OPIS Biofuels Headlines

May 18, 2016
U.S. EPA Proposes 2017 Biofuel RVO at 18.8 Billion Gal

The U.S. Environmental Protection Agency on Wednesday called for the production next year of 18.8 billion gal of renewable fuels, up from the 18.11 billion gal it set  for 2016 under the Renewable Fuel Standard (RFS).

In releasing its proposed 2017 renewable volume obligations (RVO) under the RFS, the agency said conventional ethanol, mostly produced from corn, would account for 14.8 billion gal, up from 14.5 this year.

The 2017 target for cellulosic biofuel was set at 312 million gal, compared with
230 million gals this year, while the RVO for advanced biofuels would increase to 4 billion gal from 3.61 billion gal in 2016.

EPA also set the 2018 RVO for biomass-based diesel at 2.1 billion gal, up from 2 billion gal in 2017 and 1.6 billion gal this year. The agency is required to set biodiesel targets one year ahead of the other RVOs.

In its announcement, the agency said is proposal would increase total renewable fuel volumes next year by nearly 700 million gal and would boost advanced renewable fuel, which requires a 50% reduction in lifecycle carbon emissions, by nearly 400 million gal.

In addition, EPA said conventional renewable fuels, which require a minimum 20% reduction in lifecycle carbon emissions, would rise by 300 million gal year to year and achieve 99% of the congressional target of 15 billion gal.

The 2017 target for cellulosic biofuel, which requires lifecycle carbon emission cuts of 60%, would rise by 82 million gal or 35%, from the current year, EPA said.

Ethanol trade group Growth Energy's new CEO Emily Skor said the volume obligations still fall short of the goals set by the RFS.

"The Renewable Fuel Standard is our country's most successful climate and energy policy," Skor said in a statement. "It continues to inject much needed competition and consumer choice into the vehicle fuels marketplace. It enables greater consumer use of cleaner biofuels that displace toxic emissions and reduce our carbon footprint, while creating American jobs, revitalizing rural America and lowering the price at the pump."

Growth Energy is encouraging its members, as well as consumers, to utilize the public comment period. "The administration invested $100 million in biofuels infrastructure this past year and we look forward to working with EPA and the administration to finalize a rule with higher renewable fuel levels to ensure an open and fair fuel marketplace," she added.

In a statement, Bob Dinneen, president and CEO of the Renewable Fuels Association, which also represents grain-based ethanol producers, criticized the agency for falling short of the 15 billion gal statutory target for conventional biofuels.

"For months, EPA has been saying it plans to put the program 'back on track.'
Today's proposal fails to do that. The agency continues to cater to the oil industry by relying upon an illegal interpretation of its waiver authority and concern over a blend wall that the oil industry itself is creating. As a consequence, consumers are being denied higher octane, lower cost renewable fuels. Investments in new technology and advanced biofuels will continue to languish and greenhouse gas emissions from automobiles will be unnecessarily higher.

"The real frustration is that EPA seems to be artificially constraining this market. The RFA has demonstrated just how easy it would be for obligated parties to reach the 15 billion gallon statutory volume for conventional biofuels next year. The fact is with rising gasoline demand, increased E15 and E85 use made possible by USDA's infrastructure grant program, continued use of renewable diesel and conventional biodiesel that also generate D6 RINs (Renewable Identification Numbers), well more than 15 billion gallons will be used next year. All of that is in addition to the 2 billion surplus RINs available to refiners due to EPA's tepid enforcement of the RFS in the past.

"EPA can be given credit for two things -- getting the proposal out in a timely fashion and at least coming within a mere 200 million gallons of the statutory level of 15 billion gallons for conventional biofuels. As this process continues, we intend to work to encourage a final rule that truly puts the RFS 'back on track.' As it is, today's proposal is a lost opportunity for this administration to cement its legacy in clean fuels, advanced biofuel and climate change."

Iowa Renewable Fuels Association (IRFA) Director Monte Shaw shared Dinneen's concerns. 

"The proposed corn-based ethanol level for 2017 ... doesn't match the current reality of the nation's fuel sector," Shaw said in a statement. "Low fuel prices have spurred increased driving habits, the USDA is projecting a historic excess supply of corn, and the number of stations offering fuel blends above E10 will dramatically increase this year through the USDA's Biofuels Infrastructure Partnership. All of these signs direct the Agency to stick to 15 billion gallons for corn-based ethanol, as prescribed by Congress."

"Today's proposal did provide some much-needed certainty for the biodiesel industry looking forward, but the proposed levels for 2018 are roughly equal to what we'll use this year, and they still did not account for the slew of foreign imports we're currently seeing. The EPA's proposal should be a formula for growth in advanced biofuels, not an enshrinement of the status quo," said Shaw.

The American Coalition for Ethanol (ACE) also weighed in, saying EPA mistakenly relied on U.S. Energy Information Administration data that indicates falling gasoline consumption.

"EPA has claimed they can't require oil companies to add more ethanol to a shrinking gasoline pool because of the so-called E10 blend wall. Under that logic, EPA's ethanol blending volumes for 2017 should increase to statutory levels because gasoline use is on a steady rise and will set a new record this year," Brian Jennings, the group's executive vice president, said in a statement.

ACE is "pleased that EPA's 2017 proposal increases ethanol blending levels from 2016," but remains "disappointed that EPA falls back on the questionable E10 blend wall methodology which has disrupted implementation of the RFS for more than a year."

Advanced Biofuels Association President Michael McAdams said today's proposed rule "is good news for the advanced biofuels industry with increases to the advanced, biomass-based diesel, and cellulosic pools. This shows great progress for the advanced biofuels sector. We look forward to commenting on the proposed rule and are particularly encouraged by the growth of available renewable diesel and biodiesel to our country to achieve these targets."

Advanced Biofuels Business Council Executive Director Brooks Coleman applauded EPA's proposal to increase volumes, but said the proposal "fails to correct regulatory missteps when it comes to how the blending requirements are derived from year to year and to what degree implementation of the RFS hinges upon the oil industry's willingness to secure and distribute low carbon biofuels when they are available."

"The administration has pledged to do everything in its power to drive the commercialization and use of advanced, low carbon biofuels. The 2017 proposal does not do that."

The National Biodiesel Board was also disappointed that EPA proposed increasing the 2017 biodiesel volume by only 100 million gallons in 2018 and said it would urge the White House to increase the target before the final volumes are released in November. 

"We appreciate the EPA's timeliness in releasing these volumes and its support for growing biodiesel use under the RFS, but this proposal significantly understates the amount of biodiesel this industry can sustainably deliver to the market," Anne Steckel, NBB vice president of federal affairs, said in a statement. "We have plenty of feedstock and production capacity to exceed 2.5 billion gallons today, and can certainly do so in 2018."

NBB added that it believes EPA could "easily call for at least 2.5 billion gallons in 2018 after nearly 2.1 billion gallons of biodiesel were delivered under the RFS in 2015. There is substantial unused production and distribution capacity in the United States, and the U.S. industry has already diversified its feedstocks and expanded into renewable diesel to increase its production."

"We have made tremendous progress in cleaning up vehicle emissions but the fact remains that petroleum still accounts for about 90 percent of our transportation fuel," Steckel said. "This is dangerous and unsustainable, and the RFS is the most effective policy we have for changing it."

The American Petroleum Institute was also unhappy with the proposed volumes, saying EPA "must do more to ensure Americans have access to fuels they want and can safely use in their vehicles until Congress fixes the outdated and broken"
RFS.

"Consumers' interest should come ahead of ethanol interests," API Downstream Group Director Frank Macchiarola said in a statement. "EPA is pushing consumers to use high ethanol blends they don't want and that are not compatible with most cars on the road today. The administration is potentially putting the safety of American consumers, their vehicles and our economy at risk."

"EPA's proposal makes abundantly clear that the only solution is for Congress to repeal or significantly reform the RFS," he added. "Members on both sides of the aisle agree this program is a failure and we are stepping up our call for Congress to act."

The American Fuel & Petrochemical Manufacturers (AFPM) voiced a similar argument, saying the proposed volumes exceed "marketplace realities."

"While we support the EPA's continuing use of its statutory waiver authority to reduce the unrealistic mandated biofuel volumes for 2017," AFPM President Chet Thompson said, "the proposed volumes still go beyond marketplace realities."

"EPA's proposal threatens to force consumers to use more biofuel than vehicles, engines and fueling infrastructure can handle," he added. "This proposal provides more evidence that Congress should finally step in and repeal or significantly reform this broken program."

--Jeff Barber, jbarber@opisnet.com
--Molly White, mmwhite@opisnet.com
--Michael Schneider, mschneider@opisnet.com

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