By MARK DRAJEM & LUCIA KASSAI
(Bloomberg) -- The US Environmental
Protection Agency is considering scaling back legal
requirements on the use of ethanol next year amid complaints
from refiners that statutory mandates would exceed their
ability to blend it into fuels without putting engines at
A proposal from the agency would cut the mandate to 15.21
billion gallons for renewable fuels in 2014 instead of the
18.15 billion gallons established by a 2007 law, according to
an internal proposal provided to Bloomberg. The agency would
call for the use of 13 billion gallons of conventional
corn-based ethanol and 2.21 billion gallons of advanced
biofuels such as biodiesel, down from 13.8 billion gallons and
2.75 billion gallons respectively this year, it said.
The EPA proposal is addressing both availability of
qualifying renewable fuels and constraints on their
consumption, the agency said in the draft, which is dated
August 26, just days before a plan was officially submitted to
the White House for review. The EPA document was provided to
Bloomberg by an industry representative.
The administration of President Barack Obama, which has the
ability under the law to adjust the legal requirements, could
revamp the plan before the EPA issues it in the coming weeks.
After that, the proposal could be changed before being
finalized by the agency. This proposal was previously reported
Under the Renewable Fuel Standard, refiners such as Exxon
Mobil Corp. must use a certain amount of those fuels each year,
with their target determined by their share of the fuel market.
The EPA and renewable-fuel makers argue it spurs production of
domestic fuels and cuts greenhouse-gas emissions by reducing
use of gasoline or diesel.
The EPA is also considering dropping the requirement for
cellulosic fuels to just 23 million gallons from 1.75 billion
gallons as required in the law, as production of fuels made
from scrap wood or corn husks has failed to grow as expected,
according to the proposal.
The 2007 law mandates the use of 14.4 billion gallons of
corn-derived ethanol in 2014 and 15 billion in 2015. Lobbyists
for refiners such as Valero say that requirement is too high,
and have pressed both Congress to scrap the entire program and
EPA to lower the requirements.
Oil industry proponents have said that the escalating
requirements of ethanol to be added would force them to sell
fuel blends exceeding 10% or export gasoline, a phenomenon
known as hitting the blend wall.
Blending in ethanol at greater than 10 percent can cause
problems with engine materials breaking down and the operation
of emission control systems, according to the American
Petroleum Institute. Older vehicles cant handle blends of
15 % ethanol, the Washington-based trade group said.
The EPA had already pledged to adjust the quotas for falling
demand for gasoline, and this proposal shows how they may be
considering doing that. Based on the Energy Information
Administrations estimated 132.9 billion gallons of
gasoline demand in 2014, an ethanol requirement of 13 billion
gallons would fall below that 10 % share.
Still, supporters of the Renewable Fuel Standard, or RFS,
indicated today that they are contemplating legal action if
this plan is carried out.
Existing vehicles that can use fuels with 85 % ethanol and new
filling stations using 15 % ethanol could allow for the sale of
14.4 billion gallons of ethanol in 2014, said Bob Dinneen,
president of the Renewable Fuels Association.
The oil industry has argued that the existing vehicle
fleet and current refueling infrastructure are incapable of
absorbing significant volumes of ethanol above the E10
blend wall, Dinneen, whose group is based in
Washington, wrote in a blog post. This contention is
We believe it would be unlawful for EPA to waive the
RFS based on the blend wall, he added. If
this is the proposal for biodiesel and advanced biofuels it
doesnt make sense, said Anne Steckel, vice president for
federal affairs at the National Biodiesel Board.
Were not sure where these numbers are coming
from, and it may just be wishful thinking among folks in the
oil industry, she said in a statement.