EPA may relax the ethanol mandate in 2014

With Americans using less gas, refiners can't meet the volume requirements

WASHINGTON — The Obama administration said Tuesday it will propose reducing the country’s ethanol mandate in 2014, acknowledging that the increasing levels laid out by Congress in 2007are unrealistic and may need to be reduced.

The oil industry has warned about the “blend wall,” a threshold where refiners are struggling to blend enough ethanol into the country’s fuel mix to comply with a congressional mandate. As consumers cut back on driving and cars become more fuel efficient, gasoline demand has declined. As a result, the public is using less fuel with a blend of 10 percent ethanol, making it more difficult for refiners to meet the volume levels required by law.

The Environmental Protection Agency said it is “evaluating a variety of options and approaches consistent with our statutory authorities” for 2014 to help address the blend wall. The agency said it would identify ways to reduce the ethanol mandate, including the advanced biofuels component that requires some of the fuel to be produced from wood crops and other agricultural waste, when it outlines its volume requirements for 2014.

The Renewable Fuel Standard, or RFS, a law that requires refiners to buy alternative fuels made from corn, soybeans and other products, calls for 18.15 billion gallons to be blended into the nation’s gasoline supply in 2014. The figure will rise to 36 billion gallons by 2022. Iowa is the country’s largest ethanol producer with 41 ethanol plants that produced 3.7 billion gallons during 2012.

“Everything (the EPA is) doing thus far is to try to make sure that the RFS stays as flexible as possible,” said Chad Hart, an economics professor at Iowa State University. “When it’s just not feasible, the RFS is adjusted. The EPA is allowed to do this.”

The move by the EPA to make changes to the mandate comes as the agency told refiners Tuesday they will be required to blend 16.55 billion gallons of renewable fuels in 2013, but will be given four extra months to do it. The deadline to comply was extended to June 30, 2014, after the EPA was nearly eight months late in issuing the final volume requirements for 2013.

The agency said 1.28 billion gallons of biomass-based diesel and 2.75 billion gallons of advanced biofuels are required to be blended into the fuel supply in 2013. In addition, the EPA said 6 million gallons of cellulosic fuel must be added in, a sharp drop from 14 million proposed in January.

“We think that total is realistic to reach this year,” said Brian Jennings, executive vice president for the American Coalition for Ethanol in Sioux Falls, S.D.

Cellulosic, which has been slow to get off the ground, is seen by the renewable fuels industry as its next source of growth. Last year, the EPA said 8.7 million gallons of the cellulosic fuel must be blended into gasoline, but the ethanol industry produced a small fraction of that total — about 20,000 gallons. The nascent industry has seen growth, with a few smaller plants now online and facilities in Emmetsburg and Nevada, Ia., scheduled to start producing fuel in 2014.

The RFS has become the epicenter of debate over the country’s renewable fuels future, with supporters lobbying to defend it while critics — led by the American Petroleum Institute, the restaurant industry and livestock groups — have pushed Congress to modify or repeal the mandate.

“While the administration acknowledges that higher ethanol mandates are unworkable by suggesting a new approach for the 2014 standards, EPA missed an opportunity to fix the problem this year,” said Jack Gerard, who heads the American Petroleum Institute. “It’s up to Congress to exercise leadership and move quickly to end this dangerous mandate before it hurts consumers, damages vehicles, and harms our economy.”

Lawmakers, chiefly those outside rural America or away from ethanol-producing areas, have appeared willing to consider a change through legislation.

Still, it appears to be an uphill climb to advance any meaningful changes through a divided Congress and the White House, where the administration has championed the RFS as a way to reduce the country’s dependence on foreign oil.

“It just seems pretty clear to me that from the comments out of the White House ... and again with the action taken by the EPA, there is a clear signal that the administration is fully behind the Renewable Fuel Standard,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association.