EPA Reduces RFS Volumes

Barrel-crush

By Ed Burke, Dennis K. Burke Inc.

In November, the Environmental Protection Agency (EPA) released its proposed volume requirements for the 2014 Renewable Fuel Standard (RFS). The proposal would scale back next year’s total renewable fuel volumes from 18.15 billion gallons to 15.21 billion gallons. Unlike past RFS proposals, EPA has proposed volume ranges for most fuels, in place of exact target volumes.

 

Why the Change?

EPA has been pretty unyielding when it comes to volume reductions. A driving factor in its decision to reduce the 2014 volume obligations, EPA cited concerns about breaching the 13.8 billion gallon “blend wall.” That’s where essentially every gallon of gasoline used in the U.S. contains 10 percent ethanol. EPA says the volume reduction (about 16 percent) will hold ethanol blends in gasoline at the current E10 level.

The RFS has become controversial this year because for the first time, it will be difficult for refiners to meet the required RFS levels. The oil industry and other lobby groups have argued that the RFS should be repealed, while the biofuels lobby argue that it is working and can be made to function as it was intended.

Refiners are concerned about problems associated with moving beyond the E10 blend wall. Ethanol groups contend that the oil industry is only resisting E15 to maintain its market share. They say E15 is safe, citing at least 40 studies and data from the Department of Energy that have found E15 can be safely used in more than 60 percent of cars on the road today. That leaves the enormous problem of about 250 million vehicles on the road today that can’t use it, and then there are the marine engines, chain saws, and other small engines.

 

AAA Speaks Up for Motorists

You can add AAA Motorclub to the list of groups supporting lower RFS volumes. While the group says it supports the development of alternative fuels, there are concerns that ethanol blends higher than 10 percent have not been thoroughly vetted. They also point to results of a 2012 survey, finding only 12 million of the 240 million light-duty vehicles on the road were approved by manufacturers to use E15. They also noted that 13 vehicle manufacturers have policies that indicate the use of E15 may void warranty coverage.

In an interesting twist, a recent survey by the Renewable Fuels Association found that about 70 percent of the top-selling cars in the U.S. for model year 2014 can use E15 without voiding their warranty.

 

Heating Oil RINS Added to RFS

EPA has also revised the definition of Heating Oil, adding an additional category of fuel oils in the RFS. The idea is to expand the scope of fuels that generate RINs to help obligated parties meet their annual biodiesel volume obligations. These heating oil gallons will not be included in the EPA’s annual volume requirements, but expand the number of RINs available to obligated parties, without increasing their volume requirements.

 

Ethanol Benefits Questioned

Ethanol has been billed as a green alternative to gasoline, but recent reports suggest that ethanol’s environmental impact may not be as green as we thought. A report released by the National Research Council concluded, “Although biofuels should reduce carbon dioxide emissions because they rely on renewable resources, many studies we reviewed found the opposite.”

In an eye-opening investigative report, the Associated Press took a look at how the RFS models were created, and the alarming environmental devastation caused by the ethanol boom.

When the RFS was created, EPA’s experts warned that the mandate would increase demand for corn, raise crop prices, and encourage farmers to plow more land. Considering those factors, they said, corn ethanol was only about 16 percent better than gasoline when it came to carbon dioxide emissions.

By law, biofuels were required to be at least 20 percent greener than gasoline. So, to get above that number, the EPA model increased the “projected yield per acre,” and they ended up with a number of 21 percent greener than gasoline.

And that started the ethanol boom. Five million acres of land set aside for conservation vanished. Landowners filled in wetlands. They plowed into pristine prairies, releasing carbon dioxide that had been locked in the soil.

Sprayers pumped out billions of pounds of fertilizer, some of which seeped into drinking water, contaminating rivers and worsening a huge dead zone in the Gulf of Mexico where marine life can’t survive.

As farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies, the Associated Press investigation found.

 

More Challenges Ahead

This is a proposed rule and it is not final. The EPA expects to release a final rule in the spring after a 60-day public comment period. Both sides of the issue plan to make their cases heard, although in the past, the proposed levels have never been changed in the final ruling. Once the final rule is released, pro-biofuels supporters will likely file legal challenges to any reductions or waivers to the mandate.

Bringing together an unusual coalition, environmental groups and the food industry will join the oil industry in trying to have the RFS repealed.

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