EPA proposes a biofuels compromise — and makes nobody happy

29 May 2015 | Author: | No comments yet »

E.P.A. Proposes Changes to Fuel Standards.

The embattled Environmental Protection Agency on Friday released new proposed rules for the volume of biofuels to be blended into the nation’s fuels through 2016, in an effort to put itself back on schedule after numerous missed deadlines but still failing to please business interests on both sides affected by the rule.

The Obama administration’s proposed renewable fuel standard won’t have much of an impact on gas prices, but could become an issue in the 2016 presidential elections, especially in farm states that have profited over the years from higher corn prices linked to the use of corn-based ethanol. The proposal, which would become final by the end of November, would set levels for last year at what producers actually made but increase the total volume of renewable fuel required by 1.5 billion gallons, roughly 9 percent, by the end of 2016. “There are real limits to the actual amounts of biofuels that can be supplied to consumers at this time,” Janet McCabe, the E.P.A. administrator, wrote in a blog post. “These proposed volumes are achievable in the timeframes under consideration. The proposed standards also represent a blow to renewable fuel companies that have pushed to keep high volumes of their product flowing into drivers’ gas tanks.

At the same time, the volumes steadily increase every year, reflecting Congress’s clear intent to drive up the nation’s use of renewable fuel.” The announcement — which seemed to please few — represents the latest turn in the agency’s beleaguered journey since it began requiring increasing levels of ethanol to be incorporated into vehicle fuel under energy laws passed in 2005 and 2007. But declining gasoline use has crimped plans greatly, since ethanol volumes beyond 10 percent of gasoline — the so-called “blend wall” — would exceed what many car warranties say vehicles should use.

The proposed policy simultaneously increases conventional biofuel volumes (mostly comprised of corn-based ethanol) for 2016 to up to 14 billion gallons — enough to breach the “blend wall,” industry charges — but also raises them less than the law had initially stipulated (to 15 billion). The market is already saturated with regular corn ethanol, and production of cellulosic, or so-called advanced, biofuel — made from nonfood parts of corn plants or other biomass like wood waste — is lower than what the mandate has required refiners to use. The new policy would also steadily increase mandated volumes for so-called “advanced” biofuels, like cellulosic ethanol. “We recognize at EPA that the delay in issuing the standards … has led to uncertainty in the marketplace,” said Janet McCabe, acting assistant administrator at the agency’s Office of Air and Radiation, on a call with reporters Friday. Next-generation biofuels, made from agricultural waste such as wood chips and corncobs, have not taken off as quickly as Congress required and the administration expected.

Inhofe, Republican of Oklahoma and chairman of the Senate Environment and Public Works Committee, said in a prepared statement. “All of these actions by E.P.A. give a clear case for a mismanaged program in need of rigorous oversight.” The new proposed rule, she said, “will help provide the certainty that the marketplace needs to help these [fuels] develop.” But members of the renewable fuels industry were quick to denounce the EPA’s move. “Today’s proposal by the EPA puts the oil industry’s agenda ahead of farmers and rural America,” said Jeff Lautt, chief executive of leading ethanol producer POET, in a statement.

The National Corn Growers Association said that the new rules would mean “nearly a billion and a half bushels in lost corn demand.” Meanwhile, traditional fuel refiners appeared no happier. “In acknowledging that the proposal seeks to force more ethanol use than the marketplace can handle, EPA is playing Russian Roulette with fuel supply and consumers,” said the American Fuel and Petrochemical Manufacturers’ president Chet Thompson. “I guess the one liner is that there’s something in here for everybody not to like,” said James Stock, a a Harvard economist and fellow at the Center on Global Energy Policy at Columbia University. “What they’ve decided to do is to make a commitment to moving through the blend wall – get out higher volumes of ethanol through higher blends – but to do so in a measured way.” Stock, who calculates that the blend wall could be breached by 0.2 percent in 2016 under EPA’s proposal, thinks nonetheless that the compromise is a smart move. EPA officials said the new requirements would drive growth at an “ambitious but responsible” rate. “We believe these proposed volume requirements will provide a strong incentive for continued investment and growth in biofuels,” said EPA’s Janet McCabe. Oil companies say they would prefer that the market determine how much ethanol is blended into their gas. “It is unfortunate that EPA chose to side with the obligated parties who have deliberately refused to live up to their obligation to provide consumers with a choice of fossil fuels or lower cost, higher performing, homegrown renewable energy at the pump,” Buis said.

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