Lawsuits likely as EPA declares US ethanol blend wall a "reality"
The White House Office of Management and Budget (OMB) must sign off on the EPA's rules before they are released for public comment. It is expected to do so only after the end of the partial government shutdown.
Lawmakers Coming Along
The EPA also said its proposal set out a "durable methodology that could be used in 2015 and beyond to reduce market uncertainty", by using industry estimates and Monte Carlo options analysis to estimate usable supply.
That may be an acknowledgement that the original law, as written, could cause more problems.
The RFS was based on an assumption that gasoline demand would continue to rise, allowing the volume of biofuel to grow even if the overall share did not.
Instead, the severe recession and rising vehicle fuel efficiency led to a sharp drop in gasoline demand: 133 billion gallons are now projected to be consumed in 2014, according to the Energy Information Administration (EIA), down from an estimate in 2007 of 154 billion.
The fall in demand means that the larger volumes of ethanol embedded in the 2007 law are being crammed into a shrinking gasoline pool, rapidly expanding its share.
Lawmakers are attempting to craft amendments to the law. The House Energy and Commerce Committee is weighing a proposal to cap the ethanol requirement at below 10 percent for two or three years, according to a person close to the committee.
The proposal, which is not yet finalized, would give the industry time to study the use of higher ethanol blends during that time and then raise the target above 10 percent, according to this source.
"Things are moving, and they're not moving in the direction that 'big corn' would like them to be moving," said Stephen Brown, vice president of federal government affairs for refiner Tesoro Corp. in Washington D.C.
"So, it's really starting to become a question of 'when' the thing gets changed, not 'if'," Brown said.