EPA Proposes Rollback in Renewable Fuel Mandate

Today the EPA announced the first potential reduction in renewable fuel requirements since Congress expanded the mandate in the 2007 Energy Independence and Security Act.  The agency is seeking comment on a proposal that would require refiners to use 15.21 billion gallons of biofuels in gasoline and diesel fuel blends in 2014; of that target, 13.01 billion gallons must come from conventional ethanol and the remainder would be composed of advanced renewable fuels that are not corn-based. By contrast, the 2007 bill's biofuels target for 2014 was 18.15 billion gallons of renewable fuel.

According to the agency's release, "Production of renewable fuels has been growing rapidly in recent years. At the same time, advances in vehicle fuel economy and other economic factors have pushed gasoline consumption far lower than what was expected when Congress passed the Renewable Fuel Standard in 2007. As a result, we are now at the “E10 blend wall,” the point at which the E10 fuel pool is saturated with ethanol. If gasoline demand continues to decline, as currently forecast, continuing growth in the use of ethanol will require greater use of higher ethanol blends such as E15 and E85. " Refiners and auto companies have historically cautioned against fuel blends beyond E10 because of potential negative impacts to vehicle engines that could void warranties and damage equipment with small engines. The move was supported by the CEO of the American Petroleum Institute, Jack Gerard, who was quoted in a recent story in Greenwire urging EPA to go further, "For the first time, EPA has acknowledged that the blend wall is a dangerous reality and must be addressed to avoid serious impact on America's fuel supply and harm to American consumers...While the agency took a step in the right direction, more must be done." Ethanol and renewable fuel groups strongly criticized the proposal with the President of the Renewable Fuel Association (RFA), Bob Dinneen, saying, "They’re capitulating to the oil companies." RFA recently developed an analysis which estimated that the EPA's proposal would substantially cut farm income for corn growers and would cause gasoline prices to increase by 5.7 cents a gallon. 

This week, tremendous media activity was generated by an AP investigation that was critical of the renewable fuel standard and ethanol programs because of assertions that it incentivized farmers to take lands out of conservation and plant corn on marginal lands susceptible to erosion. Renewable fuels groups took exception to several findings made by the AP, one of which stated that 38,000 acres of virgin grassland was converted to corn production for the first time in 2012 and another stating more than 5 million acres of land set aside for conservation have since been converted to production since President Obama took office.

Once the EPA's plan is published in the federal register, it will be open for a 60-day public comment window.