Current Ethanol Blending Mandate Generates Interesting Opponents and Forces Delay

by Burr & Forman
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An increasingly pitched battle between business and agricultural interests over the blending of ethanol in gasoline has turned its focus to EPA’s rulemaking mandate which sets the minimum volume of renewable fuel sold annually in the U.S.  This Renewable Fuel Standard (RFS) has drawn significant attention because opponents of the use of ethanol in gasoline and diesel fuels believe that there is little if any likelihood of congressional action in the near term.  The EPA has proposed to reduce the volume of ethanol that must be blended into gasoline this year, while keeping the biodiesel mandate the same.  The subsequent comment period saw EPA  flooded with comments causing the Agency to delay a final decision setting the standard for the year.

According to a recent article in The Hill, the American Petroleum Institute is spearheading an effort ultimately intended to secure a congressional change to the RFS, which requires oil refiners to mix ethanol and other renewables into their gasolines and other vehicle fuels.  This mandate is implemented through EPA’s annual rulemaking establishing a volume of renewable fuel that must be produced for the coming year.  The current mandate is for 16.55 billion gallons for ethanol and biodiesel.  Interestingly, the API has attracted a range of advocacy groups in support of its position including the American Motorcyclists Association, the National Chicken Council, the National Council of Chain Restaurants, and the Environmental Working Group in support of an effort to scrap the corn-based ethanol requirement entirely.  For various reasons these groups oppose the use of ethanol primarily either because of its believed adverse impacts on engines and fuel systems, or its effect in driving up costs of food production.  The Environmental Working Group also asserts that the process increases carbon dioxide emissions because ethanol-based fuel additives have higher CO2 emissions than conventional gasoline.

By contrast, the National Corn Growers Association (NCGA) supports an increase in the mandated level, and the Association has criticized EPA for its delay in issuing the 2014 standard.  As explained in the farm and rural policy newsletter Agri-Pulse, EPA received over 350,000 comments on the issue and this has slowed its response, a situation that is hurting the ethanol industry according to the NCGA.

The law creating the Standard requires EPA to set an annual limit in November for the coming year, although EPA frequently misses this deadline.  The problem is compounded this year by the large number of comments.  While the Agency moved its target date for a final proposed rule from June to late July, none has been issued.  And White House adviser John Podesta told Senate Democrats last week that the administration plans to raise the 2014 level for biodiesel before making it final.

Regardless of how the issue was resolved by EPA’s annual rulemaking, it appears that forces are coming together in a concerted effort to eliminate or substantially reduce the requirement for renewables in gasoline.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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