Ethanol quotas irk refiners, fall short of targets
Officials say new plan acknowledges market limits, strives to comply with law boosting renewables’ use
The Obama administration is proposing to boost the amount of biofuel refiners must blend in gasoline, but the quotas fall short of federal targets.
WASHINGTON — The Obama administration is proposing to boost the amount of biofuel refiners must blend in gasoline, but the new quotas fall short of ambitious targets established by federal law.
So the Environmental Protection Agency plan unveiled Friday angered both refiners, who say they’re being forced to use more ethanol than can realistically be consumed, and biofuel supporters who say the oil industry is stifling their growth.
In announcing the revised goals, EPA official Janet McCabe repeatedly stressed to reporters that the proposal is “ambitious, but responsible,” reflecting the tension between the goals of the 8-year-old law and market constraints limiting how much biofuel currently can be consumed domestically.
“We’re balancing two dynamics: Congress’ clear intent to increase renewable fuels over time to address climate change and increase energy security and the real-world circumstances that have slowed progress toward these goals,” said McCabe, acting assistant administrator for the EPA’s Office of Air and Radiation.
The agency’s proposal would require refiners to use some 17.4 billion gallons of renewable fuels next year, with about 14 billion gallons of that coming from traditional cornbased ethanol. The 2007 renewable fuel law set a target of 22.25 billion gallons total renewable fuel for 2016.
The EPA also proposed a 16.3 billion gallon target for the current year — down from 20.5 billion gallons set out by law — and a 15.93 billion gallon quota for 2014 that reflects the actual volumes used nationwide. Individual refiners still must comply with the 2014 quotas, once they are finalized.
The proposed quotas still represent an increase in the amount of biofuels used and required by the
EPA in recent years.
The agency is employing its waiver authority that allows it to drop below the mandated volumes if there is an inadequate domestic supply of renewable fuel or if implementing the law’s requirements would “severely harm the economy or environment.”
In departing from the more ambitious targets, the EPA appeared to accept refiners’ arguments they can no longer incorporate enough ethanol to meet the law’s volumetric targets without exceeding a 10 percent threshold acceptable for use in all cars and trucks.
That is a significant victory for the industry.
But American Petroleum Institute President Jack Gerard suggested the latest EPA numbers are still too high.
“There’s not been near enough attention paid to the reality of the marketplace,” he said.
“Some of their rosy assumptions raise questions of how much more ethanol can be consumed.”
Most gasoline consumed in the United States is E10, containing 10 percent of the ethanol that provides essential octane for fuel.
Higher ethanol blends such as E15 and E85 have been gradually gaining ground nationwide but are not widely available.
The oil industry has asked EPA to cap biofuel mandates at 9.7 percent, allowing room for some sales of ethanol-free gasoline. But the agency’s plan for 2016 would likely push ethanol to about 10.1 to 10.6 percent of the nation’s transportation fuels.
Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, cited a “saturation point” for using ethanol in motor fuels.
“Although EPA took appropriate actions and recognized the blend wall, it proposed a standard that falls far short of mitigating the potential harm to consumers,” Thompson said.
Biofuel producers countered that the EPA was effectively rewarding the oil industry for not embracing higher blends and investing in infrastructure to make them more available. Bob Dinneen, president of the Renewable Fuels Association, said the proposal “has eviscerated the program’s ability to incentivize investments in infrastructure that would break through the blend wall and encourage the commercialization of new technologies.”
The EPA is aiming to finalize its biofuel targets by Nov. 30, after accepting public comments in writing through July 27 and at a June 25 hearing in Kansas City, Kan.
The proposal invites both lawsuits and a renewed push in Congress to overhaul the biofuel law, said Stephen Brown, vice president of federal government affairs for Tesoro.
“If the goal of the administration was to set the stage for protracted and complex litigation over the rule when finalized later this year, today’s proposal is a giant step toward that objective,” Brown said.
Valero Energy, the San Antonio-based refiner and a leading U.S. biofuel producer, also said legislation is needed.
“If there’s going to be a mandate, the mandate needs to be realistic and achievable, and based on actual fuel usage,” spokesman Bill Day said.
“The targets shouldn’t be based on ambitions, and the mandate shouldn’t pick winners and losers among industries.”