Burning Down the Rumor Mill on 2014 RFS Requirements: RVOs Must Reflect Statutory Authority

by Bob Dinneen (Renewable Fuels Association) EPA’s proposed rule establishing 2014 renewable volume obligations (RVOs) under the Renewable Fuel Standard (RFS) is expected to be published soon. Many believe the 2014 RVO will, for the first time ever, require obligated parties to move beyond the status quo and blend volumes of renewable fuel above the so-called “E10 blend wall.”
In August, however, EPA signaled that it intends to exercise its authority in the 2014 RVO rule to adjust “…both the advanced biofuel and total renewable fuel categories.” This announcement has sparked speculation, rumors, and questions about what adjustments EPA will make to the 2014 RVOs, what authority EPA has to make revisions, and what impacts any EPA action will have on the markets. Indeed, the market is already responding to a leaked draft document reflecting the ongoing debate within the Administration about the 2014 RVOs.
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Section 211(o)(7)(D) requires EPA to adjust, by November 30 of the preceding year, the volume requirements for cellulosic biofuel if production is likely to be less than the minimum applicable volume established under EISA. The statute directs EPA to reduce the applicable cellulosic biofuel volume to “the projected volume available during that calendar year.” Importantly, if EPA reduces the cellulosic biofuel standard, it “…may also reduce the applicable volume of renewable fuel and advanced biofuels requirement…by the same or a lesser amount.”
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EPA also has “general” waiver authority under 211(o)(7)(A). This is the only waiver authority that would allow the Agency to reduce to the total required renewable fuel volume by an amount greater than the reduction of the cellulosic biofuel requirement. However, in order to effectuate such a waiver, EPA would have to determine, after public notice and comment, that implementation of the RFS would “…severely harm the economy or environment of a State, a region, or the United States.” Alternatively, EPA may use this waiver authority if it determines, after public notice and comment, that there is “inadequate domestic supply” of renewable fuels to meet the RFS requirements.
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Curiously, EPA stated in August that, as part of its RVO rulemaking process, it plans to “…assess the E10 blendwall and current infrastructure and market-based limitations to the consumption of ethanol in gasoline-ethanol blends above E10.”
However, the “blend wall” and perceived “market-based limitations” are clearly not among the statutory criteria identified in Section 211(o)(7) for EPA to consider in adjusting the 2014 RVOs.
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As much as the oil industry might wish it to be true, the requirement to blend beyond the “blend wall” or purchase RINs to meet their obligations is not a basis for changing the law—it is the very point of the law.
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By 2014, roughly 9% of the light-duty vehicle fleet will be comprised of flex-fuel vehicles (FFVs) that are capable of operating on gasoline blends containing up to 85% ethanol (E85). These vehicles alone would have the annual capacity to consume 8-9 billion gallons of ethanol above the E10 “blend wall.” ... Further, roughly 45% of new vehicles sold in 2014 will be explicitly approved and warranted by the automakers to use up to E15.
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E85 is offered at approximately 3,190 retail gas stations nationwide. If E85 conservatively represents 25% of fuel sales at these stations in 2014, more than 950 million gallons of E85 will be sold (containing roughly 710 million gallons of ethanol). If E85 makes up 40% of fuel sales at these stations, more than 1.5 billion gallons of E85 would be consumed (containing more than 1.1 billion gallons of ethanol). Thus, increased E85 sales through existing stations could easily bridge the gap between the E10 blend wall and the 14.4-billion-gallon portion of the RFS open to non-advanced biofuels. READ MORE and MORE (DomesticFuel.com includes audio interview) and MORE (Reuters) and MORE (OilPrice.com) and MORE (Hoosier Ag Today includes audio interview) and MORE (Platts) and MORE (Ethanol Producer Magazine) and MORE (Ethanol Producer Magazine)