By MARK DRAJEM
The Obama administration proposed Friday a reduced quota for
the amount of renewable fuel that refiners must use next
year, bowing to industry complaints that the targets
contained in 2007 legislation were too high.
In a draft rule, the US Environmental Protection Agency said
it would wait until spring to issue a specific quota, though
said it would be in a range of 15 billion to 15.52 billion
gal for renewable fuels such as corn ethanol and biodiesel
from soybeans, according to a document posted on the
EPAs website. That compares with 18.15 billion gal set
in the legislation.
The range is in line with an August draft that was leaked and
prompted intense lobbying from industry officials.
Overall, the proposal, which is set to be finalized in the
first quarter of 2014, would reduce demand for corn-based
ethanol and lower compliance costs for refiners such as
Valero Energy Corp. and Tesoro Corp.
While the agency took a step in the right direction,
more must be done, said Jack Gerard, the chief
executive of the American Petroleum Institute, the
Washington-based group that represents companies such as
ExxonMobil. "They are getting close to making sure they
dont breach us through the blend wall.
The agency also proposed a range for the mandate for
biodiesel and cellulosic products, such as those made from
corn stalks or woody waste, which would be somewhere from 2
billion gal to 2.5 billion gal. Thats below the 3.75
billion gallon target spelled out in the legislation, and
compares to 2.21 billion gallons from the leaked draft.
This could significantly chill investments in advanced
s, Brent Erickson,
executive vice president of Biotechnology
said in a statement. We will focus over the immediate
comment period on convincing the administration to right the
course on this policy.
EPA officials say they are listening to those concerns and
have pledged to preserve a market for what are dubbed
next generation fuels. In presenting a range, the
agency would allow outside groups to weigh in over the next
two months prior to a final EPA decision.
Advanced biofuel, such as biodiesel and Brazilian ethanol, is
part of a larger program for renewable fuels that is anchored
by corn-based ethanol. Corn growers and the ethanol industry
pushing for an increase in the 13 billion-gal quota called
for in the leaked August plan, which is below the 14.4
billion gal in the law. The EPA has the ability to adjust the
quotas in response to market pressures.
Refiners, fast-food restaurants, motorboat makers and chicken
farmers have all pushed the EPA to scale back the ethanol
mandate, saying it risks ruining engines by forcing more
ethanol to be blended into gasoline and is acting to push up
demand for corn. Gasoline demand is falling, and so rising
requirements for renewable fuels are ramping up the
percentage of those fuels in the overall mix.
Refiners, which have waged a battle against the corn ethanol
mandate, havent fought so hard against biodiesel, as it
doesnt present the same constraints as ethanol.
Escalating the required amount of ethanol could force
refiners to sell blends with more than 10% of the corn-based
fuel, a phenomenon known as hitting the blend
wall, according to the American Petroleum Institute.
Fuel with more than 10% ethanol can cause engine materials to
break down and damage emission-control systems, according to
research from the oil-industry group. Supporters of ethanol
say newer cars can run on fuels with 15% ethanol, and many
flex-fuel vehicles can use 85% ethanol.
Part of our challenge is, the oil industry has done a
pretty good job of making it harder to access higher blends
and making it harder to take advantage of all the flexible
fuel vehicles that are on the road today, Agriculture
Secretary Tom Vilsack said this week.