 billion gallons with a range of 15.0-15.52 billion gallons.

Nearly all gasoline sold in the U.S. is now “E10,” which is fuel with up to 10 percent ethanol. Production of renewable fuels has been growing rapidly in recent years. At the same time, advances in vehicle fuel economy and other economic factors have pushed gasoline consumption far lower than what was expected when Congress passed RFS in 2007. As a result, EPA said, “We are now at the E10 blend wall, the point at which the E10 fuel pool is saturated with ethanol. If gasoline demand continues to decline, as currently forecast, continuing growth in the use of ethanol will require greater use of higher ethanol blends such as E15 and E85.”

In a separate action, EPA said it is also seeking comment on petitions for a waiver of the renewable fuel standards that would apply in 2014. EPA expects a determination on the substance of the petitions will be issued at the same time that EPA issues a final rule establishing the 2014 RFS.

On Capitol Hill, lawmakers jumped all over EPA's long-awaited RFS announcement.

Several House lawmakers, including Reps. Bob Goodlatte, R-Va., Peter Welch, D-Vt., Jim Costa, D-Calif., and Steve Womack, R-Ark., called the announcement welcome news, but at the same time said the agency did not go far enough.

“While the EPA's slight reduction of the RFS for 2014 acknowledges that the mandate is unworkable, it is not enough to provide the much-needed relief businesses, farmers, and consumers need,” Goodlatte said.

The four lawmakers authored the Renewable Fuel Standard Reform Act (H.R. 1462), which would repeal the corn ethanol mandate, cap ethanol use at 10 percent (E10); and “preserve the mandate for the fledgling cellulosic biofuels industry.” House Majority Whip Kevin McCarthy, R-Calif., said the EPA rule is an admission that the foundation of RFS is flawed and hurting U.S. consumers.

“While the law's original intention was to help secure domestic energy supply in response to declining domestic oil and gas production, today's decision also reflects the transformation in the energy landscape taking place in North America,” McCarthy said. “The ethanol mandate requiring refineries to blend more ethanol into gasoline than can be tolerated by today's car engines is unnecessarily increasing the price of corn, hurting California farmers, consumers, and motorists.”

In opposing the proposal, Senate Agriculture, Nutrition and Forestry Committee Chairwoman Debbie Stabenow (D-Mich.), said the rule would “pull the rug out from underneath a growing American-made energy sector poised to create thousands of jobs.”

“The so-called blend wall is a crisis manufactured by the oil industry, which is interested in eliminating the competition so they can continue reaping even greater windfall profits,” Stabenow said. “The proposed rule could cost thousands of good paying clean energy jobs and mean less competition at the pump.”

Sen. Charles Grassley, R-Iowa, said the proposed rule would lower the required consumption of conventional renewable fuel to 13.01 billion gallons, despite the law mandating consumption of 14.4 billion gallons, and below the 2013 level of 13.8 billion gallons. “These misguided rules could cost jobs and create dirtier air, while protecting the stranglehold ‘Big Oil' has on the country's fuel supply,” Grassley said.

In support of the proposed rule, several organizations, including the American Petroleum Institute (API) and groups representing meat producers, restaurants, and motorcyclists welcomed the EPA decision.

API president and chief executive officer Jack Gerard said this marks the first time that EPA has acknowledged “that the blend wall is a dangerous reality that must be addressed to avoid serious impacts on America's fuel supply and would be harmful for American consumers.”

Gerard said more needs to be done to ensure Americans have the choice of ethanol-free gasoline “for boats and small engines, and to bring their mandates closer to reality on cellulosic biofuels, which do not exist in commercial quantities.”

Gerard said the RFS mandate could cause severe fuel rationing, drive up the cost of diesel by 300 percent and the cost of gasoline by 30 percent by 2015, and lead to a $770 billion decrease in U.S. gross domestic product and a $580 billion decrease in take-home pay for U.S. workers.

The American Meat Institute (AMI) said RFS has had a continual detrimental impact on food prices, arguing it has driven up the price of feed. Mark Dopp, AMI vice president of regulatory affairs and general counsel, said food costs have outpaced other staple items during the past year, climbing 1.4 percent.

In opposition to the rule, other agricultural organizations largely argued it would set back the renewable fuel movement while capitulating to the oil industry.

The National Corn Growers Association (NCGA) expressed outrage, saying the proposed rule caps corn-based ethanol at 13 billion gallons, cutting 1.4 billion gallons from the conventional ethanol cap.

“This recommendation is ill-advised and should be condemned by all consumers because it is damaging to our tenuous economy and short-sighted regarding the nation's energy future,” said NCGA President Martin Barbre. “Agriculture has been a bright spot in a failing U.S. economy, but current corn prices are below the cost of production. EPA's ruling would be devastating for family farmers and the entire rural economy.”

Barbre said the EPA proposal will make investments in new biofuels plants “very risky.” He noted this decision came shortly after the USDA projected record high corn production. “As a result of this record, corn prices are falling and currently stand close to where they were when the RFS was enacted in its current form in 2007,” Barbre said.

Bob Stallman, president of the American Farm Bureau Federation, said his organization also was disappointed with the proposed rule, and said it strikes a blow to conventional ethanol production as well as prospects for advanced biofuels.

“The intent of the (RFS) was to get more renewable fuels into our nation's pipeline and move beyond the E10 fuel blend,” Stallman said. “Today's announcement from EPA moves us in the opposite direction. This decision has the potential to pull the plug on new technologies and investments that are currently in place and needed to produce advanced biofuels.”

National Farmers Union President Roger Johnson said the EPA was apparently willing to accept the oil industry's “fictitious blend wall” argument.

“Big oil has determined that biofuels are taking their market share, so they have prevented increased amounts of biofuel to be sold at gas stations,” Johnson said. “At a time when advanced and cellulosic biofuel plants are just starting to come online, the EPA is sending a negative signal which will stifle investment in this nascent industry.”

Bob Dinneen, president and chief executive officer of the Renewable Fuels Association (RFA), said, “By re-writing the statute and re-defining the conditions upon which a waiver from the RFS can be granted, EPA is proposing to place the nation's renewable energy policy in the hands of the oil companies.”

Dinneen said this would lower the innovation and evolution in the motor fuel markets, and increase consumer costs at the pump. “This proposal cannot stand.”

Tom Buis, chief executive officer of Growth Energy, said the RFS policy is five years into a 15-year policy that is working and has saved Americans billions of dollars at the pump.

“It makes no sense to roll back a successful policy just because ‘Big Oil' stands to lose profits - profits that come directly from the wallets of American drivers,” Buis said. “In its current form, this rule would freeze innovation or investment in next generation biofuels; reduce production of conventional biofuels; harm our environment and jeopardize savings to consumers.”

Read Smith and Bart Ruth, co-chairmen of the 25x'25 National Steering Committee, said reducing the RFS requirement from 18.15 billion gallons to 15.21 billion gallons “is a reversal of a working policy that is enabling the biofuel industry to create jobs, enhance our nation's energy security and provide a cleaner burning fuel alternative.”

The American Soybean Association (ASA) expressed concern that the biomass-based diesel levels for 2014 and 2015 would be reduced below the amount actually produced in 2013. “The level set forth in the proposal is unnecessarily low and will stifle the growth and job creation potential demonstrated by the biodiesel industry over the past several years,” said ASA president Danny Murphy.

The proposed RFS rule can be viewed here.

Updated Nov. 15, 8:30 p.m.

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