EPA cutting alternative fuels goal in bow to market reality

The Environmental Protection Agency bowed Tuesday to the limits of the U.S. market’s ability to work renewable fuels into the nation’s energy mix, disclosing it will set 2014 production goals for alternative motor fuels that are below the target set by law.

The agency said it has no plans to abandon the mandate to increase the use of biofuels as some oil industry critics have suggested, but its plan for reduced targets next year was a tacit acknowledgment the market is not ready yet to handle the production volumes for ethanol and other alternative fuels envisioned by Congress.

The EPA “does not currently foresee a scenario in which the market could consume enough ethanol” to meet the 2014 requirements set forth in the law, the agency said in a fact sheet that accompanied Tuesday’s announcement.

The decision was mixed news for both oil industry groups that oppose the renewable fuels standard, known as the RFS, and biofuel backers, which have argued the more ambitious targets could be met through higher blends of ethanol in gasoline that EPA has approved but which gas stations have yet to adopt.

EPA officials did not say how much they would seek to reduce the law’s 2014 target of 18.15 billion gallons of biofuels use in transportation fuels. They will unveil a proposal later this year for comment.

The EPA said it was responding to rising concerns about the market’s inability to absorb more corn-based ethanol at the common 10 percent blend, or “E10.”

The EPA said it would use its authority under the law to adjust biofuels requirements.

For this year, EPA kept the law’s 2013 combined mandate of 16.55 billion gallons in place, but made two smaller changes.

It lowered the requirement for cellulosic biofuels from non-corn feedstocks to 6 million gallons from a proposed 14 million gallons, in response to a court ruling that mandated it rely only on expected output from producers.

EPA also extended the 2013 compliance period by four additional months, through June 2014, to give refiners and importers more time to prepare for the following year.

Biofuels groups applauded the agency’s decision not to lower this year’s target, while opponents and critics said the EPA had heard their complaints that the renewable fuels mandate of 36 billion gallons of biofuels use by 2022 was becoming impractical.

Renewable Fuels Association President Bob Dinneen said the reduction in the revised mandate showed EPA had the power to make the standard workable. “As in years past, the finalized annual requirements are a testament to the inherent flexibility that is the backbone of the RFS,” he said.

Advanced Biofuels Association President Mike McAdams said the EPA had effectively rejected oil industry claims that it was being forced to buy compliance credits for cellulosic fuels that were not being produced. “Today’s announcement of 6 million gallons of cellulosic fuels should put to an end the argument that refiners are being taxed to pay for phantom fuels,” he said.

Oil groups called for EPA to substantially lower the 2014 target to less than 10 percent of total gasoline consumption, and for Congress to repeal the standard

American Petroleum Institute President Jack Gerard called the final 2013 rule a “missed opportunity” for the EPA to agree to waive the RFS this year. He said Congress should act on bills industry groups support that would end the renewable fuels standard altogether.

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