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API: EPA proposal recognizes blend wall limitations

To listen to Brandon’s Money Matters report on the American Petroleum Institute’s reaction to the EPA proposal lowering RFS requirements in 2014, click here.

Director of Downstream Operations with the American Petroleum Institute Bob Greco says the EPA proposal to lower renewables production in 2014 by 16% from the original mandate is recognition of the limitations of the ethanol blend wall.

The new numbers would lower production to just 15.21 billion gallons, which is 9.2% of total projected fuel use. Originally the amount produced in 2014 was set at 18.15 billion gallons, or 10.97% of all fuel used.

“We continue to be concerned that EPA probably should have gone slightly lower to provide a little more breathing room and a little more flexibility in compliance,” he says, “but in general the acknowledgement of the blend wall, I think, is an important first step. And it does still also recognize that biofuels are an important part of our energy mix – they will remain that, going forward – but EPA’s latest proposal does acknowledge that there are limitations to how much can be blended.”

If the blend wall had been breached, Greco says most cars would have been affected. Market over-saturation of ethanol would have forced fuel into the market without demand for it, or could damage engines, and Greco adds that the blend wall will continue to be an issue until manufacturers are on-board with higher ethanol blends.

“You have to look at what fuels the vehicles and small engines on the road are designed to run on,” says Greco. “95% of those vehicles and 100% of small engines – you know, weed whackers, snowmobiles, marine engines – are designed to run on a maximum of 10% [ethanol] blend.”

According to Greco, API finds the RFS fundamentally flawed. The fact that EPA even needs to change the RFS, Greco says, demonstrates problems with the mandate. But he says EPA’s tardiness in announcing those changes also makes it difficult for refiners to plan compliance. In 2012, Greco says the requirements for this year weren’t finalized until August, which left the industry in the dark for 8 months.