U.S. EPA to issue new ethanol use targets this summer despite controversy

The U.S. Environmental Protection Agency plans to announce new domestic targets for 2013-2014 ethanol use this summer, an EPA official told lawmakers in June even as critics of the program warned of a brewing fuel crisis.
The U.S. is nearing the point where the law will require the use of more ethanol than can be physically blended into the fuel supply at 10% per gallon.
“When Congress wrote this law, Congress anticipated that the market would solve this problem,” Christopher Grundler, the EPA’s director of the office of transportation and air quality, told lawmakers at a House oversight committee hearing recently.
“Clearly, it has not been resolved,” he said.
Grundler said the EPA, which has the authority to lower ethanol use targets or waive them completely, will determine the best way to address the issue of the so-called “blend wall” and will release the new targets by the end of summer. “Given these facts, we will continue to look at the potential impacts of the E10 blend wall over the near and longer term,” Grundler said.
Biofuel producers slammed the House hearing for shunning witnesses from the renewable fuel industry. Among those testifying were officials from the American Petroleum Institute and the National Turkey Federation.
Oil refiners and ethanol producers are awaiting the EPA’s decision on the targets.
Stalled development of advanced renewable fuels means the United States will fall far short of federal targets for expanded biofuel use by 2022, the head of the Energy Department’s energy statistics arm said on June 5.
The Renewable Fuel Standard (RFS) requires rising volumes of biofuels to be blended into U.S. gasoline and diesel supplies. Oil companies warn that the mandate could lead to fuel shortages and raise energy prices for consumers.
The June 7 white paper “Energy Policy” is the fourth in a series examining a variety of areas impacting the RFS. Previous white papers, seen as laying the groundwork for possible energy panel hearings on the RFS, asked for comment on the program’s impacts on fuel compatibility, the agricultural sector, and its assessment of greenhouse gases from fuels. A pending fifth and final paper will assess fraud in the RFS credit market.
But the paper questions the RFS’ role in energy security benefits given the United States’ changing energy dynamics due to newly found oil and gas supplies, increased vehicle fuel economy, growing use of natural gas and electric vehicles, and overall lower gasoline demand, though the committee takes no policy positions.
Although the paper notes that there have been significant changes in fuel usage and energy security in recent years, it also says that decreases in diesel and gasoline use can be attributed to the RFS.
Adam Sieminski, the head of the Energy Information Administration, told lawmakers at a House Energy and Commerce hearing that the EPA would need to lower the target.
While the EIA has projected that biofuel use would fall short of the mandate since it was enacted in 2007, the issue has taken on more significance as lawmakers spar over the future of the program.
The agency blamed the shortfalls on the failure of developing commercial cellulosic ethanol, made from sources such as grasses and agricultural waste.
Lawmakers have been divided mostly along regional and political lines on the biofuel mandate. Those from corn-growing states support renewable fuel targets, since the majority of U.S. ethanol is produced from corn, while lawmakers from major oil and gas producing or livestock producing states have urged repeal or reform of the program. Republicans on the panel pressed the EPA to use its authority to waive the fuel targets, which they said were already raising food and fuel costs.
Ethanol producers have blamed the volatility of ethanol credit markets, known as RINS, on opposition to allowing ethanol gasoline blends higher than 10%. The agency said it expects refiners will still be able to meet this year’s targets using RINS purchased from renewable fuel producers in 2013 or credits carried over from 2012.
The amount of unused 2013 biofuel credits left over for use next year will be “critical” in determining how refiners comply with the mandate in 2014, Grundler said.
The EPA has authorized the use of gasoline blends with up to 15% ethanol content for cars built since the 2001 model year, or about two-thirds of vehicles still on the road.
Refiners say the higher blend could damage older vehicles, and gasoline station operators and oil refiners have voiced concerns that they could be held liable if engines are damaged.
(June 5, 6, 17, 27, 2013)