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RFS Changes Could Stagnate Biofuels Investment, Groups Say

More than 37 agribusiness and ethanol companies signal concern over leaked Renewable Fuel Standard draft proposal

Published on: Oct 31, 2013

Ethanol and agribusiness organizations Wednesday issued a letter to the White House, signaling concern over the possibility of lower Renewable Fuel Standard volumes next year.

The concern of lower volumes stems from the mid-October leak of an Office of Management and Budget draft document that proposed a 3 billion gallon cut in RFS volumes.

The groups signing on to the letter, including Monsanto, Novozymes, DuPont and the Advanced Ethanol Council, said lower volumes could send the wrong signal to renewables investors, stagnating growth and limiting the availability of cheaper fuels.

The change, the letter argues, is unnecessary given that the RFS is "engineered to address challenges like the oil industry's historic and current refusal to blend more renewable fuels.

More than 37 agribusiness and ethanol companies signal concern over leaked Renewable Fuel Standard draft proposal
More than 37 agribusiness and ethanol companies signal concern over leaked Renewable Fuel Standard draft proposal

"Investors in next generation biofuels understand how the RFS and (Renewable Identification Number) values work to introduce market access for advanced biofuels," the letter said. "As such, any perceived unwillingness on the part of RFS administrators to allow the program to work would send a clear signal to the advanced biofuel marketplace that the RFS may not be allowed to change market behavior as promised."

The group went on to say that any reliance on the blend wall – the point at which some say more ethanol will be produced than can be used by the marketplace – to provide effective waiver of the program presents the same problem, because the legal standard for a waiver is narrow by design.

Supporters of changes to the RFS, like the American Petroleum Institute, and recently the AAA Motorclub, say the policy must be changed to accommodate decreasing petroleum use.

"Rigid mandates of the RFS have no place in today's energy market. . .The RFS was based on gasoline use rising significantly when the opposite is occurring. In what is termed the ethanol blend wall, consumers are now faced with putting more ethanol in their tanks than their engines were designed to accommodate," suggested API Downstream Group Director Bob Greco in an Oct. 24 press statement.

The group said lowering the RFS to 12.9 billion gallons of ethanol would "avoid the ethanol blend wall for now while also preserving the availability of ethanol free gasoline for consumers who demand it."

But the agribusiness groups dismissed API's claims in Wednesday's letter, noting, "the controversy over the RFS boils down to a market share battle between a growing biofuels industry and the incumbent oil industry… In essence, the oil industry wants the Environmental Protection Agency/OMB to make administrative adjustments to the RFS that will greatly reduce or eliminate the drivers that facilitate more biofuel blending over time, which will ultimately lead to price competition between the two industries at the fuel pump."

Though the EPA confirmed in August that it would propose to use flexibilities in the RFS to reduce renewable volumes in the 2014 standards, it was not specific on what flexibilities it would use or by how much volumes would decrease.

EPA also sought to cool rumors following the document leak, with the agency confirming that the information was a draft that had yet to be reviewed.

View the complete letter here.