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EPA Relents on U.S. Renewable Fuel Mandate

August 7, 2013
pC12 Banking on Biofuels 1
  

The federal government relented on quotas for renewable fuels as U.S. production of next-generation sources and demand for gasoline have lagged projections.

In issuing long-overdue final quotas, the Environmental Protection Agency today gave refiners an additional four months to reach the goal of using 16.55 billion gallons of renewable fuel for 2013. It also signaled it will cut the 18.15 billion gallon mandate for 2014, a looming requirement that had driven up the price of ethanol credits that refiners can buy to comply.

"EPA’s decision represents a positive sign for consumers and should help to prevent unnecessary increases in gasoline prices," Jason Bordoff, director of Columbia University’s Center for Global Energy Policy, said in a statement.

Under the Renewable Fuel Standard, passed by Congress in 2007, refiners such as Exxon Mobil Corp. must use a certain amount of renewable fuels each year, with their contribution determined by their share of the fuel market. The EPA and renewable-fuel producers argue it both spurs production of domestic fuels and cuts greenhouse-gas emissions by reducing use of gasoline or diesel.

Refiners complain that declining demand for gasoline means next year they would be forced to blend in more than 10 percent of ethanol, which they say isn’t safe for all engines and lacks support from consumers. Lobbyists for refiners such as Valero Corp. have pressed Congress to scrap the program altogether.

 

EPA Pledge

 

The EPA pledged today to lower the quota next year based on the estimated 13.2 billion gallons of ethanol that could fit within the 10 percent so-called blendwall, plus additional biodiesel or cellulosic fuels that would qualify. Without a change, "in 2014 compliance is expected to become significantly more difficult," according to the rule.

The companies are "encouraged that the agency indicated the need to address the blendwall when setting next year’s requirements," Charles Drevna, the president of the American Fuel and Petrochemical Manufacturers, which represents both Exxon and Valero, said in a statement. "In doing so, EPA now has an opportunity to act decisively to bring long-term stability to the market."

Because the 2013 quotas were issued late in the year, EPA also extended the deadline to comply by four months, to June 30, 2014. The agency also cut its 2013 requirement for use of cellulosic biofuel to 6 million gallons from a proposed 14 million, saying the next-generation fuel wasn’t available in adequate volumes.

 

‘Phantom Fuels’

 

That change "should put to an end the argument that refiners are being taxed to pay for phantom fuels," said Michael McAdams, president of Advanced Biofuels Association, which represents makers of fuels from products such as algae and wood waste.

If refiners don’t make or buy enough renewable fuel, they can buy credits for it, known as Renewable Identification Numbers, on a market. Those RINs had surged this year, as refiners worried there wouldn’t be adequate gasoline demand to mix in a safe level of ethanol and other renewable fuels either this year or next.

After today’s announcement, corn-based ethanol RINs dropped 13 percent to 90 cents, the lowest since June 18. The RIN price was $1.43 on July 17 before Congress started hearings on overhauling the program, up from 7 cents at the beginning of the year.

 

Rising Prices

 

That run-up in price prompted refiners to join with advocates for the hungry and corn buyers such as chain restaurants to urge Congress to scrap the mandate. Refiners have argued that the RIN price is driving up the cost of gasoline for consumers.

Gasoline for September delivery declined 3.66 cents to $2.9140 a gallon at 3:55 p.m. on the New York Mercantile Exchange, a four-week low, as the value of RINs fell today.

Some of critics weren’t swayed by today’s EPA pledge.

"EPA missed an opportunity to fix the problem this year," Jack Gerard, president of the American Petroleum Institute, said in a statement. "Now it’s up to Congress to exercise leadership and move quickly to end this dangerous mandate before it hurts consumers, damages vehicles, and harms our economy."

 

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RELATED TOPICS: Policy, Biofuels, Biodiesel

 
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COMMENTS (3 Comments)

Surviving I think - Olivet , MI
I think I should be pleased to see EPA taking a reasonable stance with this matter, I however hope the pendelem doesn't swing back to where we started. I don't think I should feel sorry for the Oil companys that have had record profits. Lets not loose site of why we did this, smoggggg. and lots of it. We were like China is today in the big cities, at least now we don't need to wear gas masks, it has made a difference. At the same time no program is 100 % right, the fact that EPA has adjusted is monumental, up till now I didn't have much of anything good to say about them, sad that it is taking Big Oil to convince them once again, please don't scrap 10 yrs or so of work, most things are working out. 4 dollar corn makes this problem change quickley as far as cost don't forget, they (Big Oil) makes money on either, they will put 25% in if it makes them money and you might not know.Technology needed to change for the best use, so, I think we will be better in the long run, we have only been a few years relative to where we have been whats wrong with improvements for our children, remember.
4:23 PM Aug 7th
 
Felix Gorges - Goddard, KS
With Lisa Jackson out and Gina McCarthy in as new head of EPA, common sense is returning to the EPA. Thank you Gina.
4:16 PM Aug 7th
 
RayPulver - Billings, MO
yes,today again i,ve tryed to get some one to build my wire master so it could be bought.The real thing is this i hear people say it would take fenceing jobs away BS, that is not true,infact if you had one you could put up a fence a day all 6 strands.But instead the mom&pop farmers that have worked like dogs to keep afloat with the cost of things is going down hill.I made this so they could invest in it but still have it for there kids to us.But no one wants to build it & share in the profits with me.If you want to build it please call me at 417 732 9572 or 417 732 6442 for Wire master,thank you .
3:34 PM Aug 7th
 



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