Ethanol Industry Threatened By Midwest Drought

The always-ugly battle between US oil refiners and the biofuels industry over EPA’s renewable fuel standards heated up again today when 31 oil executives sent a letter to President Obama urging EPA to stick with fuel blending volumes proposed last November. The proposal aims to find a balance between encouraging the continued growth of the biofuels sector and avoiding blending more ethanol into the motor fuel pool than some engines can safely handle.

At the most basic level, the fight is over how much ethanol and other biofuel should be blended into the US liquid fuel system. The ethanol constituency continually pushes for higher volumes and claims the oil industry acts to block incremental volumes of biofuels from entering the system. While refiners and oil companies say they have nothing against biofuels, but the free market should decide what fuel consumers’ purchase.

EPA released their proposed RFS rule for 2014 last November and for the first time decreased targets for both advanced biofuels and total renewable fuel.

2014 RFS Mandates

With 2014 drawing to a close, the rule has yet to be finalized and there are rumors that EPA might backtrack and raise biofuel blending requirements above those originally proposed, which would cause compliance issues.

“EPA is now 10 months late in finalizing the 2014 rule. If EPA raises the volume requirements, the supply chain is unable to retroactively generate additional compliance credits for the first nine months of 2014. This problem will grow in 2015 as EPA continues to delay release of the 2015 proposed rule, compounding compliance challenges for obligated parties managing volatile and uncertain RIN markets,” according to the refiners’ letter.

They go on to say:

“Our industry does not oppose renewable fuels and is one of the largest investors in renewable technologies. However, technological and market limitations exist and consumers, not the federal government, should determine what goes in their cars.”

Expect more action on this issue from both sides in the coming weeks.