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December 2, 2016
The debates over the merits of the Renewable Fuel Standard (RFS) are back at the forefront, as EPA recently issued its final rule for 2017 Renewable Volume Obligations (RVOS), as well as 2018 RVOs for biodiesel. EPA initially issued tentative volumes in May for public comment. After reviewing the comments, EPA made some alterations to the proposed volumes and released the finalized rule November 23. The 2017 RVOs represent an overall six percent increase from 2016 volumes, or a growth of 1.2 billion gallons of renewable fuels.
Changes from Proposed Volumes
The final rule represents a larger increase compared with the initial May proposal. In total, renewable fuels will represent 10.7 percent of U.S. transportation fuel, compared with the initially proposed 10.44 percent. In 2016, the total volume was set at 10.1 percent.
Advanced biofuels also saw an increase, from the initial proposal of 4 billion gallons (2.22 percent) up to 4.28 billion gallons (2.38 percent), compared 3.61 billion gallons for 2016. Advanced biofuels are those that represent a lifecycle greenhouse gas reduction of at least 50 percent compared with traditional gasoline. This category includes cellulosic biofuels and biodiesel.
Final volumes for cellulosic biofuels saw a small decrease from proposals—down from 312 million gallons to 311 million gallons. Cellulosic biofuels have consistently been slower to advance than initially predicted when the RFS was established. Despite the decrease from the May proposals, this rule still represents an increase from the 2016 volumes of 230 million gallons.
EPA commented on these changes in the final rule, stating that while it had initially intended to use a general waiver reducing the total renewable fuel volume compared with the mandate in the RFS, it decided that the waiver was only necessary for cellulosic biofuels: “That is, we have determined that use of the cellulosic waiver authority alone will be sufficient to yield a volume requirement that is consistent with available supply.”
Addressing the “Blendwall”
Oil companies and refiners, as well as other stakeholders, have long warned of a “blendwall” at ten percent ethanol, meaning it is difficult to have amounts of ethanol higher than ten percent, or E10, in the fuel supply. Biofuels proponents and others have pushed back against the idea of the blendwall, pointing to the millions of cars that can use E15 and E85 as examples. In this year’s RVOs, EPA mandates a total renewable fuel volume of over ten percent, causing increased blendwall controversy.
EPA wrote about the blendwall in its response to the public comments submitted on the proposed volumes in May, saying, “We believe that there are real constraints on the ability of the market to exceed a pool-wide ethanol content of 10 percent. However, these constraints do not have the same significance at all levels above 10 percent ethanol. Instead, for the state of infrastructure that can be available in 2017, the constraints represent a continuum of mild resistance to growth at the first increments above 10 percent ethanol and evolve to significant obstacles at higher levels of ethanol.”
“In short, the E10 blendwall is not the barrier that some stakeholders believe it to be, but neither are increases in pool-wide ethanol concentrations above 10 percent unlimited in the 2017 timeframe as other stakeholders have suggested.”
Reactions to the Rule
Biofuels organizations have come out in strong support of the new rule. Bob Dineen of the Renewable Fuels Association said, “The final RVO rule helps put consumers in the driver’s seat when it comes to fuel choice at the pump and we thank EPA for listening to the public’s demand for lower cost, higher octane fuels, recognizing the rising demand for gasoline and abiding by the statute.”
Growth Energy also praised the rule, with CEO Emily Skor calling the RFS “our country’s most successful energy policy.” Support also came from the American Coalition for Ethanol, the National Farmers Union, the Biotechnology Industry Organization, the Advanced Biofuels Association, Renewable Energy Group, National Corn Growers Association, the Advanced Biofuels Business Council, the National Biodiesel Board, POET, and the Iowa Renewable Fuels Association.
On the other hand, the American Petroleum Institute (API) commented, “We are disappointed that EPA has taken a step backwards with this final rule. The RFS mandate is a bad deal for the American consumer.” The American Motorcyclists Association also condemned the new rule.
The rule has also prompted speculation about the role of the Renewable Fuel Standard in the upcoming Trump administration. Chris Prentice of Reuters commented that the new rule “has pitted two of Trump’s support bases against each other: Big Oil and Big Corn.” While Trump professed pro-ethanol and RFS views on the campaign trail, it is unclear how he will balance these two interests.
Author: Rebecca Chillrud
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