EPA's 2017 RFS Proposal Takes Small Steps To Move Beyond The Blend Wall

  • Thursday, 19 May 2016 13:58

The U.S Environmental Protection Agency (EPA) yesterday proposed to set the 2017 renewable volume obligation (RVO) for corn ethanol at 14.8 billion gallons. While the EPA’s proposal is a step in the right direction, the level proposed for 2017 (and 2016) is still below the 15 billion gallons Congress stipulated under the Renewable Fuel Standard (RFS).

Nonetheless, the EPA’s target for 2017 and 2016 does move us past the oil industry’s fictional 10 percent blend wall in small increments.  

That we are only making incremental steps now (the EPA states ethanol will comprise 10.44 percent of transportation fuel in 2017 as a result of its proposal) is a result of the EPA’s refusal to stick to the RVOs stipulated by Congress nine years ago.

Indeed, E15 availability and consumption would be far higher today had the EPA enforced the RVOs in the RFS from the start and particularly following the agency’s approved use of E15 in vehicles manufactured after 2000.

Still, the EPA’s target for 2017 may finally force the oil industry to comply with the goals set in the RFS. That is because the EPA’s targets for 2016 and 2017 can only be met if there is significant growth in E15 consumption and that, in turn, is only achievable if the oil industry gets on board with E15.

Why? According to publicly available RIN data, a total of 3.6 billion gallons of ethanol was produced in the first quarter of 2016, of which 249.4 million gallons were exported. That leaves domestic consumption at an annualized volume of 13.41 billion gallons, well below the 14.5 billion gallons target for 2016 set by the EPA.

Still, the scenario above is only based on the first quarter and is certainly not an accurate reflection of how consumption would trend for the rest of the year.

The Energy Information Administration (EIA) expects ethanol consumption to be 14.2 billion gallons this year and 2017. While significantly higher than the annualized scenario above, the EIA’s projections are still lower than the EPA’s RVO targets for both 2016 and 2017.

As such, the oil industry can no longer set the blending threshold at 10 percent nor can it continue to buy its way out of compliance. It has to begin offering E15. 

Implementation of the USDA’s Biofuel Infrastructure Partnership (BIP) program, which will add 5,000 E15 pumps across the nation, also has to be accelerated.

Lastly, if the EPA is serious about achieving its targets, it needs to extend the Reid Vapor Pressure (RVP) waiver to E15 immediately so that E15 can be sold all year long.