Oil Industry Groups Seek RFS Mandate Waiver

Industry groups have petitioned EPA to lower the 2014 RFS ethanol mandate to below 10 percent of projected gasoline demand.

On August 13, 2013, the American Petroleum Institute and the American Fuel & Petrochemical Manufacturers petitioned the Environmental Protection Agency (EPA) for a partial waiver of volume requirements under the 2014 Renewable Fuel Standard (RFS) to prevent adverse economic consequences from the RFS blend wall expected to hit this year.  The petitioners claimed that the blend wall, the point at which ethanol blending targets would exceed acceptable limits, will significantly increase fuel costs and fuel supply shortages.

The petitioners requested EPA to reduce the 2014 cellulosic biofuel mandate to reflect actual production and waive at least 1.83 billion gallons from 3.75 billion gallons of the 2014 advanced biofuel volume.  They sought a waiver of 3.35 billion gallons from the total renewable fuel (ethanol, drop-in cellulosic gasoline, cellulosic diesel, and biomass-based diesel) volume of 18.15 billion gallons.  Based on Energy Information Administration projections that 132.8 billion gallons of ethanol will be consumed in 2014, the petitioners stated that the maximum amount of ethanol that can be effectively blended into the gasoline supply is 13.28 billion gallons (10 percent ethanol levels), with total ethanol usage not exceeding 9.7 percent of projected gasoline demand.

Economic Impact of Hitting the RFS Blend Wall (API)

The blend wall would cause RFS mandates to exceed the ability of fueling infrastructure and vehicle engine compatibility to accommodate additional volumes of renewable fuels, thereby resulting in shortage of Renewable Identification Numbers (RINs), the tradable permits that demonstrate compliance to renewable fuel volume obligation (RVO).  Industry groups say the resultant shortage in gasoline and diesel supply could adversely affect consumers and the economy.

The petitioners draw on a study by NERA Economic Consulting on the economic impacts of the blend wall through 2015.  The API-commissioned study concluded that implementation of RFS without changes could increase diesel costs by 300 percent and gasoline costs by 30 percent in 2015.  It projected a Gross Domestic Product (GDP) loss of $770 billion in 2015.

Established in 2007, the RFS program requires incorporation of specific volumes of renewable fuels in the transportation sector, with mandates increasing yearly to reach 36 billion gallons by 2022.  Under the Clean Air Act, Congress authorized EPA to waive RFS mandates if they would result in inadequate domestic supply or adverse economic consequences.  In its final 2013 RFS requirements, EPA acknowledged blend wall concerns, stating that it would provide flexibilities in its 2014 RFS proposal to ensure reasonably attainable blending mandates.  The EPA has 90 days to respond to the waiver request.

August 14, 2013 via Energy Solutions Forum

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