The fight over ethanol and the EPA, explained

Back in 2007, Congress passed a law requiring the US to use more and more biofuels — like corn-based ethanol — each year. This was known as the Renewable Fuel Standard. But in recent years, gasoline refiners and biofuels producers have been fighting over how much ethanol US cars can safely handle. The EPA was supposed to set standards this year to help resolve the dispute. After a long delay, the EPA has punted on a decision in 2014 — prolonging uncertainty over the issue. The fight over the Renewable Fuel Standard Back in 2007, Congress passed a law that would require the nation to use more and more ethanol and other biofuels each year. This was known as the Renewable Fuel Standard, and the hope was that it would help reduce America’s dependency on oil. Under the original law, refiners were supposed to blend 16.55 billion gallons of ethanol into their gasoline by 2013 — and that amount was supposed to keep rising until it hit 36 billion gallons in 2022. (Congressional Budget Office) There was just one hitch. When Congress passed the law in 2007, lawmakers figured that Americans would keep using more and more gasoline each year, and all that ethanol would make up a small portion of the total. Instead, the opposite happened. Americans started buying more fuel-efficient cars and driving less. US gasoline use has actually fallen in recent years. US gasoline use has actually fallen in recent years Which means that biofuels now make up nearly 10 percent of the nation’s gasoline supply. Refiners and auto manufacturers call this the “blend wall” and argue that cars would get damaged if we go above this limit. Biofuels producers say there are ways around the wall — oil companies are just blocking them. In 2013, the EPA took the unusual step of proposing to cut the total amount of biofuels that refiners had to mix into their gasoline for 2014. (Current law requires 16.55 billion gallons of ethanol into their gasoline by 2013. But that proposal didn’t satisfy anyone. Oil companies wanted to repeal the standard altogether. Ethanol producers argued that the EPA couldn’t just relax its limit – this would hurt the budding biofuels industry. So the EPA… hemmed and hawed. Finally, on Friday, the agency came out and said it wasn’t going to release any standard for 2014. Instead, it would delay a year while it figured out how to set ethanol standards for 2014, 2015, and 2016. This is a small win for ethanol producers, who were fearing a big cut. But gasoline refiners aren’t happy with this — the American Fuel and Petrochemical Manufacturers is suing the EPA, arguing that this delay is illegal. How big a deal is the “blend wall”? Right now, the nation is at the point where much of its gasoline contains about 10 percent ethanol. That, in itself, isn’t a problem. Cars and fuel pumps in the United States can easily handle gasoline with 10 percent ethanol or less, a blend known as “E10.” But if we started mixing even more ethanol in that gasoline — say, moving up to 15 percent, or E15 — it gets trickier. E15 is more corrosive, and it’s not deemed suitable for cars built before 2000, heavy-duty vehicles, motorcycles, or non-road engines (like boats or snowmobiles). For cars built after 2001, the government has declared the fuel safe after extensive testing, but even so, many auto manufacturers have said that their warranties won’t cover any damage caused by fueling with E15. For that reason, the 10 percent number is known as the “blend wall,” and fuel marketers claim we’ve just about hit it. If the targets for biofuels keep going up and up each year, it’s going to be increasingly difficult to mix ethanol into the gasoline. Blenders and refineries say they’ll have to keep buying up renewable credits instead to comply with the law — and that will raise their costs. In theory there are ways the wall could be knocked down. The country could find ways to use more E15. What’s more, there are currently about 11 million “flexible-fuel” vehicles in the United States that can technically handle E85, or fuel that’s 85 percent ethanol. The problem? There aren’t many fueling stations that offer E85 outside of the Midwest, and regulators aren’t sure how quickly these stations will pop up. Oil refiners and blenders say that these stations aren’t popping up quickly enough — and won’t anytime soon. Renewable fuels advocates, for their part, claim that the biggest obstacle is actually the oil industry itself, which (they say) has hindered the expansion of E15 and E85 fueling infrastructure. The fight has also attracted the attention of environmental groups like Friends of the Earth who say that corn-based ethanol has never lived up to its promise of curtailing greenhouse-gas emissions. (The main fear with crop-based biofuels is that it pushes more farmers to plant these crops, which in turn may exacerbate deforestation.) Okay, so what did the EPA do in 2013? That brings us to the Environmental Protection Agency. Back in 2013, the EPA proposed to relax the biofuels target for 2014 to 15.21 billion gallons, which amounts to just under 10 percent of the motor fuel expected to be used that year. That proposal irked advocates of renewable fuels, who said it was likely to hurt corn farmers, who made planting decisions this year in anticipation of a rising ethanol supply. (Roughly 38 percent of the U.S. corn crop is used to make ethanol.) Corn prices fell more than 1 percent after the EPA announced its proposal. The EPA also dealt with the question of “advanced” biofuels. When Congress enacted the law in 2007, it declared that a certain portion of biofuels had to come from cellulosic materials or other sources. The idea was to shift the nation’s biofuel industry away from crop-based ethanol, so as not to put a strain on the food supply and to address the environmental concerns about corn ethanol. But so far, cellulosic ethanol hasn’t really materialized in large volumes. The technology is advancing slowly. So, on Friday, the EPA lowered its targets for advanced biofuels to around 2.2 billion gallons (down from 2.75 billion gallons this year). What’s more, refineries will have to use roughly 17 million gallons of cellulosic ethanol, made form things like switchgrass, corn cobs, and wood chips. What did the EPA do in 2014? The EPA was supposed to finalize its biofuels targets earlier this year, but delayed on a decision until November 21. And that decision was… to punt. The agency said that it wouldn’t make any decision about ethanol volumes for 2014 this year. Instead, it would finish up the 2014 targets in 2015, and try to get back on schedule in proposing the 2015 and 2016 blending volumes. The biofuels industry seemed happy with the delay — because the EPA hasn’t yet said it would cut the biofuels targets. Here’s Brian Jennings, executive vice president for the American Coalition for Ethanol: “Thanks to thousands of comments from ACE members and other biofuel supporters, EPA wisely chose to reconsider their ill-advised proposal which would have legitimized the so-called ‘blend wall’.” Gasoline refiners, by contrast, were much less pleased. For one, it’s very hard to comply with a law whose requirements just get delayed endlessly. The American Fuel & Petrochemical Manufacturers are planning to sue the EPA. “The fact that EPA proposed the 2014 standards over a year ago, and now 2014 is almost over, is another reason why Congress needs to step in and repeal or significantly reform this badly broken program,” said AFPM President Charles T. Drevna. The debate over biofuels policy will no doubt continue. Oil companies have kept lobbying to relax the rules considerably — with some groups even asking Congress to repeal the standard altogether. Biofuels producers are pushing back. And the dueling ad campaigns have gotten increasingly ferocious.


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