EPA Trims 2014 Renewable Fuel Mandate To 15.21 Billion Gallons, Citing Blend Wall

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By Andrew Childers  

Nov. 15 --The Environmental Protection Agency proposed Nov. 15 to use its waiver authority for the first time to reduce the overall renewable fuel blending requirement for 2014.

The proposed rule for the 2014 renewable fuel standard would require petroleum refiners and importers to blend 15.21 billion gallons of renewable fuels into their products. That is down from the 18.15 billion gallons required by the Energy Independence and Security Act (Pub. L. No. 110-140) as the agency takes steps to address the ethanol blend wall.

The EPA is reducing the 2014 requirement to avoid breaching the ethanol blend wall--the point at which the amount of ethanol that must be blended into the gasoline supply exceeds 10 percent. That is the maximum that can be safely used by all vehicles and small engines.

The agency has significantly reduced the cellulosic ethanol blending requirement in previous years, but it has never lowered the overall target.

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.

While the agency is proposing an overall target, the EPA said it also will seek comment on setting the standard between 15 billion gallons and 15.2 billion gallons. The EPA is also seeking comment on setting the advanced biofuel target between 2 billion gallons and 2.51 billion gallons.

The EPA is proposing a requirement to blend 17 million gallons of cellulosic ethanol into the fuel supply in 2014. The agency is also taking comment on a range between 8 million gallons and 30 million gallons.

The EPA anticipates finalizing the rule in the spring of 2014.

The proposed rule was signed Nov. 15 by EPA Administrator Gina McCarthy. The agency will accept comments on the proposal for 60 days once it is published in the Federal Register. Comments can be made at http://www.regulations.gov and should reference Docket ID No. EPA-HQ-OAR-2013-0479.

Producers Dispute Waiver

Ethanol producers argued that the EPA is inappropriately using its Clean Air Act waiver authority to reduce the 2014 blending requirements. Section 211 of the Clean Air Act only allows the EPA to waive the blending requirements if enforcing the requirement would cause severe economic harm or if there is insufficient supply to meet the demand, they said.

Concerns about the blend wall don't meet either of those requirements, Bob Dinneen, president of the Renewable Fuels Association, told reporters Nov. 15.

“The blend wall should not be a factor in a waiver decision,” he said. “The minute you introduce blending capacity or blend wall factors is the minute you take the nation's renewable fuel policy away from the statute and you put it in the hands of the oil companies who do not want to invest in the infrastructure to allow more than 10 percent blends to be used.”

Reducing the blending requirements is the equivalent of giving oil companies a “$10 billion windfall,” Dinneen said.

While renewable fuels producers are still reviewing the rule, they didn't rule out the prospect of lawsuits to challenge the EPA's use of the waiver authority.

“I'm hopeful that somebody at EPA reads the statute between now and the final rulemaking,” Dinneen said.

Industries Seek Repeal

Several industry groups, including petroleum refiners and livestock producers, praised the EPA's decision to use its waiver authority to decrease the blending requirement for 2014. However, they reiterated calls for Congress to step in and revise or repeal the blending mandate.

“Congress needs to step in and fix this once and for all,” Jack Gerard, president and chief executive officer of the American Petroleum Institute, told reporters Nov. 15.

The American Petroleum Institute has repeatedly called on Congress to repeal the renewable fuel standard.

The EPA's decision to exercise its waiver authority did not mollify some congressional critics of the renewable fuel standard who are calling for the law to be repealed or revised (see related story).

Livestock producers also called for the law to be repealed, arguing the EPA has never addressed the renewable fuel standard's impact on their industry. While the EPA has taken action to address the blend wall, livestock producers said the agency's action does not do enough to counteract the corn ethanol blending mandate's effect on animal feed prices.

“Clearly the drought and the cost of corn has not driven this decision and until that can be addressed in Congress we'll continue to work with Congress,” Mike Brown, president of the National Chicken Council, told reporters.

Further Reductions Sought

In a separate notice released Nov. 15, the EPA is seeking comment on a petition from petroleum groups to further reduce the blending requirements for 2014.

The American Petroleum Institute and the American Fuels & Petrochemical Manufacturers petitioned the EPA in August to cap the 2014 blending requirement at 14.8 billion gallons in 2014 to avoid breaching the blend wall.

The EPA said it will accept comments on the request for 60 days after the notice is published in the Federal Register.

Gerard said the EPA is once again late in issuing the renewable fuel volume requirements. The Energy Independence and Security Act (Pub. L. 110-140) requires the EPA to finalize the requirements by Nov. 30, a date the agency has repeatedly missed in recent years.

“We're late in the year, we're moving already into 2014 and we're being told we won't know what our obligation will be until the first quarter or perhaps later,” Gerard said.

The EPA didn't finalize the 2013 volume requirements until August.

Petroleum groups have threatened to sue the EPA if it misses the Nov. 30 deadline to finalize the 2014 standards .

Could Stymie Investment

Advanced biofuels producers said the EPA's decision to reduce the blending requirements for 2014 could chill investment in the industry.

“The current proposal would have the effect of closing the market to renewable fuels and undermining the investment community's confidence in the program, starving advanced biofuel and biotech companies of the capital they need to successfully commercialize new and innovative technologies,” Brent Erickson, executive vice president of the Biotechnology Industry Organization's Industrial and Environmental Section, said in a statement.


To contact the reporter on this story: Andrew Childers in Washington at achilders@bna.com

To contact the editor responsible for this story: Larry Pearl in Washington at lpearl@bna.com

The EPA's proposed rule on the fuel blending requirements for 2014 is available at http://www.epa.gov/OTAQ/fuels/renewablefuels/documents/rfs-2014-standards-nprm-11-15-13.pdf.

The notice on petitions for a waiver of the renewable fuel standard is available at http://www.epa.gov/OTAQ/fuels/renewablefuels/documents/fr-notice-waiver-requests-2014.pdf.

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