Proposal Seeks Input to Address “E10 Blend Wall,” Reaffirms Commitment to Biofuels
The U.S. Environmental Protection Agency (EPA) today proposed for public comment the levels of renewable fuels to be blended into gasoline and diesel as required by Congress under the Energy Independence and Security Act of 2007. Developed with input from the U.S. Department of Energy and U.S. Department of Agriculture, the proposal seeks public input on annual volume requirements for renewable fuels in all motor vehicle gasoline and diesel produced or imported by the United States in 2014. The proposal seeks to put the Renewable Fuel Standard (RFS) program on a steady path forward – ensuring the continued long-term growth of the renewable fuel industry – while seeking input on different approaches to address the “E10 blend wall.”
“Biofuels are a key part of the Obama Administration’s “all of the above” energy strategy, helping to reduce our dependence on foreign oil, cut carbon pollution and create jobs,” said EPA Administrator Gina McCarthy. “We have made great progress in recent years, and EPA continues to support the RFS goal of increasing biofuel production and use. We look forward to working with all stakeholders to develop a final rule that maintains the strength and promise of the RFS program.”
The proposal discusses a variety of approaches for setting the 2014 standards, and includes a number of production and consumption ranges for key categories of biofuel covered by the RFS program. The proposal seeks comment on a range of total renewable fuel volumes for 2014 and proposes a level within that range of 15.21 billion gallons. Specifically, EPA is seeking comment on the following proposed volumes:
Nearly all gasoline sold in the U.S. is now “E10,” which is fuel with up to 10 percent ethanol. 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.
The Obama Administration has taken a number of steps to allow or encourage the use of these higher ethanol blends. In 2010, EPA approved E15 for use in vehicles newer than model year 2001 and developed labeling rules to enable retailers to market E15. In addition, since 2011, USDA has made funding available through the Rural Energy for America Program to support deployment of “flex-fuel” pumps that can dispense a range of ethanol blends. The 2014 proposal seeks input on what additional actions could be taken by government and industry to help overcome current market challenges, and to minimize the need for adjustments in the statutory renewable fuel volume requirements in the future. Looking forward, the proposal clearly indicates that growth in capacity for ethanol consumption would continuously be reflected in the standards set beyond 2014. EPA looks forward to further engagement and additional information from stakeholders as the agency works in consultation with the Departments of Agriculture and Energy toward the development of a final rule.
The renewable fuels program was developed by Congress in an effort to reduce greenhouse gas emissions and expand the nation’s renewable fuels sector while reducing reliance on foreign oil. The standards determine how much renewable fuel a refiner or importer is responsible for, and are the standards designed to achieve the national volumes for each type of renewable fuel.
Today, in a separate action, EPA is also seeking comment on petitions for a waiver of the renewable fuel standards that would apply in 2014. EPA expects that a determination on the substance of the petitions will be issued at the same time that EPA issues a final rule establishing the 2014 RFS.
Once the proposal is published in the Federal Register, it will be open to a 60-day public comment period.
More information on the standards and regulations: http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm.
More information on renewable fuels: http://www.epa.gov/otaq/fuels/renewablefuels/index.htm.
Smith Statement on Proposed Changes to Ethanol Requirements
Congressman Adrian Smith (R-NE) issued the following statement today after the Environmental Protection Agency proposed scaling back the amount of renewable fuels blended into gasoline for 2014:
“America must continue to diversify our energy portfolio and increase production from all sources of fuel. Ethanol provides consumers in Nebraska and across America with a competitive, clean, domestically-produced alternative. As the Environmental Protection Agency reviews comments submitted on the proposed changes, I hope sound science and the rule of law will prevail after a full consideration of the facts and the need for greater consumer choice.”
Statement from Agriculture Secretary Tom Vilsack on EPA 2014 Volume Standards
Agriculture Secretary Tom Vilsack today made the following statements on EPA's proposal of 2014 Renewable Fuel Standards:
"The Obama Administration remains committed to the production of clean, renewable energy from homegrown sources, and to the businesses that are hard at work to create the next generation of biofuels.
It's important to take a long-term approach to the RFS. Clearly, as Governor of Iowa and as U.S. Secretary of Agriculture, my support for the RFS has been steady and strong. But I also believe that improved distribution and increased consumer use of renewable fuels are critical to the future of this industry. We are proud of our record to support increased demand for renewable fuels. USDA has invested in the creation of advanced biorefineries across the nation; developed a unique partnership with the U.S. Navy and Department of Energy to create new biofuels for marine and aviation use; and boosted markets for nearly 3,000 U.S. companies that are creating biobased products from homegrown materials.
I am pleased that EPA is requesting comments on how we can help the biofuels industry expand the availability of high-ethanol blends, and I hope the industry uses the comment period to provide constructive suggestions. Together, we will be able to chart a path forward that maintains President Obama’s strong commitment to an “All of the Above” energy strategy for our nation.”
EPA Ethanol Proposal Will Devastate Farmers, Rural Economy
The National Corn Growers Association expressed outrage today in the wake of an announcement by the U.S. Environmental Protection Agency that will significantly weaken the Renewable Fuel Standard by reducing the volumes for corn-based ethanol for 2014.
“This recommendation is ill-advised and should be condemned by all consumers because it is damaging to our tenuous economy and short-sighted regarding the nation’s energy future,” said NCGA President Martin Barbre. “Agriculture has been a bright spot in a failing U.S. economy, but current corn prices are below the cost of production. EPA’s ruling would be devastating for family farmers and the entire rural economy.”
The Environmental Protection Agency’s proposed renewable volume obligations set the annual targets for the utilization of cellulosic, biodiesel, advanced and total renewable fuel within our transportation fuels. The proposed rule caps corn-based (or conventional) ethanol at 13 billion gallons. These proposed volume obligations are a drastic reduction from the mandated RVOs in statute. Today’s proposed rule cuts 1.4 billion gallons from the conventional ethanol cap that was set at 14.4 billion gallons.
Barbre noted the EPA proposal will make investments in new biofuels plants very risky, stagnate investment in infrastructure by petroleum marketers and send the wrong signals to automakers who want more direction on where they should be spending millions of targeted investments on research and development.
“Ethanol and the RFS have been a great success story. Now, the EPA is sending a terrible message that we no longer have a long-term energy policy for biofuels, which was the original intent of this forward-thinking legislation. The Administration has clearly backed away from their commitment to renewable energy and this proposal blatantly contradicts the President’s Climate Action Plan,” Barbre said. “The goal of the RFS is to reduce our dependence on imported oil to make our country more energy independent and more secure. It has done that while also revitalizing rural America.”
According to the U.S. Energy Information Administration, U.S. oil imports have decreased from 60 percent of our total usage to 45 percent. This was due to increased efficiency in our automobile fleet, the recession and the increased use of biofuels.
American farmers are currently harvesting their corn crops, and by the latest USDA projections, it will be a record 14 billion bushels. As a result of this record, corn prices are falling and currently stand close to where they were when the RFS was enacted in its current form in 2007.
While corn prices have returned to previous levels, the cost of producing the crop has continued to increase. In 2012, it cost $655 per acre to plant corn. Based on this year’s projected yields, a farm price of $4.25 per bushel would be required to cover production costs.
The psychological impact of EPA’s proposal is anticipated to push corn prices well below the cost of production. To further put this into perspective, if corn prices dropped to $3.50 a bushel farmers and the rural economy would lose more than $10 billion.
“A shock of this magnitude to agriculture markets would send ripples throughout the entire economy. Congress must carefully weigh the ramifications any changes to the RFS would have on agriculture and related industries. The U.S. economy and consumers can ill afford a downturn in this sector,” Barbre said. “EPA is making a conscious decision to limit ethanol’s access to the market even with the significant price advantage of ethanol compared to gasoline.”
Statement by Bob Stallman, President, American Farm Bureau Federation, Regarding EPA’s Proposed Cut to the RFS2
“The American Farm Bureau Federation is disappointed in the Environmental Protection Agency’s proposed reduction in the amount of ethanol that must be blended into the nation’s gasoline supply. This decision strikes a blow to conventional ethanol production as well as dampens the prospects for advanced biofuels.”
“The intent of the Renewable Fuels Standard revised in 2007 (RFS2) was to get more renewable fuels into our nation’s pipeline and move beyond the E10 fuel blend. Today’s announcement from EPA moves us in the opposite direction. This decision has the potential to pull the plug on new technologies and investments that are currently in place and needed to produce advanced biofuels.
“The ethanol industry, from farmers to investors and everyone in between, needs stability and certainty.”
The EPA’s RVO Proposal Cannot Stand
The Environmental Protection Agency (EPA) today released the proposed 2014 Renewable Fuel Standard (RFS) volumetric requirements. For 2014, EPA is proposing to lower the conventional renewable fuel requirement from the statutory level of 14.4 billion gallons (BG) to 13 billion gallons, and slash the total RFS volumetric requirement from 18.15 BG to 15.21 BG. However, the EPA does not have the statutory authority to lower the total requirement by more than the total reduction in advanced and cellulosic. In addition, the so-called “blend wall” does not qualify under the law as grounds for a “general waiver” of the RFS volumes. The specific conditions needed to effectuate a “general waiver”—severe economic harm or inadequate domestic supply of renewable fuel—are not present. The cellulosic biofuel volumetric requirement was waived to 17 million gallons, and the total advanced volumetric requirement was waived to 2.2 billion gallons. The proposed 2014 blending requirements will be open to public review and comment before a final ruling is made. Commenting on today’s announcement, Bob Dinneen, President and CEO of the Renewable Fuels Association (RFA), said:
“By re-writing the statute and re-defining the conditions upon which a waiver from the RFS can be granted, EPA is proposing to place the nation’s renewable energy policy in the hands of the oil companies. That would be the death of innovation and evolution in our motor fuel markets, thus increasing consumer costs at the pump and the environmental cost of energy production. This proposal cannot stand.
“During the comment period, I expect reason and fact to replace the fear and misinformation peddled by Big Oil and seemingly adopted for this proposal. But an Administration committed to addressing climate change cannot turn its back on biofuels. An Administration managing an economic recovery cannot watch gasoline prices rise for lack of competition. An Administration intent upon seeing the next generation of biofuel technology commercialized cannot eviscerate the demand base that would allow those fuels to succeed. And an Administration that understands the importance of a healthy farm economy cannot rip away demand that farmers relied upon in growing the largest corn crop in history, particularly at a time when there is no Farm Bill safety net. This Administration, a consistent supporter of the RFS, will not affect its demise.”
Dinneen concluded, “I look forward to engaging the EPA and others in the Administration in constructive dialogue as to the path forward.”
Slashing the 2014 targets could lead to negative impacts for America’s farmers and consumers, and ultimately cut American jobs, harm the environment, and discourage the future of biofuels. The impact of these numbers could be seen far and wide, including:
- Corn Prices Sink and Farm Income Falls
- Increased Demand for Gasoline and Higher Pump Prices
- Increased GHG emissions from Transportation Sector
- Puts American Jobs at Risk
- Discourages Investment in Biofuel Infrastructure
- Deters Investment in Advanced and Cellulosic Biofuels
ACE says EPA proposal to reduce RFS betrays commitment to renewable fuels
Brian Jennings, Executive Vice President for the American Coalition for Ethanol (ACE), today issued the following statement after the U.S. Environmental Protection Agency (EPA) released its’ proposed 2014 Renewable Volume Obligations (RVOs) for the Renewable Fuel Standard (RFS), which if finalized would cut ethanol use below levels called for in the law.
“There is nothing positive that can be said about EPA’s proposal to unnecessarily restrict sales of ethanol-blended fuel in 2014. This proposed rule will increase pump prices, drain billions of dollars from consumer pocketbooks, and transfer billions more to oil company profit statements,” said Jennings. “ EPA’s proposal fundamentally betrays this Administration’s commitment to clean renewable fuels and caves to Big Oil demands to put a ceiling on ethanol use."
“We are deeply disappointed in EPA and will try to help them come to their senses before the final rule is published, by helping the Administration better grasp the role E15 and E85 can play in meeting the 2014 RFS" continued Jennings. “This proposal likely violates the law, would shut down biofuel facilities, put Americans out of work, and chase investment in advanced biofuel overseas to our competitors.”
“As we said in our October 15 letter to EPA, using the E10 “blend wall” as an excuse to reduce ethanol use rewards oil companies for doing nothing to comply with the RFS or inevitability of higher ethanol blends, and sets a dangerous precedent by taking the teeth out of the most consequential policy Congress has ever enacted to reduce greenhouse gas emissions of transportation fuel,” said Jennings.
Advanced Ethanol Council Disappointed by Proposed 2014 RFS Volume Obligation
The Advanced Ethanol Council expressed disappointment today in the proposed 2014 required volume obligation (RVO) for the federal Renewable Fuel Standard (RFS).
“While only a proposed rule at this point, this is the first time that the Obama Administration has shown any sign of wavering when it comes to implementing the RFS,” said Brooke Coleman, Executive Director of the Advanced Ethanol Council (AEC). “EPA is in the right ballpark for cellulosic biofuels, and we are confident that the final number will be the right one for the industry in 2014. But bigger picture issues must be resolved in the final rule because advanced biofuel investors also pay attention to the big picture.”
The Council pointed to unnecessary reductions to the advanced biofuel pool, unfounded concern about imaginary blend walls, and not enough faith in the mechanics of the RFS program among certain Administration officials as the primary issues that need to be resolved during the comment period.
“What we’re seeing is the oil industry taking one last run at trying to convince administrators of the RFS to relieve the legal obligation on them to blend more biofuel based on clever arguments meant to disguise the fact that oil companies just don’t want to blend more biofuel. The RFS is designed to bust the oil monopoly. It’s not going to be easy,” added Coleman.
The Council added that the catalyst for too conservative a proposal is higher RIN prices in 2013.
“We hope that the Obama Administration will realize that reasonably higher RIN prices are a good thing instead of a bad thing. Higher RIN prices are a sign that the oil companies are predictably refusing to blend actual liquid gallons of fuel to comply with the RFS. But higher RIN prices are encouraging those unwilling to obstruct on RFS compliance to actually blend more renewable fuels. Investors are starting to see the RIN program drive more demand for renewable fuels with consumer savings at the pump. Now is not the time to depressurize the program,” Coleman said.
The Council added that the industry is more united than ever before, and will work together to fix the final rule.
EPA’s RFS Proposal Goes Backward on Biodiesel
In response to a Proposed Rule for the 2014 Renewable Fuel Standard Required Volume Obligations (RVO) issued today by the U.S. Environmental Protection Agency, the American Soybean Association expressed concern that the biomass-based diesel levels for 2014 and 2015 would be reduced below the amount actually produced in 2013. The rule, which establishes the amount of biofuels that obligated parties must utilize for 2014 and the amount of biomass-based diesel for 2014 and 2015, proposes a biomass-based diesel RVO of 1.28 billion gallons, less than the amount produced by the industry in 2013. EPA has also proposed to reduce the total advanced biofuels requirement, which also limits the opportunities for biodiesel.
“The level set forth in the proposal is unnecessarily low and will stifle the growth and job creation potential demonstrated by the biodiesel industry over the past several years,” said Danny Murphy, a soybean, corn and wheat farmer from Canton, Miss., and ASA’s president. “Biodiesel, including biodiesel produced from soybean oil, is the most prevalent advanced biofuel currently produced in the United States. Biodiesel is the first and only EPA-designated Advanced Biofuel to reach 1 billion gallons of annual production. The industry has met or exceeded the RFS Biomass-based Diesel volume requirements each year they have been in place.”
ASA will continue to work with EPA and industry partners to demonstrate the flaws represented by this proposal and looks forward to achieving a final rule that does not hinder the momentum and positive economic benefits generated by biodiesel.
“The biodiesel industry is on track to produce at least 1.7 billion gallons of biodiesel in 2013, and can match or surpass that production level in 2014,” added Murphy. “By keeping the RVO target at the lower 1.28 billion gallon level, EPA would be limiting an industry that is supporting jobs, providing a valuable market for soybean farmers, and in turn lowering the price for the protein-rich soybean meal used in animal feed.”
As Murphy points out, processing biodiesel from soybeans uses only the oil portion of the soybean, leaving all of the soy meal protein available for livestock feed and consumer food products. By providing a market for soybean oil, biodiesel increases the availability of protein-rich meal, and the increased meal supply results in a more cost-effective food and feed source.
“As we move forward, ASA will be working with industry stakeholders as well as with EPA during the public comment period to demonstrate to the agency the merit and benefits of setting the biomass-based diesel RVO at a level in the final rule that is not below the amount produced in 2013.”
Biodiesel Industry Voices Disappointment in RFS Proposal
The National Biodiesel Board (NBB) warned Friday that the EPA’s proposal for 2014 volumes under the Renewable Fuel Standard (RFS) would cause plant closures and layoffs in the U.S. biodiesel industry and called on the Obama Administration to recommit to developing American-made Advanced Biofuels.
“The growth in domestic biodiesel production dovetails exactly with President Obama’s statement in July of this year that ‘biofuels are already reducing our dependence on oil, cutting pollution and creating jobs around the country,’” said Anne Steckel, NBB’s vice president of federal affairs. “This is why EPA’s action today is so 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,” Steckel said “It also sends a terrible signal to investors and entrepreneurs that jeopardizes the future development of biodiesel and other Advanced Biofuels in the United States.”
“This Administration has for years supported strong renewable fuels policies and encouraged investment in this industry,” Steckel added. “The private sector has responded to these policies by meeting or exceeding the Advanced Biofuels requirements in every year of the RFS. The Administration should be celebrating that success and continuing the momentum, not retreating.”
Biodiesel production is on track to set a production record exceeding 1.7 billion gallons this year, using an increasingly diverse mix of feedstocks including recycled cooking oil, agricultural oils and animal fats. The EPA’s proposed rule for next year would set biodiesel volumes at 1.28 billion gallons while shrinking the overall Advanced requirement to 2.2 billion gallons. The biodiesel category is a subset of the overall Advanced category.
Amanda Cunningham of Veros Energy, a biodiesel producer in Moundville, Ala., is among those in the industry whose job is at risk under the proposal. Cunningham and her husband both work at the company, supporting a family of six children.
“If biodiesel volumes are decreased, it has a hard, hard trickle down impact,” Cunningham said. “We would surely have layoffs; layoffs reduce production; reduced production drops the bottom line; and at that point the plant might as well shut down.”
The draft proposal is particularly challenging because excess biodiesel production in 2013 can be carried over for compliance into 2014. As a result, the 1.28 billion gallon proposal could mean an effective market closer to 1 billion gallons – a dramatic reduction from current production.
“Our industry has been running recently at 170 million gallons per month – an annualized rate of 2 billion gallons. This proposal could nearly cut that in half,” Steckel said. “We will continue urging the Administration to improve this rule before it becomes final.”
NSP Statement on EPA’s RVO Proposal
National Sorghum Producers Chairman J.B. Stewart released the following statement in response to the U.S. Environmental Protection Agency’s release today of its proposed renewable volume obligations (RVO) in the 2014 standards for the Renewable Fuel Standard (RFS) program.
“We are greatly disappointed in the EPA’s decision to reduce the advanced biofuel and total renewable fuel obligations for 2014. Sorghum-based ethanol is a vital segment of our industry, and this proposal could significantly harm grain farmers and rural economies by undermining the Renewable Fuels Standard.
“The sorghum industry is playing a critical role in reducing our nation’s dependence on foreign oil by producing a clean, renewable biofuel, and the sorghum industry is committed to continue working with the Administration in a way that keeps progress moving forward. This is not a final rule, but a proposed rule, and NSP will seek every opportunity to ensure the 2014 RVO numbers are increased and do not negatively impact the RFS and the sorghum industry.”
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