WASHINGTON, D.C. — In Washington, the U.S. EPA finalized the 2013 percentage standards for the Renewable Fuel Standard program. 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 percent blend).
The standard specifically requires:
- Biomass-based diesel (1.28 billion gallons)
- Advanced biofuels (2.75 billion gallons)
- Cellulosic biofuels (6.00 million gallons)
The EPA action essentially waived down cellulosic biofuels from 14 million to 6 million gallons, while keeping other proposed numbers largely in place. The 1.28 billion gallons in biomass-based diesel will count as 1.92 billion ethanol-equivalent gallons towards the overall 2.75 billion gallon advanced pool. The remainder is likely to reflect primarily renewable diesel and Brazilian sugarcane ethanol.
In the rule issued today, 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. The move follows comments from a number of stakeholders concerning the “E10 blend wall.”
EPA is also providing greater lead time and flexibility in complying with the 2013 volume requirements by extending the deadline to comply with the 2013 standards by four months, to June 30, 2014.
The Digest’s Take
Items off the table: The EPA’s move may well de-fang voices that point to Congress as the only body that can address blendwall issues — and it may well take RFS repeal (if not reform) completely off the Congressional agenda.
Should blend wall and RIN issues be addressed in this rule, it may well take reform off the agenda too — if the EPA has sufficiently demonstrated the flexibility of RFS2 and wisdom in EPA’s stewardship. As ABFA president Mike McAdams notes, it also takes “phantom cellulosic fuels” out of the firing line.
Items on the table: 2014 looms as a big year — essentially not a year about capacity building and production (except perhaps for drop-in biofuels): it will be a year about building market access. The EPA has put the blendwall on the table — and apparently is not convinced that E15 ethanol blending is a total solution and not convinced that drop-in fuels or biobutanol will be available in large quantities in 2014.
Market access: For US ethanol producers, continuing to build export markets and E85 outlets. For drop-in biofuels producers, building capacity. For automakers, making more flex-fuel cars and particularly in clusters.
E85 and higher ethanol blends: With a big harvest expected and corn ethanol volumes flat, low corn prices my open up enough of a spread between ethanol and petroleum to make E85 an attractive alternative.
Biodiesel: If the feedstock is affordable — and rising soy meal demand from China may well power the kind of increased acreage that drops soybean oil prices — it could well be a big, big year for biodiesel. The size of the advanced biofuels mandate will likely rest on EPA’s estimates of biodiesel expansion.
Long-term: We continue to see the possibilities of 18 billion gallons of biobutanol, 5 billion gallons of biodiesel, 1 billion gallons of renewable diesel and 2 billion gallons of drop-in fuels of other types (including algae biofuels and aviation fuels) by 2022. That’s based on current technology, now in operation (e.g. Gevo, numerous biodiesel producers, Diamond Green Diesel, Neste, Dynamic Fuels, and the likes of KiOR, Solazyme, and Sapphire Energy.) Those kinds of volumes would give the US 36 billion gallons of ethanol-equivalent fuels and fit within existing blend levels. otal price tag, somewhere in the $20 billion range (on top of existing industry investment).
Piper Jaffray analyst Mike Ritzenthaler wrote:
“More interesting than largely keeping 2013 RVOs at proposed levels – only lowering cellulosic biofuel requirements – the EPA mentioned the possibility of reducing 2014 RVO levels for other biofuel categories, including corn-based ethanol, in order to address the highly controversial blendwall issues.
“We believe that the EPA calling out the option to adjust the total renewable fuel mandate opens the door for skepticism surrounding the volume mandate and the sustainability of RINs. Additionally, a lower 2014 ethanol mandate will likely result in continued pressure on corn prices due to perceived lower corn demand – although we would expect improved producer margins to correct the demand destruction as ethanol can be exported, circumventing the blendwall issues.
“Ethanol RINs values have increased significantly since the beginning of the year — up from 7 cents at the start of the year to approximately 90 cents today — and have shown significant volatility throughout, reaching over $1.40 in mid-July.
“We believe the fear of lower ethanol demand for corn will weigh on the Ag sector as a whole, while uncertainty around 2014 RVOs will weigh on stocks in the biofuel space, but as indicated by the EPA, a proposed rule making for the 2014 RVOs is expected in September.”
For industry reaction, move to the next page.
Michael McAdams, president, Advanced Biofuels Association
“ABFA salutes the EPA and today’s announcement of the 2013 RVOs. We are delighted to see EPA validate the significant contributions that advanced and cellulosic biofuels are making to the American biofuels sector. Today’s announcement of 6 million gallons of cellulosic fuels should put to an end the argument that refiners are being taxed to pay for phantom fuels. Advanced and cellulosic biofuels will continue to grow over time, giving Americans a diversity of lower carbon fuels for our future.”
Brent Erickson, Executive Vice President of BIO’s Industrial & Environmental Section
“This is a pivotal year for cellulosic and advanced biofuels. Following years of research and development and millions of dollars in investment, the first companies are right now commissioning biorefineries and producing commercial volumes of cellulosic fuel for American drivers. Additional companies have new facilities under construction, with expected start up over the next few years.
“BIO firmly believes that the limits to market access for biofuels commonly referred to as the blendwall represent a series of barriers contrived by obligated parties to prevent biofuels from gaining access to the marketplace. Multiple avenues exist for blending additional volumes of biofuel into the nation’s fuel supply. BIO urges EPA to withstand pressure to reduce RFS obligations based on blendwall claims.”
Bob Dinneen, CEO, Renewable Fuels Association
“First and foremost, by decreasing the cellulosic requirement by 99.4 percent to a very realistic, achievable number, the EPA has totally obliterated Big Oil’s myth that the RFS is inflexible and unworkable. As in years past, the finalized annual requirements are a testament to the inherent flexibility that is the backbone of the RFS.”
Tom Buis, CEO, Growth Energy
“Growth Energy is pleased that the EPA has finalized the 2013 biofuel volumes and has continued to show its strong commitment to the RFS. We look forward to closely reviewing the final rule and we strongly support increasing levels of renewable fuel into our nation’s fuel supply.
Brooke Coleman, Executive Director, Advanced Ethanol Council
“It is clear that U.S. EPA has done its homework when it comes to setting the 2013 standard. The commercial cellulosic biofuel facilities that U.S. EPA projected to start up in 2013 are indeed operating, and the adjusted targets reflect the number of actual gallons expected to be available through the end of the year. We agree with U.S. EPA that there will be sufficient quantities of advanced biofuels in the market to maintain the broader advanced biofuel standard, which is consistent with the legislative intent of the RFS to promote advanced renewable fuels.”
Anne Steckel, Vice President of Federal Affairs, National Biodiesel Board
“Biodiesel is proving that Advanced Biofuels are working today and that they can reduce prices for consumers. The RFS is a critical component to that success, and today’s rule will help stimulate new technologies and additional growth. Today’s announcement also demonstrates that the EPA has tremendous flexibility in addressing concerns stemming from the various volume requirements under the RFS, and that it is prepared to use that flexibility in a practical way to ensure that the policy is running smoothly.”
Leticia Phillips, Brazilian Sugarcane Industry Association (UNICA)
“Sugarcane ethanol producers applaud today’s Environmental Protection Agency (EPA) announcement on 2013 annual percentage standards for the Renewable Fuels Standard (RFS), which maintains the advanced biofuel volume at 2.75 billion gallons. Brazilian exports provided nearly one-quarter of the entire U.S. advanced biofuel supply in 2012, are projected to supply nearly 700 million gallons in 2013, and could supply up to one billion additional gallons in 2014 – all with at least 61% fewer emissions than gasoline, according to the EPA.”
Jason Bordoff, Director, Columbia University’s Center on Global Energy Policy
“The EPA’s announcement today that it will leave the renewable fuel volume mandates in place for 2013 but is willing to use its flexibility to issue waivers next year shows the Obama Administration clearly understands the current RFS statutory mandates are unworkable beyond 2013. It’s a significant development for the EPA to overtly state that it intends to be flexible in using its waiver authority to ensure consumers are not penalized at the pump.”
Brian Jennings, Executive Vice President, American Coalition for Ethanol
“ACE appreciates that EPA has issued the final volumes for 2013, keeping the total volume intact and thoughtfully used the flexibility given to it by Congress to set the final cellulosic target at 6 million gallons. We think that total is realistic to reach this year. To ensure that the RFS drives sufficient demand for E15 and higher blends of ethanol, and serves as a catalyst for innovation in advanced and cellulosic biofuels, ACE will continue our constructive dialogue with EPA as it considers its flexibility to address the volumes for 2014 and beyond.”
This article was originally published on Biofuels Digest and was republished with permission.
Lead image: Biofuels via Shutterstock