OPIS Biofuels Headlines

April 24, 2017
Biofuels Supporters, Opponents Spar During EPA Teleconference

Supporters and opponents of biofuels expressed predictably contrasting viewpoints during a teleconference held today by EPA's Office of Air and Radiation (OAR).

The call was held to solicit input on regulations OAR oversees that could be repealed, replaced or modified. OAR is, among other things, responsible for administering the Renewable Fuel Standard (RFS).

Howard Feldman, senior director for regulatory and scientific affairs for the American Petroleum Institute, cited "a number of problems with the outdated RFS program."

EPA should utilize its waiver authority to reduce the advanced, cellulosic and total renewable fuel obligations, he said, "to ensure the mandate does not exceed the E10 blend wall."

Feldman added that EPA should not set an RFS mandate that would cause the average ethanol content to exceed 9.7% of projected gasoline demand "in order to maintain a market for ethanol-free gasoline."

EPA should also "use realistic projections of E0, E15, E85 and cellulosic demand when setting the annual renewable volume obligations (RVOs)," he stated.

He added that EPA should reject calls to move the RFS point of obligation.

"The RFS has significant structural flaws, and moving the point of obligation will not alleviate them; it will simply reallocate the problems to a different group of fuel supply chain participants," he said. "The issue was considered by the two previous administrations and both appropriately decided to place the obligation with refiners and importers.

"EPA should work with Congress to reform and ultimately end this unworkable program as the program does reflect current market realities and it creates the potential for economic harm."

Tim Hogan, director of motor fuels at the American Fuel & Petrochemical Manufacturers (AFPM), also panned the RFS.

His organization "opposes government-mandated biofuel blending, which distorts the free market's efficient allocation of transportation fuels and disadvantages consumers," he said. "The statute contains an aggressive schedule for renewable fuel blending."

Declining gasoline demand and higher ethanol mandates "threaten our nation's fuel supply," according to Hogan.

"EPA must use realistic projections and continue to exercise its waiver authority to reduce renewable fuel obligations in recognition of the E10 blend wall," he said, "since moving beyond the blend wall is not feasible for the existing fleet of motor vehicles, small engines and the fuel distribution infrastructure."

On the other hand, Geoff Cooper, senior vice president of the Renewable Fuels Association, focused on EPA rules that he said effectively prohibit the sale of E15 during summer in most of the country.

Cooper called the rules "perhaps the most egregious example of a burdensome and unnecessary fuel regulation that offers no environmental benefit and is increasing the cost of fuel for U.S. consumers."

"In essence, EPA refused to apply the same volatility -- or RVP -- standard to E15 that applies to today's marketplace gasoline (E10), even though E15 is slightly less volatile than E10 and therefore results in fewer volatile emissions," he said.

"EPA requires E15 to meet a volatility standard in the summertime that is 11% more restrictive than the standard applied to today's E10 gasoline. Due to this inexplicable EPA prohibition on selling E15 from June 1 to Sept. 15 each year, most retail gas stations have chosen not to offer the fuel at all, even though it is a cheaper and cleaner alternative with a higher octane rating."

Cooper said that the "EPA-imposed market dysfunction can be corrected with simple administrative action" and that EPA should level the playing field for E15 and E10 with respect to fuel volatility regulation.

"EPA could accomplish this by immediately extending the current E10 volatility standard to all ethanol blends, including E15," he stated. "Alternatively, EPA could immediately lower the volatility limits for gasoline blendstock, such that all finished ethanol blends would meet current gasoline volatility standards."

Cooper said that the disparate regulatory treatment of E10 and E15 "is our industry's most important barrier in the near term," but that it "is symptomatic of the larger problems with our current fuel regulatory framework."

He also stated that "the 'blend wall' is a fiction and should not be a consideration in EPA's rulemakings for the RFS."

"In reality, the ethanol content of our gasoline has already exceeded 10% nationwide," he said.

Separately, RFA sent a letter today to EPA Administrator Scott Pruitt and encouraged the agency to ensure that the 2018 RFS RVO rulemaking stays on schedule and maintains the conventional renewable fuel requirement at the statutory level of 15 billion gal.

RFA also said that it submitted a new analysis to EPA "showing that gasoline contained more than 10% ethanol in 2016, underscoring that the so-called 'blend wall' is not a real barrier to RFS compliance."

"The ethanol industry was highly encouraged by your commitment to 'administer the [RFS] program according to the intent of Congress' and to keep the program's rulemakings on schedule," RFA President and CEO Bob Dinneen wrote. "When affected parties under the RFS are provided with regulatory certainty and sufficient lead time for planning, they have consistently demonstrated an ability to adapt their operations and comply with the standards."

The final 2017 RFS RVO -- which set the conventional biofuel requirement at the statutory level of 15 billion gal -- was published on schedule in November 2016, RFA noted.

"This provided obligated parties and renewable fuel producers with ample time to plan and implement strategies that will facilitate compliance with this year's standards," Dinneen wrote.

The teleconference was related to President Trump's Feb. 24 executive order that directed all federal agencies to create task forces to evaluate existing rules they believe are "burdensome" and can be changed or eliminated.

EPA published a notice in the Federal Register on April 13 that launched a 30- day comment period to allow the public to weigh in on regulations that could be targets under the executive order.

--Michael Schneider, mschneider@opisnet.com

Copyright, Oil Price Information Service

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