An Obama administration proposal in May to cut quotas for renewable fuels led to a rout in ethanol credits and handcuffed the industry’s growth, biofuel groups said.
EPA proposed that refiners blend 13.4 billion gallons of ethanol with gasoline this year and 14 billion next year, less than the 15 billion called for under a 2007 energy law. That’s led to a 43% plunge in the value of credits used to track refiner compliance with the mandate.
Refiners get one credit, known as a Renewable Identification Number, for each gallon of ethanol they mix with gasoline. EPA’s proposal reduced the amount of ethanol needed to comply, even as a memo from the agency shows that prices for the RINs don’t raise retail gasoline costs, according to executives from the biofuel lobby.
“It’s really bewildering here for the administration to say there’s no impact,” Tom Buis, CEO of Growth Energy, an ethanol industry trade group, said on a conference call with reporters. “But they’re fundamentally changing the goals of the [Renewable Fuel Standard]. They’re ignoring the tsunami of credits they’re creating.”
An EPA memo written May 14, studying 2013’s increase in RIN prices, shows that the ethanol credits don’t raise retail gasoline prices and therefore the agency shouldn’t have relented on the targets, industry advocates said.
“The RIN market seems to be functioning generally as expected, providing an incentive for the continued growth of renewable fuels in the transportation fuel market without causing overall increases to the retail price of gasoline,” EPA’s Dallas Burkholder wrote in the memo.
Ethanol accounts for 10% of the U.S. gasoline market, and the biofuel industry is pushing for more. Petroleum interests have opposed increases in ethanol content, saying that higher blends subject them to liability risks and that the previous volume targets raised fuel prices.
EPA’s memo shows that increasing ethanol mandates under the law “could increase the cost of transportation fuels and ultimately lead to significant economic harm,” Carlton Carroll, a spokesman for the American Petroleum Institute, said by e-mail.
The United States will consume 138.7 billion gallons of gasoline and produce 14.4 billion gallons of ethanol, the Energy Information Administration forecasts.
Refiners will have excess RINs and be able to use those to comply with next year’s mandate instead of blending more gallons of ethanol, Geoff Cooper, senior vice president of the Renewable Fuels Association, said. He said EPA’s proposal has “disemboweled” the RINs market.
