Lawsuits likely as EPA declares US ethanol blend wall a "reality"
With two words, the U.S. environment regulator may be handing oil refiners the biggest win of a long battle to beat back the seemingly inexorable rise of ethanol fuel.
In a leaked proposal that would significantly scale back biofuel blending requirements next year, the U.S. Environmental Protection Agency (EPA) says the blend wall - the 10 percent threshold of ethanol-mixed gasoline that is at the crux of the lobbying war - is an "important reality."
The agency's rationale for a cut in the volume of ethanol that must be blended echoes an argument the oil industry has been making for months: the U.S. fuel chain cannot absorb more ethanol.
Few retailers are able to sell ethanol blends beyond the 10 percent maximum, or willing to take the legal risk that comes with it, they argue.
The words will cut deep for proponents of biofuels. They have argued for years that the blend wall is largely a fiction constructed by an oil industry that doesn't want to cede any more share of a shrinking U.S. gasoline market.
If approved, the proposed cut in the biofuel mandate in 2014 to 15.21 billion gallons from 18.15 billion would mark an historic retreat from the ambitious 2007 Renewable Fuel Standard (RFS) law that charted a path toward ever-greater use of clean, home-grown fuel, which the biofuel industry counts on to underpin bank loans and new factories.
Even though the EPA proposal has not been publicly released or approved by the White House, both sides are gearing up to shift the fight over the future of the country's fuel supply to a new venue: the courts.
This week two U.S. oil industry groups sued the EPA over its 2013 biofuel targets. On Thursday, their opponents appeared to signal a likely challenge to the 2014 rule.
"Let me be clear: any plan to roll back the targets ... under the guise of addressing the blend wall would be patently unlawful," said Bob Dinneen, president of the Renewable Fuels Association, an industry group.
The EPA's proposal puts ethanol proponents in a tough spot.
The Renewable Fuels Association has previously argued that Congress need not amend the 2007 law because the EPA has enough flexibility under the law to make changes to reflect market realities. The agency is now exercising some of that discretion - but certainly not as proponents would like.
The law has run up against an unexpected reversal in U.S. gasoline use, an emboldened oil industry saddled with soaring ethanol credit costs, and differences over what kind of fuel can be safely used in today's cars.