EPA proposes a biofuels compromise — and makes nobody
happy
By Chris Mooney May 29, 2015
The
embattled Environmental Protection Agency on Friday released new proposed
rules for the volume of biofuels to be blended into the
nation’s fuels through 2016, in an effort to put itself back on
schedule after numerous missed deadlines but
still failing to please business interests on both sides affected by the rule.
The
conflict traces back to the 2005 Renewable Fuel Standard,
which (as later updated) required blending of corn-based ethanol and other
biofuels into motor fuels in escalating amounts, eventually reaching 36 billion
gallons by 2022. The law sought to increase U.S. energy independence and also reduce greenhouse gas emissions. But declining
gasoline use has crimped plans greatly, since ethanol
volumes beyond 10 percent of gasoline — the so-called “blend wall”
— would exceed what many car warranties say vehicles should use.
According to AAA,
the large majority of today’s cars are “not approved
by manufacturers” to run on fuels containing between 10
and 15 percent ethanol, dubbed E15 — and doing so
for a sustained time “could result in significant problems.”
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Hence
EPA’s conundrum — and its difficult compromise. The proposed policy
simultaneously increases conventional biofuel volumes (mostly comprised of corn-based
ethanol) for 2016 to up to 14 billion gallons — enough to breach the “blend
wall,” industry charges — but also raises them less than the law had initially
stipulated (to 15 billion). Total conventional biofuels used in 2014 amounted
to about 13.25 billion gallons. The new policy would also steadily increase
mandated volumes for so-called “advanced” biofuels, like cellulosic ethanol.
“We
recognize at EPA that the delay in issuing the standards … has led to
uncertainty in the marketplace,” said Janet McCabe, acting assistant
administrator at the agency’s Office of Air and Radiation, on a call with
reporters Friday. The new proposed rule, she said, “will help provide the
certainty that the marketplace needs to help these [fuels] develop.”
But
members of the renewable fuels industry were quick to denounce the EPA’s
move. “Today’s proposal by the EPA puts the oil industry’s agenda ahead of
farmers and rural America,” said Jeff
Lautt, chief executive of leading ethanol
producer POET, in a statement. The National Corn Growers Association said that
the new rules would mean “nearly a billion and a half bushels in lost corn
demand.”
Meanwhile,
traditional fuel refiners appeared no happier. “In acknowledging that the
proposal seeks to force more ethanol use than the marketplace can handle, EPA
is playing Russian Roulette with fuel supply and consumers,” said the American
Fuel and Petrochemical Manufacturers’ president Chet Thompson.
“I
guess the one liner is that there’s something in here for everybody not to
like,” said James Stock, a a Harvard economist and
fellow at the Center on Global Energy Policy at Columbia University. “What
they’ve decided to do is to make a commitment to moving through the blend wall
– get out higher volumes of ethanol through higher blends – but to do so in a
measured way.”
Stock,
who calculates that the blend wall could be breached by 0.2 percent in 2016
under EPA’s proposal, thinks nonetheless that the compromise is a smart move.
He notes in particular that at the same time, the
Agriculture Department announced plans
to spend $ 100 million to work with states to increase the number of gas
station fuel pumps that can carry higher volume ethanol blends, such as
so-called E15 and E85.
If more
consumers drove flex fuel
vehicles that can run on these fuels, then the amount of
renewable fuels in the fuel supply could be able to grow further — but with a
limited refueling infrastructure, E85 has struggled to take off. “If
there’s more places where they can buy it, more of it will be sold,” says
Stock.
“Implementation
of the RFS program to date has led to ethanol use that is essentially at the
E10 blendwall today,” acknowledges the
EPA. “Any further growth in ethanol volumes must entail the use of
higher-ethanol blends such as E15 and E85.”
But
others on the fuel industry side took a dimmer view.
“I
think that the 2016 volumes are pure conjecture on EPA’s part, and I think it
is a thinly veiled request from the agency to Capitol Hill for legislative
intervention,” said Stephen Brown, vice president and council for federal
government affairs at Tesoro, a major petroleum refiner. “That’s my read
of this thing.”
The EPA
rules are not final — they are subject to a public comment period — but the
agency pledged to be on track to finalize them by this Nov. 30.
“We’re
balancing two dynamics, Congress’s clear intent to increase renewable fuels …
and the real world circumstances that have slowed
progress towards these goals,” the EPA’s McCabe told journalists Friday.