It’s an old adage in the energy business that forecasts are always wrong and miscalculations regarding US gasoline demand growth and advanced biofuel supply growth led to a regulatory regime that is increasingly becoming untenable.

The Environmental Protection Agency (EPA) last week issued its 2013 Renewable Fuel Standard (RFS) final rule. This year’s volumetric requirement is unchanged from a previous proposal, at 16.55 billion gallons. Of that volume, 1.28 billion gallons must be biomass-based diesel, 2.75 billion gallons advanced biofuels, and 6 million gallons cellulosic biofuels. The requirement for cellulosic biofuels is down from 14 million gallon requirement in the EPA’s previous proposal.

Source: U.S. Energy Information Administration, based on U.S. Environmental Protection Agency

By leaving the total volumetric requirement unchanged this year, EPA has essentially kicked the can down the road until next year, when the agency admits changes are likely to be made. “EPA anticipates the need to adjust those targets for the 2014 RFS program year, for which EISA 2007 [Energy Independence and Security Act of 2007] specifies a total renewable fuels target of 18.15 billion gallons. EPA’s forthcoming notice of proposed rulemaking for the 2014 RFS program year will provide further information,” the EIA wrote in its “Today in Energy” publication.

Industry is not waiting for the 2014 proposed rulemaking announcement, with the American Fuel & Petrochemical Manufacturers (AFPM) and the American Petroleum Institute (API) already filing a joint-petition to the EPA for a partial waiver of the 2014 applicable RFS volumes.

“EPA missed a golden opportunity to address the ethanol blendwall in 2013; however, we’re encouraged the Agency recognized there is a problem in its rule setting this year’s biofuel requirement. This petition will provide a roadmap for the Agency to follow as it promulgates its 2014 waiver,” AFPM President Charles T. Drevna said in a statement.

The EIA explains the confluence of technological, economic and market factors that led to the current situation:

Beyond delays in the ramp-up of cellulosic biofuels production, RFS implementation has recently been challenged by the decline in recent and projected gasoline consumption since enactment of EISA 2007, reflecting higher vehicle fuel economy standards, slower economic growth, higher gasoline prices, and possible changes in consumer behavior. The level of gasoline consumption limits the amount of ethanol that may be used in the gasoline pool at any fixed blending level, such as the 10% ethanol blend (E10) that is predominant in the current U.S. gasoline supply. The anticipated need for adjustments in the 2014 RFS advanced biofuels and total renewable fuels targets reflects a combination of demand and supply issues in the biofuels marketplace, including

• The E10 blend wall in the context of stagnant or declining demand for petroleum-based gasoline
• The limited ability of the motor gasoline market in the United States to consume ethanol in higher blends such as E15 and E85, which are constrained as a result of infrastructure- and market-related factors
• The difficulty of producing significant volumes of non-ethanol advanced biofuels fuels such as biodiesel, renewable diesel, and biogas