The U.S. Environmental Protection Agency will still require refineries to increase the amount of ethanol in gasoline for the next two years, but is proposing increases lower than the benchmarks set eight years ago.
In 2007, Congress created a renewable fuel standard that set yearly increases of the percentage of biofuel mixed into the U.S. supply of gasoline. The intent behind the law was to reduce reliance on foreign oil sources and cut carbon emissions.
“The EPA has been late in setting the quotas for 2014 and 2015,” reported The Wall Street Journal. “As a result, Friday’s announcement included levels for those two years and 2016, with 2014 numbers set retroactively and close to what was actually produced.”
The 2007 law mandates that through these annual the annual increases, the U.S. must reach a level of 36 billion gallons of renewable fuels mixed with gasoline each year by 2022.
The EPA’s new numbers fall about 25 percent below these original levels. For 2014, the EPA’s retroactive requirements are set at 15.93 billion gallons. This increases slightly to 16.3 billion gallons for 2015, and 17.4 billion gallons for 2016. Under the initial quotas, 20.3 billion gallons of biofuels were required for this year, and 22.5 billion gallons next year.
The law also addresses the sources of the biofuels – setting limits on the amount of corn-based ethanol used to reach the levels – and dictates allowable emission levels from each.
Lowering the biofuel percentage is necessary, said the EPA, citing diminished production of noncorn-based biofuels and limitations in the gasoline market.
“We’re balancing two dynamics,” said EPA assistant administrator Janet McCabe. “Congress’ clear intent to increase renewable fuels over time to address climate change and increase energy security and the real-world circumstances that have slowed progress toward those goals.
“We believe these proposed volume requirements will provide a strong incentive for continued investment and growth in biofuels,” she added.
Blending ethanol into the gasoline supply has become a divisive issue. Among the pro-ethanol supporters is the U.S. Department of Agriculture. Earlier this month, the agency announced a new partnership to increase the availability of higher ethanol blends to consumers. In order to help expand the biofuel infrastructure, the USDA is offering up to $100 million in grants. A portion of this funding will double the amount of E15 and E85-compatible fuel pumps at retail stations.
Businesses linked with growing and supplying ethanol say they don’t agree with the EPA’s decision to lower ethanol percentages for the next two years.
“Today’s proposal by the EPA puts the oil industry’s agenda ahead of farmers and rural America,” said Jeff Lautt, chief executive ethanol production company Poet LLC. “The targets announced today fall well short of rural America’s potential to produce low-cost, clean-burning ethanol.”
But refineries are hesitant to add more ethanol into the gasoline supply, an issue the industry refers to as the “blend wall.”
“Congress needs to repeal whole thing,” said Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, an oil refinery trade association.
“Although EPA took appropriate actions and recognized the blend wall, it proposed a standard that falls far short of mitigating the potential harm to consumers. The use of ethanol in motor fuels has reached a saturation point and since the Agency did not appropriately address the issue, Congress must.”
Down the Road
By the end of November, the EPA is required to solidify these standards. The agency hasn’t said if these reductions will be reconciled in future years, or if the U.S. will reach 2022 with biofuel blend levels 25 percent behind its goals.
For the near future, analysts don’t expect the EPA’s proposal to affect gasoline prices. Ethanol blends will remain an ongoing topic, though, as it’s likely to become a leading issue for the 2016 presidential election. Democratic presidential hopeful Hilary Rodham Clinton is already speaking on the matter, telling Iowa constituents last week that the renewable fuel standards must get “back on track.”
(Photo by Joe Raedle/Getty Images)