"The premise and structure of the RFS were based on many assumptions that aren't realistic with current market conditions," Vitter said. "The EPA has finally realized that there is a major problem with the RFS - the ethanol blend wall - but punted on fixing the problem this year. A combination of the recession and the 2011 fuel economy standards has lowered the demand for gasoline in the U.S. The combination of rising ethanol mandates and declining gasoline consumption has exacerbated the point at which the gasoline supply is saturated with the maximum amount of ethanol that current vehicles, engines, and infrastructure can safely accommodate. This is exactly why the Administration needs to use its authority to waive the 2014 volumes."
The final rule for 2013 reduced the cellulosic biofuel volumes from 14 million gallons, as proposed, to 6 million gallons while maintaining the applicable volumes for advanced biofuel, 2.75 billion gallons and for total renewable fuel, 16.55 billion gallons.
The ethanol blendwall - the limit on the amount of ethanol that may be blended into the gasoline supply - has become an issue. This year the U.S. will consume approximately 133 billion gallons of gasoline. At 10 percent of gasoline demand, the blendwall occurs at 13.3 billion gallons even as the corn ethanol mandate rises from 13.8 billion gallons in 2013 to 14.4 billion in 2014. Recently, the increase in the price of ethanol Renewable Identification Numbers (RINs) reached record highs of $1.40 or more. Today's action by EPA does not address the E10 blendwall.
Recognizing that EPA may decide to stay the course for 2013, last week, U.S. Sens. Vitter, Mark Pryor (D-Ark.), and James Inhofe (R-Okla.) sent a letter to President Obama asking for the Administration to waive the 2014 volumes below 10 percent while Congress examines long-term policy solutions for the outdated and increasingly burdensome RFS. Click here to read the letter.
In today's final rule, EPA acknowledged that there are constraints in the market's ability to consume renewable fuels at the volumes required in future years.