The American Automobile Association has asked the US Environmental Protection Agency and the Obama administration to reduce ethanol mandates under the federal Renewable Fuels Standard (RFS) for 2014 until more realistic targets can be established. Its request came just days after an official with the American Petroleum Institute urged EPA to take the same action as a stopgap measure until Congress can significantly reform or repeal the RFS.
"It is just not possible to blend the amount of ethanol required by current law given recent declines in fuel consumption, and it is time for public policy to acknowledge this reality," AAA Pres. Bob Darbelnet said on Oct. 28.
"EPA should lower ethanol targets immediately as part of the proposed 2014 RFS rule to support consumers and promote alternative fuels," Darbelnet said.
In meetings with EPA and White House Office of Management and Budget officials, API has asked the agency to set next year's total ethanol requirements at or below 9.7% of projected gasoline demand, API Downstream Group Director Bob Greco said on Oct. 24.
"By EIA's latest projection, that would mean lowering the mandate to at most 12.9 billion gal of ethanol," he told reporters, adding, "This would help us avoid the 'blend wall' for now while also preserving the availability of E0—ethanol-free gasoline—for consumers who demand it, especially boaters and owners of older vehicles and motorcycles."
Darbelnet said reports indicate EPA has recommended a cut in the 2014 biofuel mandate to 15.21 billion gal, or about 9.33% of expected gasoline sales next year. This proposal would prevent the market from hitting a blend wall that would either result in higher gasoline prices or necessitate the increased use of E15 and E85 gasoline, he explained.
AAA would expect negative consumer consequences if ethanol requirements exceeded 10% of expected gasoline sales since most cars can only use gasoline with a 10% ethanol blend. Darbelnet said. The recommendation was included in a draft notice of proposed rulemaking EPA submitted to OMB, which must approve the rule. EPA is required to formally propose a rule for 2014 by the end of November.
EPA also needs to set realistic cellulosic fuel volumes that are based on actual production instead of overly optimistic projections, API's Greco said. The RFS, which was expanded under the 2007 Energy Independence and Security Act, assumed domestic gasoline consumption would continue to rise, supporting correspondingly higher ethanol use, Darbelnet said.
When demand fell instead, it resulted in unrealistic volume mandates creating the ethanol blend wall which could drastically reduce US fuel supplies, both men separately said. Breaching it possibly could lead to dramatically higher fuel costs and supply disruptions which would reduce US gross domestic product by $770 billion and a corresponding drop in consumption of $2,700/household by 2015, according to a study National Economic Research Associates conducted for API.
Infrastructure and market limitations make it likely the volume of ethanol that would be required under the RFS's current formula would exceed the amount that would be available, according to Darbelnet. Blenders unable to meet RFS requirements would be subject to significant fines, creating an incentive for them to export gasoline to avoid unsustainable costs, he said.
Greco said API announced previously that it is prepared to sue if EPA doesn't finalize the 2014 requirements by their statutory Nov. 30 deadline (OGJ Online, Oct. 17, 2013). Noting that the agency didn't make the 2013 requirement final until the year was two-thirds over, he observed, "The [US refining] industry cannot stop and turn on a dime based on late EPA regulatory rules, or back up midyear and reconfigure an entire industry based on overdue rules.
Greco said, "We cannot allow the bad public policy of the outdated RFS mandate to harm consumers or put our nation's economy at risk. That's why we need EPA to act immediately to provide relief for consumers while we continue to work with Congress to enact a full repeal."
Darbelnet said, "Corn-based ethanol can support the economy and reduce our reliance on fossil fuels. It is great news to hear that the EPA is considering a RFS proposal that would support this home-grown alternative while acknowledging the inability to achieve an outdated mandate.
