Under a court agreement, the EPA is obliged to announce today the Renewable Fuels Standard (RFS) – the target for biofuel use – for 2014, 2015 and 2016. The announcement will get the agency back on schedule after missing the statutory deadlines for setting the 2014 and 2015 targets, but it won’t resolve the struggle between the oil industry and the smaller renewable fuels lobby of farm groups and biofuel makers. Both sides have threatened to go to court if the agency disappoints them. “Lawsuits will drop like autumn leaves the day the EPA publishes the rule in the Federal Register,” said Politco’s Morning Energy newsletter, summing up expectations.
Analysts say the EPA, in recognition of the first sustained upturn in gasoline consumption since the recession, will set the RFS some 2-3 percent above the level that it proposed in May – a combined 16.3 billion gallons for this year and 17.4 billion gallons for 2016. Corn-based ethanol, the preeminent biofuel, would account for 13.4 billion gallons of the 2015 RFS and 14 billion gallons of the 2016 RFS. The EPA says it will set the 2014 RFS at actual use of about 13.2 billion gallons of corn ethanol and 2.68 billion gallons of “advanced” biofuels, including biodiesel.
If the RFS is set too high, says the oil industry, fuel distributors will face penalties for not meeting targets that exceed the traditional 10 percent blend rate for biofuels into gasoline. The ethanol lobby says the EPA should stick to the targets set in a 2007 law, which would boost the ethanol target to 15 billion gallons annually, beginning this year. It says the oil industry is trying to quash a clean-burning competitor and will not use higher biofuel blends unless pushed by the government.
For the EPA, a major question is how to encourage the growth of second-generation biofuels, such as ethanol made from woody plants, grass and crop debris. Those advanced biofuels are years late in coming to market and are being produced at volumes far smaller than projected. EPA administrator Gina McCarthy said this fall that the agency intends to build the market for biofuels. “I have to do it in a way that will pass muster” in case of legal challenge, McCarthy told a biofuels conference.
The EPA faces another consequential decision: If it reduces any of the biofuels targets – segments such as advanced biofuels, cellulosic biofuels, biodiesel or the overall RFS – by at least 20 percent for two years in a row or at least 50 percent for one year, it gains the power to permanently re-write the targets through 2022. If it triggers the “re-set,” also known as the “off ramp,” the agency could set the yearly targets at whatever level it chooses. The 2007 energy law calls for renewable fuel consumption by cars and light trucks to reach 36 billion gallons in 2022, more than double the rate expected this year.
Agriculture Secretary Tom Vilsack said in a DTN interview ahead of the EPA announcement, “I would hope people would be appreciative of what’s been done” by the administration to promote biofuels.