On March 23, 19 Senators wrote to EPA Administrator Gina McCarthy, asking EPA to put the Renewable Fuels Standard (RFS) “back on track.” In their letter, they state that while they are “pleased that the EPA increased the renewable fuel volumes from the proposed to the final rule, we remain concerned that it continues to use distribution infrastructure as a factor in setting blending targets.”
Under the RFS statute, EPA must release renewable fuel volumes annually. The agency claims they are on schedule to release proposed fuel volumes for 2017, likely by June, and the final volumes in December. The volume targets for renewable fuels have been beset with controversy since 2013, when EPA proposed dramatically reducing renewable fuel volumes, citing a lack of renewable fueling infrastructure and vehicles able to utilize higher blends of ethanol.
As a result of EPA’s ruling, the 2014, 2015 and 2016 volumes are in court, with the ethanol industry arguing that a lack of compatible ethanol fueling infrastructure does not constitute a valid reason to cut fuel volumes.
Cars & Pumps: Chicken & Egg
The renewable fueling infrastructure issue has been at a logjam for years – ever since the U.S. fuel supply became saturated with E10 (10 percent ethanol, 90 percent gasoline). The E10 “blend wall” is the point at which changes to refueling infrastructure and vehicles are needed to utilize higher blends. However, analyses from the Department of Energy (DOE) and elsewhere have shown that these challenges may be overstated – particularly for E15 to E25 blends.
Despite the EPA and DOE certifying the use of E15 in 2001 and newer vehicles, which constitutes over 80 percent of the fleet, auto manufacturers have been recalcitrant to authorize the use of E15 in new vehicle owner’s manuals. This may be changing, as nearly 20 percent of new vehicle owner’s manuals now certify the use of E15, according to Reuters. This is up from 14 percent of vehicles a year ago.
With low gasoline prices translating to more miles travelled and increasing sales of larger, fuel inefficient cars, automotive manufacturers are claiming they may not meet the mid-term 2025 goals for CAFE (Corporate Average Fuel Economy). While manufacturers can produce electric and hybrid vehicles, they can’t force the public to buy them.
One solution being explored to meet CAFE is increasing the octane ranking of the U.S. gasoline pool. High octane gasoline allows for use of smaller, more efficient engines. Europe already has a higher octane ranking than the United States, with a minimum octane rating of 90 to 95. For comparison, the minimum U.S. octane rating is 87, and in some areas, 85 octane is still available.
Currently, two sources of octane are available to gasoline refiners – ethanol and gasoline aromatics. Gasoline aromatics are a petroleum product which already constitutes approximately 25 percent of each gallon of gasoline. Naturally, the oil industry would like additional octane to come from a petroleum product.
RFS: Reform, Repeal or Leave As-Is?
The oil industry including several refiners, would like to see the mandate repealed or further curtailed. Some players in the advanced fuels industry, such as those which use algae and sugarcane feedstocks, feel that the RFS is not working for advanced and cellulosic fuel producers, believing instead that the program needs further legislative reform. It is not clear what reforms these producers would seek. Many environmental groups would like to see the cornstarch-based ethanol volumes removed from the RFS, and this position is backed by the oil industry. On the other side, you have corn ethanol producers stating that they can produce even more than EPA is asking of them.
While several hearings have been held on Capitol Hill in the last few months, it’s unlikely that the issue will see real traction on the Hill until after the November election.
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