Oil, biofuels industries making final RFS appeals to White House (via McGraw Hill Financial)

With the Obama administration likely to announce its long-awaited final three-year Renewable Fuel Standard next week, biofuel and oil industry groups are making their last-ditch efforts to influence the sure-to-be contentious rule.

Ethanol trade groups Growth Energy and the Renewable Fuels Association met with the White House’s Office of Management and Budget on Wednesday to discuss the rule, urging the administration to raise the biofuels mandate volumes from the level it proposed in May.

The American Petroleum Industry, meanwhile, is scheduled to meet with OMB Friday, and is expected to press officials to leave the volumes below the 10% blend wall.

While the Environmental Protection Agency, which administers the RFS, has indicated that it may modestly raise the mandate due to recent increases in US gasoline consumption and vehicle miles driven, all bets are off as to what the final rule will contain.

“I don’t think any one of us can tell you what we expect the administration to do,” Roger Johnson, president of the National Farmers Union, which backs a stronger RFS, said Thursday.

The EPA faces a November 30 deadline to issue the final RFS rules for 2014, 2015 and 2016. But sources said they expect the agency to announce the rules early next week, before the Thanksgiving holiday and before EPA Administrator Gina McCarthy heads to Paris for UN climate talks that begin November 30.

“The ideal goal is next Wednesday, but it’s just a question of whether all the work can be done prior to the weekend,” one lobbyist, who asked not to be identified, told Platts.

The RFS, created by Congress in 2005 and expanded in 2007, requires annually increasing amounts of biofuels — including corn-based ethanol, biodiesel, advanced biofuels and cellulosic biofuels — to be blended in with the US transportation supply.

The EPA in late May proposed requiring 15.93 billion gallons of biofuels in 2014, 16.30 billion gallons in 2015 and 17.40 billion gallons in 2016 — levels that the biofuels industry has said is too low and the oil industry has protested is too high.

DEFINITION OF ‘SUPPLY’

Biofuels advocates said they will be looking closely not only at the final volumes, but also at the language the EPA uses in justifying them.

The statute allows the EPA two reasons for a general waiver to lower the volumes for a particular year: If it determines there is “inadequate domestic renewable fuel supply” or if the mandate would “severely harm the economy or environment.”

The EPA cited the inadequate supply provision in proposing the 2014, 2015 and 2016 volumes, based on the inability of US fueling infrastructure to handle significant quantities of ethanol blends above 10% — the so-called blend wall.

The biofuels industry has said that Congress expressly rejected fueling infrastructure limitations when it created the RFS and set the statutory levels.

“It’s not the numbers that are the most troubling. It’s the language that redefines the word ‘supply,’ from supply of biofuels to the supply of biofuels to the consumer,” said Adam Monroe, president of advanced biofuels developer Novozymes America. “When we’re capable of producing the fuel, and yet you waive that because someone downstream who’s obligated [to blend the fuel] says they can’t do it, that turns the whole thing on its head.”

The oil industry, which has sought a repeal of the RFS through Congress and the courts, has argued that insufficient fueling stations are equipped to offer ethanol blends higher than 10% to consumers, and that consumer demand for the higher blends does not exist.

It has urged the EPA to set the ethanol volumes at below 9.7% of US gasoline demand.

“We don’t think the American consumer should be a guinea pig to test the blend wall,” said Bob Greco, the API’s downstream group director. “A floor of 9.7% helps support the ethanol industry while protecting consumers.”

For 2016, the EPA said its proposal would require about 840 million ethanol-equivalent gallons beyond that supplied by E10, cellulosic biofuels and biodiesel. The end result would be a nationwide ethanol blend of between 10.05% and 10.28%, above the E10 blend wall.

According to the Energy Information Administration, domestic ethanol production averaged 968,000 b/d for the last four weeks, for an annualized rate of 14.84 billion gallons.

US gasoline demand last week averaged 9.054 million b/d, while refiner/blender input of ethanol averaged 870,000 b/d, or 9.6% of gasoline demand, EIA figures show.

The article can be accessed here: http://www.platts.com/latest-news/agriculture/washington/oil-biofuels-industries-making-final-rfs-appeals-21501315

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