COURT TOSSES OUT EPA'S RENEWABLE FUEL RULE

May 8, 1995
A federal appeals court has voided an Environmental Protection Agency rule that would have required U.S. refiners to use renewable fuels for 30% of the oxygenates in reformulated gasoline (RFG) in future years.

A federal appeals court has voided an Environmental Protection Agency rule that would have required U.S. refiners to use renewable fuels for 30% of the oxygenates in reformulated gasoline (RFG) in future years.

The District of Columbia Court of Appeals said EPA exceeded its authority under the 1990 Clean Air Act (CAA) amendments in carving out part of the gasoline market for oxygenates (OGJ, Feb. 13, p. 17). The court said, "The authority to set a standard under the CAA does not authorize EPA to mandate the manner of compliance or the precise formula for compliance without additional explicit authority."

EPA had said ethanol was likely to be the dominant renewable oxygenate used, especially in the early years of the program, because it is the only one produced in large volumes.

But the justices wrote, "The sole purpose of the RFG program is to reduce air pollution, which it does through specific performance standards for reducing volatile organic compounds and toxics emissions.

"EPA admits that the renewable oxygenate rule will not give additional emission reductions for VOCs or toxics and has even conceded that use of ethanol might possibly make air quality worse."

Officials of oil associations had claimed that EPA!s mandate was a political move to win favor with farm interests. The American Petroleum Institute, National Petroleum Refiners Association, and American Methanol Institute (AMI) sued to block the rule.

EPA has 45 days in which to file an appeal. The agency is consulting the Justice Department.

INDUSTRY CHEERED

Urvan Sternfels, NPRA president, said, "The mandate would have been an unwarranted intrusion into the marketplace to dictate the composition of gasoline sold to consumers for the sole purpose of providing ethanol producers a larger share of the U.S. motor fuel market while at the same time possibly worsening air quality.

"Mandating market shares for any product is unsound economic policy and, particularly in this case, would provide little or no benefit to the consuming public."

Charles DiBona, API president, said, "The court agreed that the EPA lacks the statutory authority for the ethanol mandate and EPA!s rule, far from improving air quality, might make air quality worse. There was no environmental or economic justification for the rule.

"Without EPA!s ill-conceived mandate, the RFG program will continue as

Congress intended, in a fuel neutral manner, bringing this new, cleaner burning fuel to areas that most need it, in the best and least costly way possible."

NPRA and API said they did not object to ethanol, only to the EPA mandate, and some refiners will use it. They argued refiners should have the flexibility to choose ethanol, methyl tertiary butyl ether, or ethyl tertiary butyl ether for use in gasoline.

Raymond Lewis, AMI president, said, "This decision reaffirms the integrity of the CAA and the merits of a level playing field for cleaner fuels."

Sen. Bennett Johnston (D-La.) said, "The ethanol mandate would literally have been highway robbery, as it would cost the highway trust fund $545 million. We already have a $550 million annual subsidy for ethanol, and our economy cannot afford any other ethanol costs.

"The court overturned very bad fiscal and environmental policy I can't imagine the EPA will have any success in appealing the court's decision."

Last summer the Senate rejected 51-50 an amendment by Johnston and Sen. Bill Bradley (D-N.J.) that would have blocked the mandate (OGJ, Aug. 15, 1994, p. 38).

APPEAL POSSIBLE

Carol Browner, EPA administrator, said, "We continue to believe renewable energy sources like ethanol offer important environmental benefits. They already have been used in significant quantities in EPA's cleaner burning gasoline program."

The agency noted the ruling does not change the RFG program or prevent refineries from using ethanol in RFG.

The American Farm Bureau urged the administration to appeal.

Agriculture Sec. Dan Glickman said the administration "believed we had the authority to issue this regulation, and we believe it furthered the interests of all Americans by increasing economic activity in rural America and promoting clean air in our most polluted cities."

Glickman said nearly 1.2 billion gal of ethanol were produced last year from nearly 500 million bu of corn.

"This increase in corn use boosted corn prices, increased farm income, and kept our farmers doing what they know how to do best: produce food, fiber, and energy for Americans.

"This administration will keep fighting for ethanol and continue to work to ensure ethanol has a role in the nation's energy future. At a time when we are importing over half of our oil, we need a growing domestic renewable energy industry more than ever."

Gary Goldberg, American Corn Growers Association president, urged the Clinton administration to issue an administrative ruling on ETBE, moving the point of certification back to the refinery for excise tax purposes.

He said, "ETBE and RFG offer agricultural interests and ethanol supporters great opportunity. The combination of full commercialization of ETBE and complete implementation of RFG holds the promise for almost 200 million bushels of new corn demand right away, and the potential for over 700 million bushels of new corn utilization by 2010. This growth in the ethanol industry can come about without the need for mandates or waivers."

High Plains Corp., Wichita, predicted ethanol will capture oxygenate market share in excess of the levels that EPA proposed.

Stanley Larson, High Plains president, said, "Ethanol continues to capture market share due to its effectiveness and its favorable economics. Only half of the volume of ethanol is needed to provide the same oxygen provided by MTBE.

"This allows ethanol blenders to replace only half as much of the less expensive baseline gasoline with a more expensive oxygenate, making the net cost of the fuel less."

Copyright 1995 Oil & Gas Journal. All Rights Reserved.