We’ve written quite a bit about bad things that could occur because of the Renewable Fuel Standard’s (RFS) mandates for ever-increasing ethanol use in the fuel supply – from potential damage to vehicle engines and small power equipment engines to broader impacts in the economy.  A study by NERA Economic Consulting warned that RFS mandates could lead to fuel rationing and supply shortages that by 2015 could drive up gasoline costs 30 percent and the cost of diesel by 300 percent.

Now EPA is in the last lap in the process to set ethanol use levels for 2014. The agency’s proposal is reduced from where it was in 2013. EPA even acknowledged the ethanol “blend wall” – the point where, to satisfy the RFS, refiners have to blend fuel with higher ethanol content than millions of vehicles are designed to use.

EPA should follow through and set this year’s mandate so we avoid the blend wall and its onerous impacts this year. For a permanent solution, Congress should repeal the RFS. API’s Patrick Kelly, senior fuels policy advisor, discussed official comments on the proposed 2014 biofuels mandates, submitted to EPA, during a conference call with reporters:

“Our major concern is that ever- increasing biofuel mandates under the Renewable Fuel Standard could harm consumers and damage their automobiles. They could also create supply shortages that severely harm our still fragile economy. To that end, we shared research with EPA showing that cars currently on the road are not equipped to use fuel with more than 10 percent ethanol. This research by the auto and oil industries report that millions of American families’ cars could be damaged by higher ethanol blends. And the automobile companies have been clear that the use of an ethanol blend above 10 percent will void the warranties for millions of consumers.”

Kelly detailed API’s main recommendations to EPA:

• Lower the 2014 ethanol mandate to no more than 9.7 percent of projected gasoline demand.
• Bring the mandate for cellulosic biofuels “closer to reality.” Despite optimistic projections from cellulosic producers, these fuels still don’t exist in commercial quantities, Kelly said. This puts refiners at risk of being penalized for not using a fuel that isn’t available on a commercial scale.
• Set the 2014 requirements as soon as possible and get the annual rulemaking process back on track.

The last point is critical for the refining sector, Kelly said:

“Refiners are responsible for producing the billions of gallons of fuel America needs each year, and EPA can’t wait to set requirements for the year after it’s halfway over. EPA must finalize the next year’s requirements by Nov. 30, as required in the statute.”

The good news is EPA seems to have heard concerns from a wide band of interests concerned about the RFS or its specific mandates. Kelly cited estimates by livestock groups that the mandate now diverts more than 40 percent of the U.S. corn crop from food to fuel and is the leading driver of food price increases seen in recent years. Kelly:

“By making these adjustments, EPA can create a welcome stopgap for a disaster in the making. But ultimately, we need a long- term solution for consumers. That’s why we’re still pressing Congress to repeal these ever -increasing biofuels mandates to protect consumers in the long run.”

By Mark Green

Originally posted January 31st, 2014

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