Government Cuts Biofuel Targets

Amid heavy lobbying from the petroleum industry and manufacturers of biofuels, the Environmental Protection Agency has proposed lowering production targets for biofuels in the U.S. fuel mix—the agency’s first reversal since a biofuel mandate was passed in 2007.

EPA is proposing to require fuel blenders to use 15.21 billion gal of renewable fuel in 2014. This is lower than the original target of 18.15 billion gal set in the Energy Independence & Security Act of 2007, the law that established the renewable fuel standard. It’s also lower than this year’s target of 16.55 billion gal.

The 2007 law was intended to drive development of U.S. produced motor fuels made from renewable domestic feedstocks. The new biofuel sources were to make the U.S. more energy independent as well as lower greenhouse gas emissions from oil and other fossil fuel sources of energy. Although corn-based ethanol production has exceeded production expectations, advanced biofuels made from cellulosic biomass have been slow to reach commercialization. The first cellulosic ethanol facilities are expected to begin production in 2014.

The EPA proposal of 15.21 billion gal of biofuel would be made up of 13.01 billion gal of conventional, or corn-based, ethanol and 2.20 billion gal of advanced biofuels not made from corn sugar. Biodiesel made from soybeans, used cooking oil, and other fats would contribute 1.28 billion gal to the advanced biofuels category. Notably, EPA expects only 17 million gal of cellulosic biofuels to enter the fuel supply in 2014, compared with 1.75 billion gal called for in the 2007 law.

Production of corn-based ethanol has steadily increased since 2007, but consumption of gasoline in the U.S. has slightly declined because of advances in vehicle fuel efficiency and a general economic slowdown. EPA notes that nearly all gasoline sold in the U.S. is now 10% ethanol, and to continue to use increasing amounts of biofuels, vehicles must accept higher ethanol blends. In 2010, EPA approved the use of a 15% ethanol-gasoline blend for vehicles newer than model year 2001 over strong objection from the petroleum industry, which has opposed the renewable fuels standard.

The so-called blend wall is a major reason that groups such as the American Petroleum Institute (API), a trade group representing oil firms, called for a dramatic lowering of the targets. The new EPA proposal would attempt to temporarily stall this conflict by lowering the government’s ethanol target while seeking comments.

However, API says the reductions are not enough. “Ultimately, Congress must protect consumers by repealing this outdated and unworkable program once and for all,” API President Jack Gerard says.

Meanwhile, backers of the U.S. biofuel industry say EPA should not sacrifice the biofuel targets because of concerns about the blend wall. They say there is plenty of room for ethanol in the fuel supply, and uncertainty over targets will hamper investments in advanced biofuels.

“The current proposal would have the effect of closing the market to renewable fuels and undermining the investment community’s confidence in the program, starving advanced biofuel and biotech companies of the capital they need,” says Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial & Environmental Section. BIO is a trade group that represents biofuel manufacturers.

The proposal begins a 60-day comment period, and EPA plans to finalize the standard in the spring of next year.