Following multiple delays, the Obama administration is under intense pressure from ethanol, oil and ag commodity groups as well as members of Congress as it prepares to release Renewable Fuel Standard obligation levels for 2014 through 2016 sometime between now and Monday.
The Environmental Protection Agency is supposed to determine how much ethanol is needed for the next year by Nov. 30, but the agency has missed its deadline at least each of the past two years.
Last May, EPA announced in a response to litigation by the petroleum industry that the agency would make the call on the blend volumes by Nov. 30. As a result, the 2014, 2015 and 2016 Renewable Volume Obligations (RVOs) are expected to be issued before Tuesday.
The RVO levels for ethanol are determined by estimating gasoline demand for the years in question. EPA had initially considered cutting the blend volumes by about 20% below the statutory levels because of earlier data showing weak demand for gasoline.
Given the fight since 2013 over these blend levels, it’s likely biofuel supporters or the petroleum industry will cry foul once the blend volumes are released and immediately file a lawsuit over the EPA’s handling of the issue.
Estimating gasoline demand has been a challenge due to the fact that the U.S. economy is resilient, but the global economy has been affected by the Chinese slowdown. However, prices for unleaded gasoline and 10% ethanol-blended gasoline across most of the country are now below $2 a gallon, the lowest for the Thanksgiving holiday since 2004, according to market analysis from the website GasBuddy.com.
EPA’s proposal released in May would set renewable fuel mandates at 15.93 billion gallons for 2014, 16.3 billion gallons for 2015 and 17.4 billion gallons for 2016. The proposal reflects between 9% and 10% of gasoline volumes.
Last week, the Renewable Fuels Association sent a letter to President Barack Obama detailing the dynamic state of the U.S. ethanol industry, and noted that in excess of 13 billion gallons of ethanol are produced annually in the domestic market.
RFA and Growth Energy, two top ethanol trade groups, went to the White House on Nov. 18 to urge strict compliance with the RFS in the face of a campaign by anti-ethanol groups for the government to either scrap the RFS law or limit the ethanol mandate. They told officials at the Office of Budget Management that the EPA should not cut RVOs as initially proposed.
RFA President and CEO Bob Dinneen said the U.S. ethanol industry would have no problem meeting the 15 billion gallon blending level specified by the statute, citing data from EIA showing that gasoline consumption projections for 2016 have increased to a nine-year high.
The American Petroleum Institute, the nation’s largest trade group for the oil and gas industry, has increased its lobbying campaign to lower the ethanol mandate. API has not been a fan of the RFS. The petroleum industry had its own meeting with White House officials late last week. API argues that ethanol mandates should be kept below the current 10% threshold acceptable for use in all cars and trucks. The American Fuel and Petrochemical Manufacturers had a similar message.
Even foreigners have got into the act. The Union of Sugarcane Industry Association, Brazil’s largest trade group for sugarcane and ethanol producers known by its Portuguese acronym UNICA, said it had earlier submitted comments opposing the proposed changes to RFS or lower ethanol mandates.
UNICA said lower statutory RVOs are “unnecessary” since Brazil has increased its output and exports to the U.S. over the past three years by 6%, and hopes to raise exports to the U.S. over the coming years to 2 billion gallons.
Lawmakers remain divided on the issue. A bipartisan group of 184 House members recently sent a letter that calls on the EPA to set the final volume for ethanol in 2016 at a level that would account for the blend wall.
But last week, House Minority Leader Nancy Pelosi, D-Calif., and Democratic Whip Steny Hoyer, D-Md., wrote to the White House urging it to push refiners to use more ethanol. Those producers say oil companies could provide ethanol blends of up to 85% if they were prodded to do so by the government. A rule that locks in the “blend wall” would be “counter to our efforts” in the 2007 law.