EPA Demonstrates the Flexibility Needed to Implement the RFS Equitably

Dominating the news in the biofuels industry this week is the announcement by EPA of the volumetric requirements for 2013 under the federal Renewable Fuels Standard (RFS). The fact that the agency finally set the amounts of advanced biofuels, including cellulosic ethanol and biodiesel, among others, some eight months into the year underscores the complexities involved as consumer fuel consumption falls well below the levels anticipated when the RFS was updated back in 2007.

Placing further emphasis on the difficulties regulators are facing in the current biofuels market are EPA’s decision to significantly reduce the volume of cellulosic ethanol required this year, from the 14 million gallons proposed early this year down to 6 million gallons. Of even greater significance is the agency’s vow to “use flexibilities in the RFS statute to reduce both the advanced biofuel and total renewable volumes in the forthcoming 2014 RFS volume requirement proposal.” The total renewable fuel requirement for next year was set to climb to 18.15 billion gallons, up from this year’s 16.55 billion gallons.

In our view, the announcement shows the agency is properly reacting to existing market conditions. That’s a good thing and it demonstrates why Congress should reject calls from the oil industry to repeal the RFS. Short of that, oil companies and refiners want Congress to modify the standard, essentially stripping the EPA of the role it plays in moving the nation to cleaner alternative transportation fuels as established with broadly bipartisan support when the Energy Independence and Security Act (EISA) was adopted under the George W. Bush administration six years ago.

The oil industry was already facing long political odds against its repeal movement, and despite some harrumphing from groups like the American Petroleum Institute and the American Fuel & Petrochemical Manufacturers, the EPA announcement likely further weakens of any move to take the RFS off the books. Still, the oil industry, desperately seeking to hold on to market share, will vigorously pursue its efforts to persuade Congress to make any changes the industry seeks to protect its profits.

However, EPA this week clearly demonstrated what renewable energy advocates have been saying all along: the statute establishing the RFS is working as intended, giving EPA the flexibility it needs to implement the RFS and negating any need to legislatively change it.

The 16.55 billion gallons of renewable fuels to be blended this year, representing about 10 percent of the U.S. fuel supply. Of that total, 13.8 billion gallons are to come from ethanol, and 2.75 billion gallons will come from advanced biofuels, including 1.28 billion gallons of biodiesel. Given how late in the year the final requirements are being set, the agency also is giving blenders greater lead time to meet the new 2013 requirements, extending the deadline for compliance by four months, to June 30, 2014.

More importantly, EPA recognizes what some are projecting as a “blend wall” – the point where ethanol exceeds the amount that can be blended into gasoline as E10 (a 10-percent ethanol blend; most gasoline sold in the United States is E10). After consulting with the industry and assessing the biofuels market, EPA said this week that it will use the RFS statute to reduce the 2014 volume requirement of 18.15 billion gallons.

The RFS is a policy tool that is critical to a U.S. energy strategy designed to reduce our dependence on foreign oil, boost the rural economy and offer cleaner burning alternatives to power our nation’s cars and trucks.

It has also promoted the investment of billions of dollars in the development of advanced biofuels. The launch last month by INEOS Bio of commercial production of cellulosic ethanol at its Indian River BioEnergy Center in Florida is among recent developments showing that the burgeoning sector is set to bring meaningful, economically viable volumes of next-generation biofuels to the market, creating additional jobs and giving U.S. agricultural producers who provide many of the sector’s feedstocks new revenue opportunities.

The 25x’25 Alliance urges lawmakers to leave the RFS alone and insure a stable policy environment that gives the industry and its investors the certainty they need to accelerate development of the next generation of biofuels and help meet our nation’s energy challenges.

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