WASHINGTON, Nov. 23, 2016 - At some point in the next week, the EPA will announce new renewable fuel blending targets for 2017. But will that announcement be good news for the oil industry or for ethanol producers?
By law, EPA is required to announce 2017 Renewable Volume Obligations under the Renewable Fuel Standard by the end of November. The agency is widely expected to meet the deadline, but questions remain about what will emerge in the pending announcement.
“They’re pretty tight-lipped,” Growth Energy co-chair Tom Buis said of the administration’s signals on the RFS. “If they follow the pattern that they established last year where they went up, then that’s probably a good thing. The question is how high up do they go.”
Under the Energy Independence and Security Act of 2007, Congress called for 2017 RVOs to be set at 24 billion gallons. That breaks down to a requirement of 9 billion gallons of advanced biofuel and 15 billion gallons of conventional renewable fuels, typically viewed as corn ethanol. In May, EPA proposed an 18.8 billion gallon RVO with room for 14.8 billion gallons of corn ethanol.
There’s no illusion that the EPA might bump the advanced biofuel requirement up 5 billion gallons higher; that segment of the industry has not developed as quickly as Congress anticipated. But renewable fuels advocates say they’d be floored by anything short of the statutory 15 billion gallons.
“Quite frankly, I think if EPA does not finalize a final
rule for conventional biofuels that is at the 15 billion gallon statutory
limit, then the agency has just kicked sand in the face of the farmer for the
heck of it,” Renewable Fuels Association President and CEO Bob Dinneen told Agri-Pulse.
“I think it would be almost impossible at this point for the agency not to
finalize a rule at the 15 billion gallons. I’m optimistic, but these days, I’m
never surprised anymore.”
The Energy Information Administration projects consumption of more than 143.6 billion gallons of motor gasoline in 2017. Opponents of the RFS seek to cap the RVO at 9.7 percent of gasoline demand, which would represent a 13.9 billion gallon conventional RVO in the upcoming announcement.
The renewable fuels industry is trying to break through the so-called 10 percent “blend wall,” a perceived cap of the amount of renewable fuels the marketplace can absorb. A 15 billion gallon RVO would put the industry well over the 10 percent hump.
But will EPA do it? For the 2016 RVO, the agency added 700 million gallons to its original proposal. By that measuring stick, a 200-million-gallon increase is potentially within reach.
“The statute says 15 billion gallons, we have enough usage to warrant the 15 billion, we have the crop to do this,” Wesley Spurlock, president of the National Corn Growers Association, told Agri-Pulse. “Everything is in place to have the 15 billion. We hope that that’s the number that they come with.”
Spurlock also pointed out that when EPA proposed an RVO under statutory levels last year, a handful of groups responded with a lawsuit challenging its reasoning. The EPA cited infrastructure concerns with getting that much ethanol to market as why it felt compelled to short the conventional RVO 500 million gallons last year. The groups, however, say that the “waiver” authority is not granted in the Energy Independence and Security Act.
Outside of the 2017 RVOs, the upcoming announcement will also set 2018 requirements for biomass-based diesel. The proposal in May called for 2.1 billion gallons, and National Biodiesel Board CEO Donnell Rehagen feels the industry can handle a higher volume.
“We have capacity far exceeding that, and we also have production and use this year here in 2016 that will far surpass 2.1 billion gallons,” Rehagen said. NBB has been asking the administration for an increase to 2.5 billion gallons.
This is the final RFS announcement to be unveiled by the Obama administration. As a senator, Obama was very supportive of the RFS, but his administration struggled to submit and finalize RVOs in a timely manner. It took a lawsuit from the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers to force compliance with a timeline. Donald Trump was supportive of the RFS on the campaign trail, but how his administration governs the policy remains to be seen.
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