Despite the Renewable Fuels Association's catchy "Don't Mess with RFS" slogan, the EPA appears quite intent on messing with the Renewable Fuel Standard.
Late last year, EPA announced a proposal to lower the Renewable Volume Obligations for 2014. According to the RFS, conventional biofuels will be mandated at 14.4 billion gallons this year. EPA's RVO proposal would slash that number to 13.01 billion gallons. That means a lot less ethanol production would be mandated for the current year.
Speaking at the National Ethanol Conference in late February, Christopher Grundler, EPA's director of the office of transportation and air quality, explained the impetus for revisiting the mandate stems from increased activity in the Renewable Identification Number credit market during the beginning of 2013.
As RIN credits soared in price, fuel blenders began raising concern that the ethanol mandate was set too high. As petitions filtered in to reduce the mandate, Grundler noted he began getting calls to appear before multiple congressional committees to discuss the longevity of the RFS mandates.
"Our goal is to put RFS on a manageable trajectory," Grundler told NEC participants.
When the EPA released a proposal to cut RVOs for 2014, he expected backlash from the ethanol and farm community. However, he said the agency still supports renewable fuels.
"The most disappointing thing is hearing 'the EPA no longer supports biofuels,'" Grundler said. "That's wrong. If we want to make reductions in greenhouse gas emissions, biofuels are a significant part of the solution."
The comment period for EPA's proposal wrapped up in late January. Grundler said his staff is currently wading through the reams of comments.
He said EPA will reach a decision this spring, i.e. midnight June 20. Industry analysts hope the decision will come by summer. However, EPA has a track record for releasing RVOs late in the year. Last year's RVO guidelines came Aug. 6, 2013.
Supply vs demand
An even more contentious point is why the EPA has its sights set on around 13 billion gallons. Grundler noted the EPA defines conventional biofuels (ethanol) supply as the point at which the consumer has purchased the fuel. He defends this position by saying the fuel must be purchased and used for the GHG benefit to be realized.
It's a position that many, including RFA president and CEO Bob Dinneen, find ludicrous. Dinneen argues the 13 billion gallons of ethanol purchased by consumers in 2013 cannot be misconstrued as anything but demand.
In his State of the Industry address, Dinneen implored Washington to stay the course on the RFS mandate. "All we ask of Washington is one thing," he said. "Keep your word. Keep your word."
Speaking on increased RIN credit prices, Dinneen said the market is doing exactly what it was intended to do – drive infrastructure improvements. He noted that for every $1 spent on infrastructure means blenders save $1.85 on RIN credits.
Stay tuned as the ethanol battle continues in Washington. These decisions will be key to whether or not the ethanol industry can push past 13 billion gallons – the point at which 10% ethanol is blended into every gallon of gasoline, i.e. the blend wall.