EnergyFactor By ExxonMobil | Pespectives has a new home

Two steps forward, one back on Renewable Fuel Standard

Earlier this week, the federal government closed the period for providing comments about finalizing its 2014, 2015, and 2016 Renewable Fuel Standard (RFS) program volumes.

Before I go any further, I understand that sentence probably has some readers scratching their heads. After all, 2014 has come and gone. The amount of ethanol that refiners needed to include in gasoline last year – otherwise known as the RFS program volumes – should already be history and not a matter still unresolved.

Meanwhile, the 2015 volumes were supposed to have been finalized last fall in order to give everyone plenty of time to plan how they would comply over the course of this year. Turns out the rules for 2015 will not be officially set until this November – a full year behind schedule and, obviously, well into the year in question.

The Environmental Protection Agency apologized back in February for failing to meet its legal deadlines. But the agency does appear to be making progress now in straightening out the situation, and hopefully it will get the entire system on track moving forward.

EPA_ETA_07-2015ExxonMobil and the rest of the petroleum industry have strong feelings about the Renewable Fuel Standard. No surprise there, as these complex regulations legally obligate us to buy someone else’s product and blend it into the motor fuels we manufacture to sell to consumers.

I’ve detailed on many occasions why this is a bad program. And I am not alone in thinking this – few issues have amassed such a broad consensus across the political and ideological spectrum as the idea that the RFS is a mistake. According to a brand new poll, “voters across party lines oppose requiring increasing amounts of corn ethanol be blended in gasoline.”

The RFS should be scrapped or, at the very least, reformed.

A few small steps that could be taken in the direction of meaningful reform were spelled out in the comments jointly submitted Monday by two of our key industry trade groups, the American Petroleum Institute and American Fuels & Petrochemical Manufacturers. ExxonMobil followed up with comments supporting API and AFPM’s positions.

The message is simple: The EPA should limit its ethanol mandates to no more than 9.7 percent of total U.S. gasoline demand.

That would ensure that the gasoline sold at service stations across America does not pose any threat to the tens of millions of automobile engines that are not warranted by car manufacturers to handle gasoline with more than 10 percent ethanol. Put another way, according to AAA, 90 percent of the vehicles in the U.S. fleet are still not compatible with E15.

This is critical because EPA is pushing the use of higher ethanol blends like E15 and E85. As an API official noted during a press call yesterday, these higher blends “are not compatible with most cars on the road today, and they could potentially put American consumers and their vehicles at risk.”

The EPA should be commended for using its waiver authority to override the nonsensical ethanol volumes initially set for 2014 and 2015 in the 2007 Energy Independence and Security Act. That law set volumes based on what Congress at the time assumed gasoline demand would be in the future – guesses that wildly overshot the amounts consumers actually use today.

But while EPA’s proposed ethanol volumes get it right for 2014 and 2015, its proposal for 2016 does not. The volumes proposed for next year would likely bust the E10 blend wall, so to speak, potentially creating headaches not just for refiners, but for motorists and other consumers as well.

It would be a shame if EPA applied common sense to its 2014 and 2015 volumes – albeit extraordinarily late – but then abandoned the logic for 2016. If our experience with the RFS has taught us anything, it’s that you can’t wish something into existence merely by passing a law.

Let’s hope regulators take API’s, AFPM’s, and ExxonMobil’s comments to heart – along with a healthy recognition of economic realism – when issuing their 2016 final volumes come November.



  • Worth a deeper look...