EPA Adherence to “Blend Wall” Damages Advanced Fuels

(Environmental and Energy Study Institute) The Environmental and Energy Study Institute (EESI) regrets that the Environmental Protection Agency (EPA), in releasing renewable fuel volumes for 2014, 2015 and 2016, artificially caps renewable fuels at under 10 percent of the U.S. fuel supply going forward. This will ultimately impair the growth of advanced cellulosic fuels, a nascent but growing sector of the fuels sector.

But today’s announcement by EPA further hampers the progress of this clean, renewable fuel. Citing infrastructure challenges, EPA has given credence to the so-called “blend wall” of 10 percent ethanol. The petroleum industry says significant changes to the retail fuel marketplace and vehicle fleet would be needed to utilize blends of ethanol above 10 percent. While some changes are indeed needed to use higher blends, EPA’s reliance on the “blend wall” as a mechanism to set fuel volumes ignores the duty of the oil industry under the 2007 law to bring these available fuels to market through infrastructure investments.

“The Renewable Fuel Standard, as enacted by Congress, is a compact among fuel refineries, ethanol producers, farmers and automotive manufacturers, not only to produce renewable fuels but also to bring them to consumers at the pump,” commented EESI Policy Associate Jessie Stolark. “These groups have proven they are capable of meeting ambitious volume targets as outlined by Congress and of getting compatible vehicles on the road. At the same time, the oil industry has not held up its side of the bargain to put these fuels in the market.”

Today, there are 17.4 million FlexFuel Vehicles (FFVs) on the road, according to the U.S. Department of Energy. These cars can use blends of up to and including 85 percent ethanol. Additionally, most existing retail fuel infrastructure is compatible with high octane mid-level blends of up to E25 (25 percent ethanol), and EPA and DOE have certified the use of E15 (15 percent ethanol) in cars of make and model year 2001 and newer—that is, more than 80 percent of cars on the road today. Just using these existing vehicles to their full biofuel potential would negate the so-called “blend wall.”

If EPA continues to adhere to the “blend wall,” the net effect will be to further offshore the cellulosic fuels industry. Representative Tammy Duckworth (D-IL) expressed her frustration at this prospect, writing to EPA, “Lowering RVO levels will drive American investments in renewable fuel overseas. Instead of creating oil jobs in the Middle East, the RFS is driving job creation and innovation here at home, supporting over 852,000 green, well-paying jobs nationwide – jobs that can’t be shipped overseas.” READ MORE /MORE and MORE/Letter (Office of Congresswoman Tammy Duckworth)

Excerpt from statement by Congresswoman Tammy Duckworth: “While serving in the Iraq War, I saw firsthand the painful price our country pays because of our dependence on foreign oil,” said Duckworth. “My fellow troops risked life and limb for this precious battlefield resource. I am concerned that weakened Renewable Volume Obligations (RVOs) under the RFS will leave America less secure and more dependent on foreign oil imports.” READ MORE

Excerpt from EESI's "EPA Releases Renewable Fuel Volumes: But You May Ask Yourself, Just How Did We Get Here?": While no one is happy about today’s announcement, the ultimate losers in all of this will be advanced fuels. Since advanced fuels are still a growth industry, compared to the more mature corn ethanol fuels, they will feel the cuts first and most deeply. Indeed, several analyses have confirmed that if the U.S. fuel supply is capped at 10 percent ethanol, corn ethanol will continue to be the dominant source of ethanol, due to its maturity in the market. If the RFS were completely abolished tomorrow, oil refiners would still continue to use ethanol as a cheap source of octane, and they would use corn ethanol.

Conversely, advanced fuels are at an inflection point. Two commercial scale plants are already open, one is slated to open by the end of 2015. If the EPA does not fix its methodology for 2016 volumes, big ethanol companies won’t build another cellulosic ethanol plant in the United States. Instead, they will look to China, South America, and other regions which have stable biofuels policies.

Taking the long view, there has been incredible progress in the advanced fuels sector in the ten years since the RFS was originally signed into law in 2005. Two commercial scale cellulosic ethanol refineries have opened in the past year (POET DSM Project Liberty in Nevada IA, and Abengoa Bioenergy Biomass Kansas plant in Hugoton KS), and another (DuPont) is expected to be operational by the end of 2015. Industry and proponents point out that the lead up to the commercialization of this technology has been incredibly fast, and short-term delays in commercialization of these technologies should not be reason to pump the brakes on federal support.

If one looks at the long term goals of the RFS, reduced petroleum use, consumer choice, diversified fuels (including biogas and electricity) reduced GHGs, invigorating the rural and farm economy, reduced economic vulnerability to global oil supply disruptions and lower fuel prices, it has been a successful policy driver. Certainly, infrastructure challenges are a bump in the road compared to the overall successes to be had in continuing to seek renewable fuels as well as chemicals and biobased products. READ MORE