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Call to Action for a Truly Sustainable Renewable Future
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-Include high octane/high ethanol Regular Grade fuel in EPA Tier 3 regulations.
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Nightmare Scenario: Renewable Fuels’ Defenders Pull out the Stops to Persuade EPA to Continue the War on Imported Oil

Submitted by on December 5, 2013 – 4:46 pmNo Comment

by Jim Lane (Biofuels Digest)  Today, the EPA has scheduled a day of testimony on its proposed 2014 Renewable Fuel volume targets — and a proposed 40 percent slash in the advanced biofuels category to 2.2 billion (ethanol equivalent) gallons, from the original Congress-set target of 3.75 billion gallons.

Yep, those affordable, available, non-food, and usually drop-in fuels that evenryone has been hoping for, and which have arrived these past few years in large volumes.

Roughly 120 individuals are expected today to have 4 minutes each for testimony.

As a result, pro- and anti-RFS forces have arranged a barrage of conference calls this week in advance of their appearances on Capitol Hill.

And there’s just a huge amount of irony that this morning, in Washington, a deep fog has settled over the capital.

The industry message?

Mike McAdams, Advanced Biofuels Association

“The EPA is considering a range of 2 to 2.5 billion gallons. They are recommending 2.2 billion, which is a 40% cut from the RFS2 statute and a 20% cut from the 2013 requirement,

“This is a woefully inadequate target and would represent devastating blow to advanced biofuels producers. It’s the industry’s worst nightmare. The Agency will have pulled the rug from underneath from the advanced biofuels sector and destroyed a sector, that spent $14B in the US on the development of the advanced biofuels.

“It’s a voluminous proposal and we are still studying it. But there are 3 quick points to make.

1. “EPA’s proposed reductions fall disproportionately on advanced biofuels. It’s a 40 percent cut on advanced, yet the proposal is for only a 10 percent cut in conventional fuels. We are scratching our heads at this unfair and counterproductive cut.

2. “The Monte Carlo model will always roll snake-eyes. The model looks backwards at historical data rather than forward at growing capacity. The method will ensure, in a growing market, a continuous oversupply compared to the EPA forecast. This will crater the value of the RIN. RIN prices are instrumental in financing. You cannot support the industry by looking in the rear view mirror.

3. “EPA should set standards based on all available fuels. This proposal leaves low hanging fruit on the tree. Even with low-ball method that EPA uses forecasts 3.2 billion advanced biofuels RINs can be produced.”

“This Administration has spent over $500 million to help build the advanced biofuels. This proposal is a significant departure from previous years and from congressional intent.

There is no shortage of renewable fuel production capacity — and no shortage of distribution capacity in the form of E10 and E85 outlets — to meet the original Congressional target for 2014.

What is lacking is a willingness to market E85 at reasonable prices.

Today, there’s a 40% spread between wholesale ethanol and wholesale gasoline prices. Yet, at the pump, consumers are being offered an average savings of only 20% on E85 vs gasoline, making E85 an unattractive “deal” in economic returns because of ethanol’s lower energy density. The fuel is being unfairly marked up to create the impression of a “blend wall”.

Case in point: E85prices.com reports an average price for E85 of $2.68, yet the price of wholesale E85 is as low as $1.69 from The Andersons in Iowa. That’s a 59% mark up.  The corresponding mark-up on wholesale gasoline is just 67 cents, or 25%.

Where markups have been fair, E85 sales are soaring. In fact, the Iowa Renewable Fuels Association reports that Q3 sales of E85 in Iowa have doubled from Q1 totals.

Congress was fully informed on the blend wall issue when RFS2 was established, and the expectation was that higher blends would find a market, and that rising RIN values would be “the stick” that would ensure that it was economically the right choice to distribute E85 at fair prices.

Looking at the US market and biomass-based diesel

There is no shortage of biomass-based production capacity — no blend wall in sight, and no shortage of distribution capacity.

In fact, the US biodiesel industry alone is on track to produce 1.7 billion gallons in 2013, as well.     READ MORE and MORE (DomesticFuel.com) and MORE (Ethanol Producer Magazine) and MORE (St. Louis Post Dispatch) and MORE (Politico) and MORE (DomesticFuel.com) and MORE (FarmFutures.com) and MORE (DomesticFuel.com includes audio with Rep. Cheri Bustos D-IL) and MORE (St. Louis Post Dispatch) and MORE (Biomass Magazine) and MORE (DomesticFuel.com) and MORE (AgNewsWire.com)

 

Excerpt from Biomass Magazine: … “They’ve changed the rules…I built this plant, I hired the people, I put the boots on the ground and I made my commitment work. The reason we can’t succeed is not because we did something wrong, or our inability succeed, it’s because the government has changed its commitment to me. So now what do I do? I have to go to the bank and say, ‘when I signed into these documents I had a cosigner in the RFS2 program, an implied partner, but that partner is gone.’ They will look at me and say ‘well, we’re sorry. But we’re looking to you to pay this.’ I am in a position where, without this support—without the RFS—we face bankruptcy and I may have to put 45 people out of work.” (Stu Lamb, president and CEO of Viesel Fuel LL)

Wayne Simmons of Sundrop Fuels, which is actively fundraising to build Sundrop’s first commercial green gasoline plant, added that the value of RINs is set by the marketplace based on supply and demand. “EPA sets the demand each year through the RVOs. When EPA sets the RVO less than the supply, the RIN value plummets and the intended economic incentives disappear. This is exactly what’s happened with this year’s proposed RVO rule. You remove the RIN value, you remove the economic incentive, you remove the willingness for bankers to lend, and you remove the ability for the industry to grow.”   READ MORE

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