WASHINGTON, July 5, 2017 - In a win for corn ethanol producers, EPA is proposing to require refiners to use another 15 billion gallons of conventional ethanol next year while maintaining the 2018 biodiesel target set by the Obama administration.
Ethanol producers had lobbied the new administration not to lower the corn ethanol mandate, which the Obama administration had raised to 15 billion gallons for the first time for 2017. The biodiesel industry was looking for an increase in the 2018 mandate for their product but was unsuccessful in persuading the agency to do so.
However, the Trump administration’s first set of renewable volume obligations, which represent the president's first major actions on biofuel policy, would slightly reduce the total amount of advanced biofuels that would have to be used in 2018 to 4.24 billion gallons, down from 4.28 billion gallons required for 2017. The reduction reflects the new administration’s lower forecast for production of cellulosic biofuel, a next-generation product that can be made from corn cobs, wood chips and other sources of plant cellulose.
The advanced biofuel target includes the 2.1-billion-gallon minimum requirement for biodiesel usage set earlier by the Obama administration and a new 238-million gallon mandate for cellulosic biofuels in 2018. The biodiesel minimum is 2 billion gallons this year while the cellulosic mandate is 311 million gallons,
The remainder of the advanced biofuel mandate is likely to be filled by biodiesel or renewable diesel, a diesel alternative produced through a hydrogenating fats and oils.
“Increased fuel security is an important component of the path toward American energy dominance,” said EPA Administrator Scott Pruitt. “We are proposing new volumes consistent with market realities focused on actual production and consumer demand while being cognizant of the challenges that exist in bringing advanced biofuels into the marketplace."
The Renewable Fuels Association appealed to Pruitt in April to maintain the 15-billion-gallon target for conventional biofuel that was originally set by the 2009 energy law. The Energy Information Administration estimated last month that U.S. ethanol production will reach 15.8 billion gallons in 2017, up from 14.8 billion gallons in 2017.
“Consumers only see the full benefits of the RFS when EPA implements the policy as intended by Congress,” said Bob Dinneen, RFA's president and CEO. “By staying the course and maintaining a strong RFS, consumers will continue to benefit from the policy, including a greater choice at the pump, while breathing cleaner air and seeing a boost to local economies.”
Wesley Spurlock, president of the National Corn Growers Association, said, “We are pleased to see EPA pick up where last year’s RFS rulemaking left off and propose a rule that keeps the RFS on track for conventional ethanol production. EPA’s proposal is good for farmers who are facing tough economic times and good for consumers who want affordable fuel choices that give us a cleaner environment.”
Emily Skor, CEO of Growth Energy, said the proposed renewable volume obligations, or RVOs, were "the first real test of the current administration’s pledged support for renewable fuels, and we are encouraged to see the EPA demonstrate President Trump’s continued commitment to the Renewable Fuel Standard."
EPA said in the proposed rule issued Wednesday that while the 15-billion-gallon mandate for 2018 was “reasonably attainable,” the relatively small number of retail stations that sell higher ethanol blends are still limiting the growth of the biofuel market.
“We continue to believe that the constraints associated with the E10 blend wall do not represent a firm barrier that cannot be crossed. … However, we also recognize that the market is not unlimited in its ability to respond to the standards we set,” the agency said.
While a USDA grant program has led to a significant increase in the number of stations that can sell E15 and E85 ethanol blends, the impact of the funding should "be fully phased in by the end of 2017 and thus have no influence on further growth in the number of retail stations offering E15 and E85 in 2018," EPA said.
The biodiesel industry is disappointed that EPA didn't increase the targets for 2018 and also proposed to keep the minimum biodiesel number at 2.1 billion gallons though 2019. The Obama administration had already set the minimum biodiesel target for 2018 at 2.1 billion gallons, up from 2 billion gallons this year.
The proposed rule said that the 2016 expiration of the $1-a-gallon biodiesel tax credit has created some uncertainty about future production levels: "Very high volumes of advanced biodiesel and renewable diesel were supplied in the last quarter of 2016, likely driven by a desire to capture the expiring tax credit, while significantly smaller volumes of these fuels were supplied in the first quarter of 2017." The agency also expressed concern that setting a higher advanced biofuel requirement could shift feedstocks to biofuel production from existing uses.
The National Biodiesel Board wanted EPA to raise the advanced biofuel mandate for 2018 of at least 5.25 billion gallons and increase the biomass-based diesel volume for 2019 to 2.75 billion gallons.
“This proposal continues to underestimate the ability of the biomass-based diesel industry to meet the volumes of the RFS program,” said Anne Steckel, vice president of federal affairs at the National Biodiesel Board.
“This is a missed opportunity for biodiesel, which reduces costs, provides economic benefits and results in lower prices at the pump. Higher advanced-biofuel and biomass-based diesel volumes will support additional jobs and investment in both rural economies and clean-energy-conscious communities.”
The president of the American Soybean Association, Ron Moore, noted that there were 2.9 billion gallons of biodiesel and renewable diesel used in 2016. "To have the levels proposed be no higher than called for in 2018 and less than what is being utilized in 2016 is disappointing and would miss an opportunity to utilize surplus soybean oil to diversify our fuel supply and boost jobs, particularly in rural America," he said.
On a separate issue, the U.S. industry on Wednesday said it was pleased that Brazil has delayed a decision on imposing a tariff of up to 17 percent on imports of U.S. ethanol.
“Imposing tariffs on U.S. ethanol imports will hurt Brazilian consumers by driving up their costs at the pump,” three U.S. trade groups -- the U.S. Grains Council, RFA and Growth Industry -- said in a joint statement. “Additionally, this action on U.S. ethanol imports will go against Brazil’s own longstanding view that ethanol tariffs are inappropriate and will harm the development of the global ethanol industry.