EPA moves forward with lower RFS mandates

Published on: Nov 15, 2013

The Environmental Protection Agency moved forward Friday with proposing significantly lower renewable fuel standard levels for 2014 with a total renewable fuel range of 15-15.52 billion gallons.

The proposal would cut conventional biofuel to 13 billion gallons per year from 14.4. This year 13.8 billion gallons of ethanol was produced. The proposal also freezes the biodiesel level at 1.28 billion gallons despite the fact the biodiesel industry is currently operating at an annualized rate of 2 billion gallons. It also reduced cellulosic biofuels to 17 million from 1.75 billion.

In a release from EPA, the agency said the proposal seeks to put the "Renewable Fuel Standard (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 biofuel covered by the RFS program. The proposal seeks comment on a range of total renewable fuel volumes for 2014 and proposes a level within that range of 15.21 billion gallons, which was the level previously leaked in October.

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

Category

Proposed Volume a

Range

Cellulosic biofuel

17 mill gal

8-30 million gallons

Biomass-based diesel

1.28 bill gal

1.28 billion gallons

Advanced biofuel

2.20 bill gal

2.0-2.51 billion gallons

Renewable fuel

15.21 bill gal

15.00-15.52 billion gallons

aAll volumes are ethanol-equivalent, except for biomass-based diesel which is actual

 

Jeff Lautt, CEO for the nation's largest ethanol producer POET, said, "The proposed reduction from EPA is troubling, as it not only cuts grain ethanol use below the levels set by Congress, 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 online in a large part thanks to significant investment from grain ethanol producers such as POET."

A statement from the National Corn Growers Assn. said the psychological impact of EPA’s proposal is anticipated to push corn prices well below the cost of production. To further put this into perspective, if corn prices dropped to $3.50 a bushel farmers and the rural economy would lose more than $10 billion.

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

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

Infrastructure

The EPA statement said the Obama Administration has taken a number of steps to allow or encourage the use of these higher ethanol blends. In 2010, EPA approved E15 for use in vehicles newer than model year 2001 and developed labeling rules to enable retailers to market E15. In addition, since 2011, USDA has made funding available through the Rural Energy for America Program to support deployment of “flex-fuel” pumps that can dispense a range of ethanol blends. The 2014 proposal seeks input on what additional actions could be taken by government and industry to help overcome current market challenges, and to minimize the need for adjustments in the statutory renewable fuel volume requirements in the future.

In the proposed rule, the Administration adopts the position that a lack of retail distribution equipment this year equates to a renewable fuel “supply shortage” next year. A statement from the Iowa Renewable Fuels Assn., said this “infrastructure” waiver was specifically rejected by Congress during the adoption of the RFS and, if allowed to stand, would effectively repeal the RFS as a factor in U.S. energy policy. 

"The circular logic of this proposal creates a downward death spiral for the RFS as the RFS could not be increased unless Big Oil had already begun to offer higher ethanol blends. With no pressure to move forward, Big Oil would be expected to continue hiding behind its Century of Subsidies and Federal Petroleum Mandate to prevent consumer choice for higher blends."

EPA said looking forward, the proposal clearly indicates that growth in capacity for ethanol consumption would continuously be reflected in the 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."

A statement from Secretary of Agriculture 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," he said. "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."

Legislative fix

In a call ahead of the official EPA announcement, several anti-ethanol groups including the National Chicken Council and National Turkey Federation were steadfast in their call for a permanent fix to the RFS.

Joel Brandenberger, NTF president and CEO, said the move was "something to be thankful for" due to the swings corn ethanol has caused on availability and pricing of feeds. However, the fix offers just a "short-term breather" he said as his members are still feeding "drought-ravished expensive corn" and it will take some time before that impact fully works its way through the system. "One-year fixes ultimately don't work," he said.

"Today is a step in the right direction, however, it is the responsibility of the Congress to find a lasting solution to this rigid, inflexible program and put livestock and poultry producers back on equal standing in the marketplace,” said a statement from the Animal Agriculture coalition which represents meat, dairy, poultry and feed associations.