News Column

Renewable Fuels Could Raise Price at Pump, Industry Says

August 14, 2013
alternative fuels

The oil industry on Tuesday pleaded with the Obama administration to lower the amount of corn-based ethanol and other renewable fuels the government requires companies to blend into gasoline next year.

Failing to drop quotas under the renewable fuel standard could cause gasoline prices to spike and result in "severe economic harm" for the United States, said the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers, in their first formal request for a waiver of the 8-year-old mandate.

The Environmental Protection Agency twice has rejected similar appeals by state leaders, including Texas Gov. Rick Perry, livestock producers and other groups, saying they failed to show severe economic damage from leaving the renewable fuel mandate in place.

But last week the EPA acknowledged concerns that refiners are hitting a "blend wall," a point at which they no longer can mix in enough ethanol to meet the mandate's volume targets without exceeding the 10 percent threshold acceptable for use in all cars and trucks.

Even before the oil and refiner groups filed their waiver request, the agency signaled it would use its flexibility under existing law to lower renewable fuel targets in 2014 to "reasonably attainable" levels.

In the request filed with the EPA, the oil and refining trade groups essentially ask it to set the 2014 targets at about 10 percent of the anticipated total fuel supply. Specifically, the groups are asking EPA to waive 3.35 billion gallons from the 18.15 billion that otherwise would be mandated under the renewable fuel standard next year.

"If EPA does not act, the inability to blend the statutory-mandated amount of ethanol could lead to domestic fuel supply shortages and ultimately cause severe economic harm to consumers and the economy," said Charles Drevna, who heads the American Fuel and Petrochemical Manufacturers.

Partial waiver bid

In their partial waiver request, the trade groups rely heavily on a study by NERA Economic Consulting that concluded that without changes, the renewable fuel standard could deal a $770 billion hit to the U.S. gross domestic product. That report, commissioned by the American Petroleum Institute and released in March, predicted that diesel costs could spike 300 percent, gasoline prices could climb 30 percent and American workers could see a $580 billion drop in take-home pay.

Bob Greco, the institute's downstream group director, said the renewable mandate is unworkable, and that it will lead to "severe economic harm to consumers and the economy" if refiners hit the blend wall.

The EPA, which is still drafting proposed renewable fuel quotas for 2014, has 90 days to respond to the 129-page waiver request. The agency said it will review the request.

Biofuels boosters said the oil industry just wants to protect its turf.

"Renewable fuel provides American consumers savings at the pump, increases national security, and provides environmental benefits -- but, for Big Oil, it means cutting into their recording-setting profits," said the advocacy group Fuels America. "Instead of using this time to invest in the inexpensive infrastructure needed to allow our nation to overcome a surmountable blend wall, Big Oil has chosen to double down on lobbying and PR stunts, prioritizing its market share over the American consumer."

Created by Congress

Created by Congress in 2005 and updated by lawmakers two years later, the renewable fuel standard requires refiners to incorporate increasing amounts of renewable fuels (typically corn-based ethanol) and advanced biofuels, including cellulosic ethanol made from non-edible plant parts.

The statute would require 36 billion gallons of renewable fuel in 2022, with 15 billion gallons coming in the form of corn-based ethanol.

The renewable fuel standard was envisioned as a way to help wean the U.S. off foreign oil and encourage the development of cleaner-burning biofuels as American gasoline demand climbed. But eight years later, more fuel-efficient cars are on American roads, keeping U.S. gasoline demand flat, even as the law's renewable fuel requirements rise annually.

Oil industry leaders contend the market for ethanol is limited, whether it is derived from corn, sugarcane or other materials. Some automakers warn that using a 15 percent ethanol blend called E15 will void vehicle warranties, even for cars and trucks made since 2001, for which the EPA has approved the product's use. And relatively few filling stations offer E15 to motorists.

The groups haven't given up their fight against the newly finalized 2013 quotas, which they cast as unrealistic. The EPA lowered the cellulosic biofuel target to 6 million gallons, down from 14 million gallons proposed earlier this year, but it is unclear whether even that much will be produced this year from new factories just now coming online.

Greco said the groups are weighing their options, which could include challenging the 2013 targets in court.

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(c)2013 the Houston Chronicle

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Source: Copyright Houston_Chronicl 2013


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