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EPA Acknowledges 2014 Ethanol Blend Wall

DC Dialogue

Getting past the 10% ethanol penetration could lead EPA to draw back its overall ethanol blending requirements in 2014.

Published on: August 9, 2013

This week the Environmental Protection Agency released the 2013 percentage standards for four fuel categories within the Renewable Fuels Standard (RFS) established by Congress in 2007. The final 2013 overall volumes and standards require 16.55 billion gallons of renewable fuels to be blended into the U.S. fuel supply (a 9.74% blend).

The EPA in its statement recognized that the 2014 levels are nearing the so-called blend wall of 10% ethanol in the fuel supply. During this rulemaking, EPA received comments from a number of stakeholders concerning the “E10 blend wall.” Projected to occur in 2014, the “E10 blend wall” refers to the difficulty in incorporating ethanol into the fuel supply at volumes exceeding those achieved by the sale of nearly all gasoline as E10. Most gasoline sold in the U.S. today is E10.

In the rule issued Aug. 6, EPA announced that it will "propose to use flexibilities in the RFS statute to reduce both the advanced biofuel and total renewable volumes in the forthcoming 2014 RFS volume requirement proposal." What those flexibilities entail remains to be seen, and will be closely watched by the industry.

Recognizing that EPA may decide to stay the course for 2013, last week, Sens. Vitter, Mark Pryor (D-Ark.), and James Inhofe (R-Okla.) sent a letter to President Obama asking for the Administration to waive the 2014 volumes below 10% while Congress examines long-term policy solutions for the outdated and increasingly burdensome RFS.

The letter states, "The quicker-than-anticipated onset of the blend wall-coupled with stagnant demand for E85 and ongoing legal, market, and technical challenges with E15-now threatens to raise fuel prices and damage the engines of our constituents. In recent testimony before Congress, the Environmental Protection Agency (EPA) noted with respect to 2014 that the challenge becomes much greater as the statutory volumes increase substantially, and asked the public for comments and advice on whether to waive the requirements."

RFS tweaks

In July the House Energy and Commerce Committee held a hearing featuring testimony from three panels of 16 total witnesses representing fuel users, developers, and representatives from the agricultural and environmental communities. Panelists discusses a range of topics, including the Renewable Fuel Standard’s potential effect on fuel and food prices, blend wall and compatibility issues, and impacts on the nation’s agricultural sector and the environment.

Although livestock and oil groups have repeatedly called for a full repeal of the RFS, four members of the House Energy Committee are looking to find middle ground on the issue. Five white papers have been released over the past year as the committee begins to evaluate the effectiveness of the program. The Senate is also taking a closer look at the RFS with a hearing planned for this fall on the matter.

Purdue economist Chris Hurt said in his testimony that meeting the 16.55 billion gallon RFS2 in 2013 is becoming increasingly difficult. Let alone the 18.15 in 2014 and 20.5 billion gallons in 2015, and so forth to 36 billion gallons in 2022, just 9 years away. "The problems arise from the blend wall, from the inability of a cellulosic industry to develop, and from a slow-start toward E15 or E85," he said.

Pam Johnson, who testified on behalf of the National Corn Growers Assn. at the House hearing, said corn producers would be supportive of modifying the RFS, as long as it avoids pitfalls. She did state many of the problems being encountered today were predicted at the time of the writing of RFS2, and could be fixed if the oil industry chose to actively make higher ethanol fuel varieties available.