Jan. 29 --The Environmental Protection Agency's
proposal to reduce the 2014 renewable fuel blending mandates below statutory
requirements violates the Clean Air Act, according to renewable fuels
The producers argued in comments on the proposed rule that
the EPA is improperly interpreting its Clean Air Act waiver authority to
reduce the annual renewable fuel standard blending requirement. The act allows
the agency to reduce the annual blending requirements only because of
inadequate fuel supply, they said.
Instead, the EPA is proposing to
reduce the 2014 blending requirement due to a lack of demand for higher
ethanol blends, they said. Renewable fuels producers also said that the EPA's
proposal could create regulatory uncertainty that hampers investment in
advanced biofuels such as cellulosic ethanol that are on the cusp of
Petroleum refiners and food producers
supported the EPA's proposed reductions, but the petroleum industry argued that
the EPA should reduce the annual blending requirements further.
comment period on the proposed rule closed Jan. 28.
The EPA proposed
reducing the overall renewable fuel standard blending mandate below the
statutory requirements for the first time in 2014. The agency is proposing that
petroleum refiners and importers blend 15.21 billion gallons of renewable
fuels into their products.
That is less than the 18.15 billion gallons
required by the Energy Independence and Security Act (Pub. L. No. 110-140) as
the agency addresses the “ethanol blend wall,” the point at which the amount
of ethanol that must be blended into the gasoline supply exceeds 10 percent,
the maximum approved for all vehicles and small engines.
That 15.21 billion-gallon requirement for 2014
also would stipulate that petroleum refiners and importers blend 2.2 billion
gallons of advanced biofuels, including cellulosic ethanol, into the fuel
supply. The EPA said it also will seek comment on setting the standard between
15 billion gallons and 15.2 billion gallons, with an advanced biofuel target
between 2 billion gallons and 2.51 billion gallons (78 Fed. Reg. 71,732; .
The EPA is proposing to reduce the statutory blending requirements using
its authority under Section 211(o)(7) of the Clean Air Act, which allows it to
waive the renewable fuel standard requirements if implementing the standard
could cause severe economic harm or if there is inadequate domestic supply to
meet the requirements.
This is the first time the agency has proposed
using that authority. It is has offered a broad interpretation of the term
“inadequate domestic supply,” which would allow the EPA to consider other
factors such as the petroleum industry's ability to blend the amount of
ethanol mandated into the nation's gasoline supply .
Renewable fuels producers disputed the EPA's interpretation
of its waiver authority, arguing they will be able to produce enough fuel to
meet the statutory blending requirements for 2014. The EPA's interpretation is
substituting a lack of demand for a lack of supply, they said.
acknowledges, at least 13.2 billion gallons of ethanol can be consumed through
consumption of [gasoline containing 10 percent ethanol], leaving only 1.2
billion gallons to be satisfied through other sources,” said Growth Energy, an ethanol trade group. “If a recent
uptick in gasoline consumptions continues, moreover, the remainder shrinks to
just 600 million gallons.
“There is no basis to conclude that the supply
of ethanol is inadequate to meet this requirement,” the group continued.
“Indeed, the proposed rule does not dispute that a sufficient amount of ethanol
can be produced to meet the RFS requirements for 2014. Rather, the proposed
rule rests on a prediction that there will be inadequate demand for ethanol to
satisfy the standards. That is an improper basis to grant a general waiver in
Increased consumption of gasoline containing 15
percent ethanol (E15) or 85 percent ethanol (E85) would be sufficient to meet
the statutory blending requirements for 2014, Growth Energy said. Petroleum
refiners also could rely on banked renewable fuel credits from 2013 to help
meet their compliance obligations, the group said.
The Renewable Fuels
Association said that maintaining the 2014 blending obligations would
help drive up prices for renewable identification numbers (RINs), serial
numbers attached to batches of renewable fuels that can be traded for credits.
The rising credit prices are intended to force refiners to invest in
infrastructure for higher ethanol blends in gasoline or advanced biofuels such
as cellulosic ethanol, the group said.
the end, the RFS program was designed to force the oil industry to change the
status quo--not to perpetuate it,” the Renewable Fuels Association said. “The
entire purpose of this program would be subverted if the oil industry is
rewarded for its failure to take the steps necessary to ensure that it was
capable of distributing, blending, and dispensing the renewable fuel volumes
required under the statute.”
The American Farm Bureau Federation also
said that the EPA's proposed rule could delay some
investment in advanced biofuels, which could economically impact farmers.
“According to an EPA report, more than $2.4 billion was invested in advanced
biofuel companies by venture capitalists alone from 2007 through the second
quarter of 2011,” the farm bureau said. “This decision sends a negative signal
that will stall future investment not only in these new potential fuels but
also in the delivery infrastructure that will be critical in the future.”
Petroleum refiners defended the EPA's decision to reduce the 2014 blending
mandate below statutory levels and called for the agency to make further
In joint comments to the EPA, the American Petroleum
Institute and the American Fuel & Petrochemical Manufacturers called the
proposed reduction “consistent with the plain language of the law.”
The petroleum groups called on the EPA
to further reduce the 2014 blending requirement, capping ethanol at 9.7
percent of the gasoline supply. The two groups had petitioned the EPA in August
to lower the 2014 renewable fuel requirement to 14.8 billion gallons .
“We believe that these volumes fully address the blendwall issues and will
avoid significant economic harm as outlined in the waiver petition,” the
petroleum groups said.
If the agency doesn't think further reductions
are warranted, petroleum refiners asked the EPA to finalize blending
requirements at the lower end of the ranges proposed.
and restaurant operators also called on the EPA to reduce the blending
requirement, particularly for corn-based ethanol. They argued that the
renewable fuel standard's annually increasing ethanol requirements have boosted
food prices for consumers and feed prices for livestock and poultry
“The proposed volumes will continue to provide incentives to
overplant corn, which will unfortunately continue the distortions in food
commodity costs that have existed since the enactment of the RFS. These
distortions have caused the price of a bushel of corn to skyrocket by as much
as 300 percent in recent years,” the National Council of Chain Restaurants said.
The council said a study it commissioned
showed that the renewable fuel standard is linked to a 10 percent increase in
food prices for the typical fast food restaurant.
Ethanol production consumed 43 percent of the corn crop in 2012
and 2013, and increasing ethanol mandates in the future will drive corn prices
higher, the National Chicken Council said.
“Corn is far and away the primary source of
nutrition for broiler chickens, rendering the industry captive to escalating,
increasingly volatile corn prices,” the council said. “At least a dozen chicken
companies have ceased operations, filed for bankruptcy protection, or have been
acquired by another company.”
Lawmakers from Midwestern states that
produce renewable fuels also opposed the EPA's proposed rule, fearing it would
lead to job losses in the agricultural and biofuels sectors.
Heitkamp (D-N.D.) called the EPA's proposal “a significant step backward”
for biofuels. She said waiving the volume requirements as a result of the
ethanol blend wall “creates significant barriers to future biofuels
“Lack of infrastructure remains one of the key hurdles to
further deployment of biofuels into the market,” she said. “Limiting RFS to
levels that can be met with existing infrastructure eliminates incentives to
invest in the technologies and infrastructure necessary to meet our domestic
policy goal of increasing biofuels production and use.”
Iowa Gov. Terry Branstad (R) called on the EPA to increase the corn ethanol mandate to
14.4 billion gallons while also requiring 1.7 billion gallons of biodiesel
“A robust RFS is needed to provide the federal policy
predictability that rural America needs to continue investments in the
renewable fuels that diversify our nation's energy portfolio, clean the air,
provide value-added opportunities to various bio-stocks, give consumers
lower-cost choices at the fuel pump, and create good paying jobs that empower
rewarding careers,” he said.
Some House Democrats have asked the White
House for a meeting to discuss the EPA's proposed rule.
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