API asks for EPA action on blend wall

Jul 19, 2013

The American Petroleum Institute (API) ratcheted up pressure on federal officials Monday to repeal the Renewable Fuel Standard (RFS) and announced a national advertising campaign designed to build support for repeal of the RFS. The group’s actions come at a time when the ethanol industry has hit the so-called blend wall—where total production exceeds the size of the market, which is primarily 10 percent of the total gasoline pool.

An API official told reporters during a conference call that oil industry officials are pressing on the U.S. Environmental Protection Agency (EPA) and the Office of Management and Budget to scale back the RFS to under 10 percent to “soften the blend wall” for 2013.

API also is asking EPA to waive the cellulosic ethanol mandate for 2013 because of a lack of available fuel stocks to meet RFS requirements for blending. So far, EPA has not announced 2013 ethanol RFS volumes.

Repealing the RFS would end what has been a successful economic development tool for rural America that has led to higher prices for corn and higher farm incomes. The RFS requires a certain volume of biofuels to be blended in gasoline and creates a broader market for corn.

Bob Greco, group director of downstream and industry operations for API, said as RFS-mandated volumes increase, the challenge for blenders to meet the mandates increases.

“This will lead refiners to decrease fuel production or to export more fuel, because exports are not required to have ethanol,” he said. As a result, Greco said, consumers will continue to see a rise in prices at the pump.

In addition, he said allowing higher ethanol blends above 10 percent such as E15, something that will be necessary to meet the RFS long-term, would damage vehicles and lead to the voiding of vehicle warranties.

This has been a point of debate between the ethanol and oil industries since EPA granted a partial E15 waiver for vehicles 2001 and newer.

“Our member companies support renewable fuels,” Greco said, “and ethanol and others will continue to be blended when the RFS is repealed. However, we cannot allow ever-increasing volumes of biofuels to continue.”

Legislation chances

Greco was not willing to handicap the chances of passing permanent repeal in both chambers of Congress and then have a bill signed by the president.

API has hope that companion bills in the House and Senate, introduced by Rep. Bob Goodlatte, R-VA, and Sen. John Barrasso, R-WY, will be the vehicle to repeal.

API announced a national advertising campaign on radio, television and in print.

The television spot shows a mechanic lying under a vehicle talking about the need to repeal the RFS, although he says the measure is good for his business.

In addition, API launched a new website, http://filluponfacts.com. It offers information about the RFS and API’s stated reasons for repeal.

“Companies are spending hundreds of millions of dollars in RINS (renewable identification numbers) to avoid the blend wall,” Greco said. Blenders can purchase RINS from companies that have purchased renewable fuels as a way to meet blending obligations in the RFS.

Repeal of the RFS makes sense, he said, because times have changed since the law was passed.

“We no longer have rising gasoline demand,” Greco said. “We no longer depend on imports. It’s a different world than it was when the RFS passed.”

Ethanol reaction

Bob Dinneen, president and chief executive officer of the Renewable Fuels Association, said in a statement that the oil industry is on a mission to scare consumers.

“Big oil’s latest campaign is nothing more than an oil slick of misleading scare tactics,” he said.

“What does it say about an industry so desperate to protect its monopoly that it distorts reality in a feeble effort to hoodwink consumers? API is intentionally confusing a debate about E15 with the Renewable Fuels Standard, an important policy that is reducing our dependence on imported oil while saving consumers money at the pump. E15 is not mandated. E15 is a cost-saving, environment-protecting, oil addiction-breaking fuel alternative. E15 is a choice and American consumers are in the driver’s seat.”

Tom Buis, chief executive officer of Growth Energy, said in a statement that API’s new campaign is nothing new.

“This is just more of the same from big oil,” he said. “They will stop at nothing to maintain their near monopoly on the liquid fuels market, even if it means saddling consumers with ever-increasing prices at the pump.

This is nothing more than a diversion from what is really on motorists’ minds.

“Notice how this ‘new campaign’ comes on the heels of a gas price increase of 3.2 cents last Friday, the largest one-day spike in five months, and predictions from AAA of another expected increase of 10 to 15 cents in the coming days.”

Also on Monday, Growth Energy submitted comments to EPA in support of the RFS. In part, the group said, “The RFS has been the country’s most successful energy policy over the last 40 years.

“Since the inception of the RFS, Growth Energy’s members and the ethanol industry have produced significant volumes of renewable fuel that have displaced 10 percent of U.S. transportation fuel, which has substantially helped reduce our dangerous dependence on foreign oil, improve our air quality, create thousands of jobs and revitalize rural communities nationwide.”

The House Energy and Commerce Committee plans to hold a hearing on the RFS this week, according to the Oil Price Information Service, or OPIS. — Todd Neeley, DTN