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'Blend Wall,' Cellulosic Mandate, Uncertainties Beg Congress to Act on RFS

Mark Green

Mark Green
Posted November 18, 2013

More on EPA’s proposed levels for 2014 ethanol usage that were unveiled last week. While the agency rightly acknowledged the existence of the refining “blend wall” by proposing a lowering of how much ethanol must be blended into the U.S. fuel supply under the Renewable Fuel Standard (RFS), it doesn’t go far enough. The blend wall still looms, and so does EPA’s insistence on requiring millions of gallons of phantom cellulosic biofuels.

We covered the blend wall issue when EPA released its proposal last week. Breaking through the blend wall, requiring refiners to put more ethanol into the fuel supply than is safe for millions of vehicles on the road today, could leave consumers stuck with repair bills and could harm the broader economy, according to a study by NERA Economic Consulting.

Let’s look at cellulosic. We refer to it as the “phantom fuel” because over the past few years EPA has required refiners to blend millions of gallons of it into the fuel supply when none was commercially available (2010 and 2011), or when very little was available (2012) – and then forced refiners to purchase credits from the government because they didn't use a non-existent fuel. This year looks to be similar. EPA’s 2013 mandate requires 6 million “ethanol equivalent” gallons, but to date only about 359,000 gallons have been produced.

Nonetheless, in its 2014 proposal EPA would mandate the use of about 17 million gallons of cellulosic – though EPA actually proposes a range of between 8 million and 30 million gallons. (More cellulosic analysis from energy blogger Geoff Styles, here). API President and CEO Jack Gerard:

“If you look at cellulosic, it’s our understanding that the proposal is somewhere around the 17 million (gallon) range, and to date we’re at (about 359,000 gallons.) So we’ve still got the same old problem of phantom fuels.”

Consumers also could be impacted by continued uncertainty for refiners under the RFS. The 2014 mandate is supposed to be finalized by the end of this month, but EPA is just now pushing out a proposal. The agency says it will be spring 2014 before the 2014 rule is finished. That’s no way to treat the private market. Gerard:

“We’re late in the year, we’re moving already into 2014, and we’re being told we’re not going to know what our obligation is until probably first quarter or perhaps later next year. That’s part of the challenge here. The Congress has to intervene, step in and fix this once and for all.”

Gerard said he doesn’t believe EPA can have a rule that has a mandate range:

“You can imagine if you’re us, as an obligated party, and you’re told, ‘Well, we might charge you for 5 billion or 7 billion, we’re not sure, we’ll tell you later.’ You can imagine where that puts us. And only one step less impactful than that is what we’re doing now, where every year we go into an annual market knowing we’re going to have a cost associated and a mandate to the Renewable Fuel Standard, and we don’t know what that is. In 2013 we didn’t learn until August. And now we’re up against the blend wall and … all the consumer impacts, corn prices and all … Congress has to intervene and fix this once and for all.”

And it’s worth noting that, in this same rulemaking, EPA proposes to rescind its unrealistic 2011 cellulosic mandate, recognizing the D.C. Circuit Court’s order vacating EPA’s 2012 cellulosic mandate. EPA would thus refund to refiners $4.8 million for credits purchased that year for this “phantom fuel” mandate.  If the definition of insanity is doing same thing repeatedly and expecting a different result, then EPA’s cellulosic mandate fits that bill.

The RFS is badly flawed. While EPA has taken small steps in a positive direction with its 2014 proposal, it’s trying to fix a program that’s unfixable.   

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.