US energy groups spar over 2014 biofuel mandate

Several major US trade groups representing the energy industry are at odds this week as the EPA prepares to finalize the nation's renewable fuels mandates for 2014.

The US Environmental Protection Agency (EPA) should roll back rising ethanol mandates until Congress can permanently repeal the program, Patrick Kelly of the American Petroleum Institute (API) trade group told reporters.

Kelly is the senior fuels policy advisor for the API.

“Our major concern is that ever-increasing biofuel mandates could harm consumers, damage their automobiles, and create supply shortages that severely harm our still fragile economy," said Kelly.

"A study by NERA Economic Consulting shows higher ethanol mandates could lead to fuel rationing and supply shortages that, by 2015, could drive up the cost of gasoline by 30% and the cost of diesel by 300%," he continued.

"And, livestock groups say the mandate -- which now diverts more than 40% of the US corn crop from food to fuel -- has been the leading driver of food price increases we’ve seen in recent years."

Kelly added that the EPA should lower the 2014 ethanol mandate to no more than 9.7% of projected gasoline demand, thereby reserving the choice of ethanol-free gasoline for consumers who want it. 

"EPA must also bring their mandates closer to reality on cellulosic biofuels, which do not exist in commercial quantities," said Kelly. "Finally, EPA must finalize these requirements as quickly as possible to get the annual rulemaking process back on track. By making these adjustments, EPA can create a welcome stopgap."

The API submitted official comments to the EPA in a joint release with the American Fuel & Petrochemical Manufacturers (AFPM).

The API and AFPM comments, as expected, are in sharp contrast with those from the Renewable Fuels Association (RFA), an ethanol trade group, and from the National Biodiesel Board (NBB). Earlier this week, the NBB called on the Obama administration to increase the biodiesel and advanced Renewable Fuel Standard (RFS) proposals to reflect current production rates.

The NBB noted that the US biodiesel industry set a new record in 2013 by producing nearly 1.8 billion gallons, significantly exceeding the 2013 biodiesel requirement under the RFS and enough to fill the majority of the advanced biofuel requirement.

"Yet the Obama administration has proposed holding the 2014 RFS volume for biodiesel at 1.28 billion gallons while also sharply cutting the overall Advanced Biofuel requirement -- a proposal that, if finalized, would significantly reduce production," the NBB said.

“The success of the biodiesel industry in 2013 proves that the RFS is working today and stimulating the commercial-scale production of advanced biofuel,” said Joe Jobe, CEO of the NBB. 

“It also makes it incredibly frustrating that the Obama administration is backing away from this progress with its recent RFS proposal. If our industry produced 1.8 billion gallons of Advanced Biofuel in 2013, why is the administration retreating to 1.28 billion gallons for 2014? We’re proving it can be done. What we need is consistent policy, and that is sorely lacking in Washington right now.”

Jobe said the proposed figures threaten biodiesel businesses across the country and thousands of jobs, in addition to undercutting the administration's stated priority of reducing greenhouse-gas (GHG) emissions

“It is incomprehensible that an administration that has unequivocally supported renewable fuels since Day One has suddenly decided to retreat on the first advanced biofuel to reach commercial-scale production nationwide,” Jobe said. 

“Perhaps more importantly, it jeopardizes the future of all renewable energy by sending a terrible signal to entrepreneurs and investors that these policies are not stable, even under a President who professes to support them,” he added.

The NBB also criticized the US Congress for allowing a key biodiesel tax incentive to lapse on December 31.

“Many biodiesel producers have been running at full capacity in recent months,” Jobe said. “That’s driving down costs and creating tremendous economic activity. Yet instead of embracing this success, Washington is walking away from it.”

Meanwhile, according to the RFA, the EPA has proposed to lower the RFS from the statutory volume of 18.15 billion gallons to 15.21 billion gallons, including a reduction in the requirement for renewable fuel from 14.4 billion gallons to 13.01 billion gallons. The RFA is asking the EPA to reconsider its proposal and finalize the 2014 requirement at the original 14.4 billion gallons.

“In the end, the RFS program was designed to force the oil industry to change the status quo—not to perpetuate it," said RFA president Bob Dinneen. "The entire purpose of this program would be subverted if the oil industry is rewarded for its failure to take the steps necessary to ensure that it was capable of distributing, blending, and dispensing the renewable fuel volumes required under the statute.”

Image courtesy of the Heartland Institute

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