API asks EPA for adequate margin of safety in 2014’s ethanol mandates

The US Environmental Protection Agency should be prepared to build in an adequate margin of safety when it develops final ethanol mandates for 2014 because forecasts often miss the mark, the American Petroleum Institute said in an Apr. 29 letter to EPA Administrator Gina McCarthy.

“For example, in 2013, gasoline consumption was more than 17 billion gal lower than what was projected in 2007, when Congress passed the Renewable Fuel Standard we use today,” API Downstream Group Director Robert L. Greco said on Apr. 30.

“But the inexactness of projections is not limited to the long term,” he told reporters during a teleconference as API released his letter to McCarthy. “Annual [US Energy Information Administration] gasoline projections since 2007 have missed the mark by an average of 220 million gal/year, and EIA’s 2014 Annual Energy Outlook Retrospective Review found total petroleum consumption was overestimated almost 70% of the time.”

Greco wrote the letter in response to reports that McCarthy told the North American Agricultural Journalists on Apr. 7 that she was aware of US Sec. of Agriculture Tom Vilsack’s statement that gasoline demand had increased since the proposed 2014 quotas were developed, and suggested that the final rule’s amounts could be higher as a result.

“EPA shouldn’t try to micromanage ethanol mandates based on slight changes in gasoline demand forecasts,” Greco said during the teleconference. “Instead, the agency must be conservative with ethanol mandates to provide consumers with a buffer against the consequences of the blend wall.”

The agency also needs to make room in the mandate for consumers who want zero ethanol gasoline for boats, recreational vehicles, and yard equipment, he said, adding, “Since sales of E0 represent about 3% of the market, that means the blend wall doesn’t start at a 10% ethanol mandate, [but] at a 9.7% ethanol mandate.”

He said, “That’s why we’ve asked EPA to limit the ethanol mandate to no more than 9.7% of EIA’s October estimates of US motor gasoline supply.”

EPA is required by statute to use EIA’s October estimates of projected gasoline demand for the coming year and issue its ethanol quotas for that period by Nov. 30, he noted. “The 2014 Final Rule is being issued very late and will be applied retroactively once again,” he said, adding, “EPA has said it wants the final rule out in June. To do this, it will have to send the final rule to [the White House’s Office of Management and Budget] in another few days.

He maintained, “So it’s especially important that the agency finalize the rule as soon as possible, and include an adequate margin for safety in order to protect consumers and preserve consumer choice.”

Contact Nick Snow at nicks@pennwell.com.

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