Big Oil Firms File Request to Slash Ethanol Target for 2014
August 19, 2013 6:14 AM
Organization claims ethanol's damage to economy will soar to three-quarter trillion dollars a year by 2015
For ethanol advocates, 2013 has been a disappointing year. Complaining that "breaking the blending wall" and
out to stations
would damage older vehicles
, automakers and motorists
united to petition
Environmental Protection Agency
(EPA) for a waiver.
the apparent win
shooting down that waiver
, ethanol producers saw the economics start to catch up to them. With refinery growth grinding to a halt due in large part to the
elimination of government grants for ethanol producers
, 2013 production levels are expected to miss their target of 16.55 billion gallons. As a result the EPA has given refiners an additional 6 months to meet that target,
effectively a cut to the 2013 target
I. Big Oil -- Ethanol Target Will Cost U.S. Economy a Quarter Trillion Dollars
Now the top two industry organizations of "big oil" --
The American Fuel & Petrochemical Manufacturers
(AFPM) and the
American Petroleum Institute
(API) -- have looked to push the EPA to make further cuts.
The EPA announced that refiners must blend in 18.15 billion gallons during 2014 or face fines, under The
Energy Independence and Security Act of 2007
's (EISA) [PDF] Renewable Fuel Standard (RFS) terms. The oil indstry advocacies want that target to be slashed 3.35 billion gallons, to 14.8 billion gallons. While that's technically a higher 12 month production level than the 2013 EPA-approved level (with the 6-month extension factored in), the oil producers are willing to live with that small increase as long as production stays at E10 levels or below.
Oil industry organizations claims that the 2014 ethanol target will cost the economy $250B USD next year. [Image Source: Independent Refiners]
This action is necessary to avoid the severe economic harm that will result from exceeding the 10 percent ethanol blendwall. Beyond 10 percent, the corrosive nature of ethanol renders the blended fuel incompatible with today’s engines, vehicles and the multi-billion dollar infrastructure in place throughout the nation. Waiving the 2014 volumes is the only available solution to avert the potentially disastrous implications of the blendwall.
The organizations claims that if no waiver is granted the RFS will cause a $270B USD dent to the U.S. gross domestic product (GDP) in 2014 a $770B USD hit in 2015 (which calls for 20.5 billion gallons, tentatively). They cite
[PDF] from a study they commissioned by the
National Economic Research Associates
, Inc. (NERA) as supporting that number.
II. EPA Admitted a Waiver May be Necessary
AFPM President Charles T. Drevna, a former Sunoco, Inc. (
) executive, remarks:
The negative impacts of the RFS will be extreme and will undoubtedly hurt consumers. If EPA does not act, the inability to blend the statutory-mandated amount of ethanol could lead to domestic fuel supply shortages and ultimately cause severe economic harm to consumers and the economy.
EPA has the opportunity to curtail the harmful effects of the policy next year by waiving the 2014 volumes before more economic damage is done. I expect it will take American families into consideration when it makes its decision.
EPA missed a golden opportunity to address the ethanol blendwall in 2013; however, we’re encouraged the Agency recognized there is a problem in its rule setting this year’s biofuel requirement. This petition will provide a roadmap for the Agency to follow as it promulgates its 2014 waiver.
The EPA seeming left the door open to a potential RFS waiver, writing in its finalization of targets:
This notice also acknowledges that there are constraints in the market’s ability to consume renewable fuels at the volumes specified in the Clean Air Act in future years, and states that the EPA anticipates proposing adjustments to the 2014 volume requirements in the 2014 rule to address these constraints.
The Renewable Fuel Association (RFA) -- the big ethanol/big corn industry's largest advocacy firm -- has not responded to the waiver request.
A waiver would be another hit to big corn's E15 plans. [Image Source: Digital Trends]
They did issue a press release last week, that suggests that ethanol production may be a bit higher than expected in 2013 due to a strong harvest and
another press release
that cites research suggesting that E85 (a higher ethanol blend for special certified vehicles) may be a route for refiners/station owners to circumvent the E15 issue and avoid vehicle damage while using more fuel. (The latter press release aside, the RFA
takes issue with automakers claims that E15 will damage older vehicles
, claiming they're colluding with the oil industy to damage alternative fuels.)
AFPM/API [press release]
"If they're going to pirate somebody, we want it to be us rather than somebody else." -- Microsoft Business Group President Jeff Raikes
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