US Congress launches a review of Renewable Fuel Standard

22 March 2013

The US House Energy and Commerce Committee launched a bipartisan review of the Renewable Fuels Standard (RFS). The Committee issued a white paper titled Blend Wall / Fuel Compatibility Issues. It is the first of a planned series of white papers that will examine a number of issues emerging with the current system and solicit input from interested stakeholders. Energy and Commerce Committee Chairman Fred Upton (R-MI), Ranking Member Henry A. Waxman (D-CA), and other members of the committee are leading the effort to review the law and its implementation.

“It has been more than five years since the RFS was last revised, and we now have a wealth of actual implementation experience with it,” the white paper explains. “In some respects, the RFS has unfolded as expected, but in others it has not. Several implementation challenges have emerged that received little if any consideration prior to passage of the Energy Independence and Security Act of 2007. Furthermore, the overall energy landscape has changed since 2007. It is time to undertake an assessment of the RFS.”

The first white paper addresses the so-called “blend wall”, the point at which adding the required volume of ethanol to gasoline supplies would result in ethanol blends that exceed 10%, which is the maximum ethanol content approved for sale for use in all vehicles. As gasoline demand has declined in recent years, and ethanol targets have continued to rise, the blend wall is approaching much faster than anticipated. The required volumes of ethanol as set by the RFS must now be added to a smaller-than-expected pool of gasoline, and many experts predict the 10% blend wall may be reached as soon as this year.

The approaching blend wall raises a number of issues for producers, refiners, auto manufacturers, and fuel retailers. The white paper examines these issues and poses a number of questions for discussion:

1. To what extent was the blend wall anticipated in the debate over the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007?
2. What are the benefits and risks of expanded use of E-15 to automakers, other gasoline powered equipment makers, refiners, fuel retailers, and others involved in the manufacture and sale of gasoline and gasoline-using equipment?
3. What are the risks of the introduction and sale of E-15 to the owners of pre-2001 motor vehicles, boats, motorcycles, and other gasoline-powered equipment not approved to use it? Are there risks to owners of post-2001 vehicles? How do these risks compare to the benefits of the RFS?
4. What is the likely impact, if any, of the blend wall on retail gasoline prices?
5. What is the timing of the implementation challenges related to the blend wall? Will some entities face difficulties earlier than others?
6. Could the blend wall be delayed or prevented with increased use of E-85 in flexible fuel vehicles? What are the impediments to increased E-85 use? Are there policies that can overcome these impediments?
7. Is E-15 misfueling unavoidable? Are there lessons from the labeling and dispensing of diesel, E-85 and other fuels that prevent their misfueling that can also be applied to E-15? What specific actions are companies taking to address potential misfueling concerns under MMPs?
8. Can blend wall implementation challenges be avoided without changes to the RFS? Is the existing EPA waiver process sufficient to address any concerns? If the RFS must be changed to avoid the blend wall, what should these changes entail? Should any changes include liability relief or additional consumer protections for addressing misfueling concerns?
9. Have the 2017 and Later Model Years Light Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy standards for cars and light trucks changed the implementation outlook of the RFS?
10. What other methods, including the use of drop-in fuels, are available to industry to ease the challenge posed by the blend wall?
11. What are the impacts on renewable fuel producers if the RFS is changed to avoid the blend wall?

The Committee is requesting interested stakeholders to send responses to these questions by April 5, 2013.

The issue of the blend wall and its potential effects to the US economy was recently raised by the petroleum industry. Considering the rapidly increasing shale oil production in the United States and Canada—with North America believed to be heading for energy independence within 10-20 years—the energy security considerations that were underlying the adoption of the RFS regulations seem to be less relevant today. Finally, an increasing body of science indicates that the global environmental effects of biofuels are likely accelerating greenhouse gas emissions and the climate change, rather than controlling it, and that biofuels may not be a viable energy source for modern economies.

These concerns have also been recognized by the European Union, who recently proposed to effectively freeze its ambitious biofuel program at the current levels.

Source: Energy and Commerce Committee