The EPA “is much more likely” to relax the so-called Renewable Fuels Standard (RFS) than to demand full compliance with the 2007 law that guarantees biofuels a share of the gasoline market, said the Congressional Budget Office. The 2007 energy law sets a target of using 36 billion gallons of renewable fuels annually from 2022, more than double the EPA proposal of 17.4 billion gallons for 2016. Meeting the target for 2022 “would require a large and rapid increase in the use of advanced biofuels and would cause the total percentage of ethanol in the nation’s gasoline supply to rise to levels that would require significant changes in the infrastructure of fueling stations,” said CBO senior analyst Terry Dinan at a joint hearing of two House Science subcommittees.
With EPA expected to announce the biofuels mandate by Nov 30, the House hearing appeared more likely to influence opinion than to spark congressional action. Bills to eliminate the RFS or to remove corn-based ethanol, the dominant biofuel, from the RFS have sat idle for months and are unlikely to see action as Congress wraps up work for the year. Oklahoma Republican Jim Bridenstine, who co-chaired the hearing, is a sponsor of the RFS repeal bill. In opening the hearing, he described the RFS as “an egregious perversion of the free market.”
“We need the RFS because we can’t get shelf space,” said Brooke Coleman of the Advanced Biofuels Business Council, who said oil companies, who enjoy many tax breaks, are trying to throttle a competitor. “If you give us the free market, we will give you the RFS.”
Some analysts say EPA is likely to raise slightly the RFS for this year and 2016 from the levels that it proposed in May because gasoline consumption is showing its first significant upturn since recession struck in 2008. Even so, the RFS would be only four-fifths of the volume that Congress envisioned. The ethanol industry as well as a corn-growers group fears EPA will exercise a “re-set” clause in the energy law that becomes available in 2016 and permanently set the biofuels targets at lower levels than scheduled in the 2007 law. Nearly 40 percent of the corn crop is used for biofuels.
“The rising requirements (in the energy law) would be very hard to meet in future years because of two main obstacles,” said the CBO’s Dinan. Second-generation biofuels, which would be made from non-food feedstocks, are “complex, capital-intensive and costly.” Production is far smaller than expected although the cleaner-burning “advanced” biofuels are supposed to provide 21 billion gallons of the 36 billion-gallon target for 2022. In the interim, EPA has scaled down greatly the mandate for using them.
The other obstacle is the “blend” wall, the amount of biofuel that can be mixed into gasoline at the traditional rate of 10 percent. Gasoline consumption is lower than forecast when Congress wrote the energy law. At the same time, the RFS is rising. The result could be a biofuel blend rate of 25 percent by 2022, said CBO. One way to accommodate the additional volume of biofuels would be to sell it as E15 or E85. “But at present, only a little more than 2 percent of filling stations in the United States sell high-ethanol blends,” said Dinan.
In its testimony, CBO considered three scenarios – an RFS similar to EPA’s proposal for 2016, adherence to the RFS set in the energy law, and repeal of RFS.