UPDATED - Reports: EPA to Propose 15.21 Bil. Gallon 2014 Renewable Fuel Requirement

October 11, 2013 12:13 AM
 

via a special arrangement with Informa Economics, Inc.

EPA document says waiver authority being used to address 'blend wall' concerns expressed by oil industry


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


 

Note the dates in the following email that was sent out by Growth Energy the evening of Oct. 10, 2013:

 

 

"There have been several rumors surrounding the 2014 RVO proposed rule including the latest that obtained a "draft document" from EPA. … as of 6 pm this evening:

 

• The draft is dated August 26, 2013 therefore we are not even certain it is what EPA sent to OMB for review. EPA did not send the draft to OMB for another week.

 

• It could be a working draft prepared by EPA that could have been changed before delivery to OMB.

 

• Even if it is what EPA proposed it is the just the first of many steps before the rule gets finalized. …"

 

The email also noted that parties that do not agree with the RVOs often file lawsuits after the final regulations are issued (in this case, probably next summer) and that whoever leaked the document broke the law.

 

 

The U.S. Environmental Protection Agency (EPA) has proposed a 15.21 billion gallon Renewable Fuels Standard (RFS) for 2014, including a 2.21 billion gallon level for advanced biofuels and 23 million gallons for cellulosic ethanol, according to reports citing an EPA document.

A Reuters item filed late Thursday echoes reports much earlier in the day that surfaced throughout the ethanol and corn industry. The publication Greenwire initially broke the news on Wednesday, noting that, "US EPA would roll back both corn ethanol and advanced biofuel targets for next year under draft proposals circulating among stakeholders in the oil and biofuels industries."

The document indicated the corn-based ethanol component would be reduced 6 percent from the 13.8 billion level set for 2013 by EPA in August, resulting in a 13 billion gallon level. This would match the 6 percent reduction that was rumored earlier today and would be some 800 million gallons under the 2013 corn-based ethanol level of 13.8 billion gallons.

The agency said it intends to use waiver authority to reduce the RFS levels for 2014, opting to use the "inadequate domestic supply" waiver criteria, Reuters said, and indicated the goal of reducing the RFS for 2014 is to address the blend wall issue that has been cited by the US oil industry.

Indications are the 13 billion gallon level for corn based ethanol is one of three options in the document, with one said to be at 12.36 billion gallons and the other at 13.15 billion gallons. The advanced biofuel component would be adjusted in each scenario to result in a total 15.21 billion gallon RFS level. Reuters indicates the agency would seek comment on all three options but would specifically propose the 13-billion-gallon level for the corn-based ethanol component.

The EPA document also said that the agency will propose freezing the biomass-based diesel volume at 1.29 billion gallons for 2014 and 2015, according to the report.

The Commodity Futures Trading Commission (CFTC) reportedly has been asked to see whether or not some traders, trading companies, or others traded on confidential information and who or what agency in the Obama administration released the market-sensitive document.

Representatives of the petroleum industry met with White House aides Sept. 26 to outline their views and urge that the RFS be waived for 2014, saying the waiver was needed to avoid running up against the blend wall. In their session with White House aides, according to The Hill newspaper, the industry gave a presentation from the American Fuel and Petrochemical Manufacturers which labeled the RFS "unworkable." Link to presentation.

Since July 1, at least 12 meetings have been held at OMB on the RFS requirements for 2014, even though some of those meetings listed on the OMB website were identified as being for the 2013 RFS standards. The American Petroleum Institute (API) and others in the petroleum and refining industry were present for several meetings in August and September, with representatives of the biofuels industry having sessions with OMB on at least three occasions. Others meetings included representatives from US airlines and the Brazilian sugar industry group Unica.

The plan is under review at the Office of Management and Budget which is not expected to make a decision until after the government shutdown ends.

Supporters of the RFS indicated Oct. 10 that they are contemplating legal action if this plan is carried out. Existing vehicles that can use fuels with 85 percent ethanol and new filling stations using 15 percent ethanol could allow for the sale of 14.4 billion gallons of ethanol in 2014, said Bob Dinneen, president of the Renewable Fuels Association (RFA). "The oil industry has argued that the existing vehicle fleet and current refueling infrastructure are incapable of absorbing significant volumes of ethanol above the E10 ‘blend wall,’ " Dinneen wrote in an Oct. 10 blog post. "This contention is completely false." Dinneen added that RFA believe "it would be unlawful for EPA to waive the RFS based on the ‘blend wall'".

The proposed reduction in the requirement for biodiesel and advanced biofuels also does not make sense, said Anne Steckel, vice president for federal affairs at the National Biodiesel Board. "We're not sure where these numbers are coming from, and it may just be wishful thinking among folks in the oil industry," she said in a statement.


Comments: It is still not clear at this stage whether or not the EPA document cited has been vetted by an interagency process that would include participation by USDA, the Energy Department, the National Economic Council and potentially others in the administration. The notice of proposed rulemaking (NRPM) for 2014 RFS levels was sent to the OMB Sept. 3 with EPA targeting an Oct. 2013 release. Initially, that had been projected to be released in September, but was pushed back in late September.

Some initial analysis:

 

  • Corn-based ethanol usage could be even less than 13.0 billion gallons if reports about the proposed Renewable Volume Obligations (RVOs) are correct and are incorporated into the final rulemaking by EPA.

  • The effective allocation to undifferentiated advanced biofuels – a category historically met by Brazilian ethanol – would decline to roughly 265 million gallons (RIN equivalent). More biodiesel (and renewable diesel) than the 1.28-billion-gallon biomass-based diesel mandate can be produced, an option that would be more economically attractive if the biodiesel blender’s tax credit is extended. The required volume of 1.28 billion gallons of biomass-based diesel would count as roughly 1.92 billion RIN-equivalent gallons, as most gallons of biodiesel count as 1.5 RINs. More biodiesel can be produced and used than required for the biomass-based diesel standard, and while imports of Brazilian ethanol would likely decline, moderate volumes still could be needed to comply with California’s Low Carbon Fuel Standard; both categories of biofuels would count toward the total advanced biofuel requirement of 2.21 billion RINs.

  • If consumption of biodiesel (and renewable diesel) and imported Brazilian sugarcane-based ethanol are more than necessary to meet the total advanced biofuel mandate, the overage would eat into the effective allocation for corn-based ethanol under RFS2 (again, with each physical gallon of biodiesel generally counting as 1.5 RINs). It should be noted that there is no specific RFS2 mandate for corn-based ethanol, and the effective allocation to corn-based ethanol is simply the difference between the total renewable fuel standard and the total advanced biofuel standard; moreover, all gallons of advanced biofuels (corn-based ethanol cannot be advanced) also count toward the total RFS.

  • Given this situation, the ability of the ethanol industry to maintain reasonably high levels of capacity utilization and keep plants from idling will be dependent upon the level of exports in 2014.

  • Still, it should be noted that the RVOs are only in the proposal stage and that EPA would likely have to substantiate a partial waiver of at least the total renewable fuel standard.


 

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


 


 

 

 

 

Back to news


Comments

 
Spell Check

No comments have been posted to this News Article

Corn College TV Education Series

2014_Team_Shot_with_Logo

Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!

Markets

Market Data provided by QTInfo.com
Brought to you by Beyer
Close