US refiners ask regulator to dump ethanol mandate for 3 years

22 March 2013 18:26  [Source: ICIS news]

WASHINGTON (ICIS)--The US refining industry on Friday asked that the Environmental Protection Agency (EPA) waive its ethanol use mandate for three years until Congress can remedy what refiners call unrealistic federal biofuel requirements.

Charlie Drevna, president of the American Fuel & Petrochemical Manufacturers (AFPM), told a press conference that recent sharp increases in ethanol proof-of-purchase credits is evidence that federally mandated biofuel consumption levels are unworkable.

In a programme that has become notorious for fraud, under the renewable fuel standard (RFS), the EPA established a system of tradable renewable identification numbers (RINs) that refiners and fuel blenders must obtain as proof that they are using certain volumes of biofuels in their energy products.

Every gallon of biofuel manufactured is assigned a RIN, and refiners obtain those numbers on purchase of biofuel supplies. After purchase, RINs can be traded on an EPA-provided website.

To comply with the EPA mandate, refiners can either buy ethanol or purchase RINs on the trading site.

But Drevna charged that the spike in RINs prices from 7 cents/gal to $1.16/gal in recent weeks is evidence that refiners and blenders are being forced to buy RINs in excess because the amount of gasoline being consumed is not enough to absorb the volumes of ethanol mandated by the EPA.

As a consequence, he said, refiners are incurring an additional cost of about 10 cents/gal of gasoline.

He said that refiners do not want to add more ethanol to their gasolines beyond the 10% ethanol-to-gasoline blend ratio, known as E-10, for fear that they will be liable for possible damage to engines and other systems in vehicles that cannot use the higher E-15 blend.

The EPA has mandated that refiners and blenders should use 16.5bn gal (62.5bn litres) of ethanol this year, but Drevna said that to consume that much, refiners would have to break the 10% blend wall and consequently face liability.

The rising costs of RINs, he said, eventually would be passed on to consumers.

Drevna cited multiple studies and pending legislation in Congress that would revise the RFS biofuel mandates, but he said that until Congress can act, the EPA should move to protect consumers from mandate-driven increases in gasoline prices.

“In the near term, EPA should ensure that there are no significant consumer or fuel supply impacts” because of the ethanol mandate, he said.

The Renewable Fuels Association (RFA) in turn charges that refiners are voluntarily bidding up the price of RINs “to avoid the alternative of adding more ethanol to gasoline”.

RFA, the leading biofuels industry trade group, noted that the EPA has approved E-15 blends for all autos manufactured in 2001 and later.

But Drevna said EPA’s testing of E-15 in late-model cars was flawed and that automobile manufacturers have refused to honour vehicle warranties even for 2001 and later cars if owners use blends higher than E-10.

He also cited a recent federal court ruling that required EPA to match its RFS mandate for cellulosic ethanol consumption to the amount of that fuel that is actually available in the market rather than the agency’s “aspirational” fuel goals.

“EPA should apply the same standard as the court has directed in cellulosic ethanol,” Drevna said.  “EPA should marry the ethanol mandate to the actual gasoline supply.”

He indicated that the AFPM might file a formal petition with the EPA to request an immediate waiver of the 2013 ethanol mandate.

($1 = €0.77)

By: Joe Kamalick
+1 713 525 2653

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