API, AFPM: Hold Ethanol RVO at 9.7%

STREATOR, Ill. (DTN) -- The American Petroleum Institute and American Fuels and Petrochemical Manufacturers said this morning they will urge the Environmental Protection Agency to hold the volume of ethanol mandated to be consumed under the Renewable Fuel Standard at no more than 9.7% of U.S. gasoline demand annually. If EPA agrees, that would mean a reduction for their 2016 proposal.

In contrast, the Renewable Fuel Association said in a news release on Monday, July 27, that they submitted comments to the EPA to abandon its proposal to reduce the amount of ethanol mandated for consumption and adhere to the original language in the Energy Independence and Security Act of 2007 establishing the expanded RFS targets.

E10, gasoline with a 10% concentration of ethanol, is the maximum level of ethanol allowed in gasoline for consumption in all vehicles on U.S. roads. API and AFPM fear the EPA is relying on higher ethanol blends in gasoline to meet the RFS.

"High ethanol blends -- such as E15 and E85 -- that EPA is pushing are not compatible with most cars on the road today, and they could potentially put American consumers and their vehicles at risk," Greco said. He added, "Consumers have shown they have little to no interest in purchasing increasing amounts of high ethanol fuels. Consumers' interests should come ahead of ethanol interests."

Greco reported six of every 100 cars are able to utilize E85, and even those motorists have "largely rejected the fuel."

On May 29, the EPA proposed Renewable Volume Obligation mandates for 2014, 2015 and 2016 under the RFS, which dictate the amount of renewable fuel an obligated party -- refiner, blender or importer -- must use to offset their petroleum-based fuel production or import rate. The proposals are below the annual RFS levels established by EISA.

The EPA proposals, which were released 18 months late for 2014 and six months late for 2015, were reduced from that statute because of concern over the E10 "blend wall."

EPA proposed lowering the overall RFS, with the biggest reductions from statute found in the Renewable Biofuel nested category, which is primarily satisfied with corn-based ethanol.

Under Renewable Biofuel, the 2014 mandate was reduced from 14.4 billion gallons to 13.25 billion gallons and to 13.4 billion gallons this year from 15.0 billion gallons. In 2016, EPA proposed a 14.0 billion gallon mandate, with the Renewable Fuel nested category capped under the RFS at 15.0 billion gallons.

EPA said it plans to finalize its proposal by Nov. 30, which would place the agency back on track in meeting its deadline for 2016. The EPA is required to have an upcoming year's RVO finalized by the final day of November of the preceding year.

"AFPM supports EPA's decision to use its waiver authority to adjust the 2014 and 2015 volumes," said Brendan Williams, AFPM executive vice president "However, we strongly disagree with the volumes set for 2016, which will break the 10% blend wall."

RFA President and CEO Bob Dinneen called the blend wall a "false narrative," and that EPA's proposal falls "far short of its intent to put the RFS back on track."

One of Dinneen's criticisms was that the EPA's proposal didn't consider Renewable Identification Numbers in its calculations, with as much as 20% of a prior year's RINs, a tradable credit showing compliance with the RFS, allowed to be carried over into a new year to meet an RVO.

"By failing to consider carry over RINs in the assessment of available supply; by miscalculating RIN retirement from ethanol exports; by underestimating gasoline demand; and, most importantly, by deliberately misunderstanding the statute's general waiver authority to infuse consumption, infrastructure, and demand considerations into a provision designed explicitly for lack of supply, the agency has turned this important program on its head," Dinneen wrote.

EPA on May 29 also proposed a higher mandate for the biomass-based diesel nested category, with the RFS stating an annual RVO at a minimum of 1.0 billion gallons since 2012, although EPA had previously proposed a 1.28 billion gallon mandate for 2014. For 2014, EPA proposed an RVO at 1.63 billion gallons, at 1.7 billion gallons for 2015, 1.8 billion gallons for 2016, and at 1.9 billion gallons in 2017.

API and AFPM objected, however, explained Williams. He noted the RFS requires the EPA to announce an increase in the RVO beyond that statute level 14 months in advance of the year it would begin.

"The statute is pretty clear to what EPA can do with biodiesel," Williams said. "If they raise the number above standard in the law, they have to look at six criteria and provide 14-month notice."