EPA puts brakes on ethanol

The Environmental Protection Agency on Friday put the brakes on ethanol. As part of its Renewable Fuel Standard (RFS) program, the EPA each year specifies the amount of renewable fuels to be integrated into the motor-vehicle fuel supply. For 2014, the EPA is proposing the use of 15.21 billion gallons of renewable fuel, with 2.20 billion gallons falling into what the EPA calls advanced biofuels, including cellulosic ethanol, biomass diesel, and other non-ethanol advanced biofuels. The 15.52 billion gallon figure is down from 16.55 gallons this year and falls well short of the 18.15 billion gallon figure specified for 2014 by the Clean Air Act (CAA).

The EPA cites limitations on the ability of the industry to produce sufficient volumes of qualifying renewable fuels as instrumental in setting its proposed standards for 2014. The agency reports, “Based on an assessment of the available volumes of cellulosic biofuels, EPA is proposing to set the cellulosic biofuel standard at 17 million gallons, significantly lower than CAA target of 1.75 billion gallons. This projection reflects EPA’s current estimate of what will actually be produced in 2014, but EPA will consider public comments before setting the final cellulosic standard.”

Under the 2014 standards, cellulosic biofuel would make up just 0.01% of the total fuel supply, with total renewal fuels accounting for 9.2%.

The proposed standards come amid reduced consumer demand for gasoline is falling. The EPA says, “The proposal seeks to put the RFS program on a steady path forward—ensuring the continued growth of renewable fuels while recognizing the practical limits on ethanol blending, called the ethanol 'blend wall.' The blend wall refers to the difficulty in incorporating increasing amounts of ethanol into the transportation fuel supply at volumes exceeding those achieved by the sale of nearly all gasoline as E10 (gasoline containing 10% ethanol by volume).

Politico reports that the oil industry has been warning that gasoline prices could spike because of the blend wall phenomenon if the mandate were not scaled back. The publication quotes American Petroleum Institute CEO Jack Gerard as saying, “For the first time EPA has acknowledged that the blend wall is a dangerous reality and must be addressed to avoid serious impacts on America’s fuel supply and harm to America’s consumers.”

The Hill quotes a senior administration official as saying that the Obama administration supports biofuels, but that market, infrastructure and other constraints warrant scaling back the mandate. “The realities of the fuel market must be addressed to properly implement the program,” the official said.

However, The Hill quotes Anne Steckel, the National Biodiesel Board’s vice president of federal affairs, as calling the proposal “…surprising and disappointing. This proposal, if it becomes final, would create a shrinking market, eliminate thousands of jobs, and likely cause biodiesel plants to close across the country.”

Politico quotes Bob Dinneen, president of the Renewable Fuels Association, as saying of the proposal, “Boy, my goodness, are the oil companies going to benefit from this. We’re all just sort of scratching our heads here wondering why this administration is telling us to produce less of a clean-burning American fuel.”

The short answer seems to be that manufacturers can't produce enough advanced biofuels. They need to shift away from corn-based ethanol, whose use drives up food prices, and toward cellulosic ethanol and other advanced biofuels.

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