Posted August 9, 2013

On Tuesday, the Environmental Protection Agency (EPA) announced its yearly requirement under the Renewable Fuel Standard (RFS), almost eight months later than expected.  According to an article from AgWeb, in “issuing long-overdue final quotas . . . [the EPA] gave refiners an additional four months to reach the goal of using 16.55 billion gallons of renewable fuel for 2013.  It also signaled it will cut the 18.15 billion gallon mandate for 2014, a looming requirement that has driving up the price of ethanol credits that refiners can buy to comply.”

According to Julian Hattern of The Hill, the ethanol “and biofuel groups applauded the new standard, but the oil-and-gas industry complained that the new requirement was stricter than necessary.” 
In 2007, Congress passed the Renewable Fuel Standard, which required refiners to blend a certain amount of ethanol and other biofuels into the nation’s gasoline supply each year.  This amount is set to increase each year, requiring a total of 36 billion gallons of biofuel to be blended by 2022.  Refiners are concerned that requiring higher levels of biofuels will lead to a “blend wall,” forcing them to “make a blend level of gasoline that consumers don’t want and cars cannot handle.”  The EPA announced on Tuesday that it will use “flexibilities” in the “law to reduce the amount of biofuel needed next year when the wall is projected to be hit.”  The Hill article is available here.  A Washington Post article is available here.
According to Bloomberg, gasoline consumption is slowing, “expected to be 133.2 billion gallons this year and 132.9 billion in 2014,” according to a U.S. Energy Information administration forecast.  The EPA stated that it “does not currently foresee a scenario in which the market could consume enough ethanol sold in blends greater than E-10, and/or produce sufficient volumes of non-ethanol biofuels to meet the volumes of total renewable fuel and advanced biofuel” as required by the law by 2014.
With this announcement, the value of the Renewable Identification Numbers (RINs) fell to 89 cents from $1.43 on July 17.  RINs are “tradable credits tied to each gallon of ethanol to show compliance with the law.”  For a detailed discussion of RINs, please visit the National Agricultural Law Center website here.  For information on the background waiver provisions of the Renewable Fuel Standards, visit the Center website here. 
Requirements for “advanced biofuels” from cellulosic materials or other sources have also changed as a result of a recent Appeals Court decision.  In January, the U.S. Court of Appeals for the D.C. Circuit required the EPA to lower certain targets in a biofuel-blending rule because supplies were not available to meet the requirements.  For a discussion of the case from The Hill, click here.  To read the decision, click here.