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Renewable Fuel Standard (RFS)

THE ISSUE: Renewable Fuel Standard (RFS)

BACKGROUND: In 2007, Congress passed the Energy Independence and Security Act (EISA ‘07), which required increases in the volume of biofuels that refiners and others (called “obligated parties”) must blend into the nation’s fuel supply. This mandate organizes biofuels into four separate categories based on their greenhouse gas emissions. It also requires obligated parties to use renewable identification numbers (RINs) to demonstrate compliance with the standard. RINs are generated when biofuels are blended with gasoline and diesel transportation fuels, and can be used to demonstrate compliance with the mandate or traded independently.

Congress based EISA ‘07 volumetric requirements on projected growing demand for transportation fuels. However, the government’s fuel demand estimates did not accurately predict the significant decrease in demand that resulted from reduced economic growth and increased Corporate Average Fuel Efficiency standards. It’s also worth noting that ethanol is less fuel-efficient than petroleum transportation fuels. This means the mandated increase in fuel efficiency conflicts with the mandate to blend more of the less-efficient biofuel.  The unintended consequence of the biofuels mandate is that the refining industry is burdened with an inflexible requirement to add more and more corn ethanol to a gasoline pool that has been steadily in decline.

In November 2013, the EPA acknowledged that the volumes of biofuel mandated under EISA ’07 might exceed the 10 percent per gallon of ethanol that can be safely absorbed by the vehicle fleet in the U.S. This limit is called the “E-10 blendwall.” As a result, the EPA proposed reduced mandated biofuels volumes. As of June 2014, that proposal was still not finalized.

In addition to the E-10 blendwall, another RFS problem is that three of the four types of biofuels (corn ethanol, biodiesel and sugar cane ethanol) are commercially available, while one of them (cellulosic ethanol) is still not available in commercial quantities. Nonetheless, the EPA, which is responsible for enforcing the law, continues to require obligated parties to blend volumes of cellulosic ethanol that do not exist.  Obligated parties – including MPC – face onerous fines under the Clean Air Act if they fail to blend the required volumes of total biofuels, or pay a fee as an alternative means of compliance for the cellulosic volumes.

MPC’S POSITION: We advocate repeal of the RFS.

WHY WE TOOK THIS POSITION: Despite the mandate reductions proposed by the EPA, which would apply only to 2014, the RFS provisions in EISA ’07 are simply unworkable. In order to satisfy the demands of the Clean Air Act, the EPA requires MPC – and other obligated parties – to force more corn ethanol biofuel into gasoline transportation fuel than the vehicle fleet can safely absorb, and to blend cellulosic biofuels that do not exist. And we face significant fines if we do not comply with these requirements.