RFS Reform Debated

13 Sep 2016

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- An official with the American Petroleum Institute on Tuesday said the group is against changing the point of obligation for the Renewable Fuel Standard from blenders to the fuel rack. Supporters of the change say it could save costs on implementing the program and to consumers at the pump.

In August, the American Fuel and Petrochemical Manufacturers petitioned the U.S. Environmental Protection Agency to move the point of obligation for the use of biofuels from gasoline blenders to owners of the fuel at the rack who pay excise taxes on the fuel. The rack price is the price refiners charge to sell their gasoline to various clients.

API Downstream Group Director Frank Macchiarola said Tuesday there is no reason to change the point of obligation or to make any other similar reforms.

"We need fundamental change to the RFS, and moving the point of obligation adds complexity to an already broken program and undermines efforts at real reform," he said during a news conference.

"Nearly 90% of vehicles on the road today were not designed for higher ethanol blends, such as E15. And many automakers say that using E15 could void car warranties. Higher ethanol blends threaten engines and fuel systems -- potentially forcing drivers to pay for costly repairs, according to extensive testing done by the auto and oil and natural gas industries. Moving the point of obligation does nothing to address this fuel incompatibility problem."

Macchiarola said his group continues to build "momentum" for RFS reform and has thrown its support behind bipartisan legislation introduced by Bill Flores, R-Texas; Peter Welch, D-Vt.; Bob Goodlatte, R-Va.; and Jim Costa, D-Calif., to limit the growth of the RFS to 9.7% of projected gasoline demand.

At this point, more than 100 members of the U.S. House of Representatives support the bill. Macchiarola said there is hope the API can generate similar interest in reform on the Senate side.

"This has us looking at our strategy," he said. "On point of obligation, we don't think there should be a point of obligation at all. We don't think there should be a program at all."

Emily Skor, chief executive officer of Growth Energy, said her group is against reforming the RFS at all.

"This conversation is about competition among oil companies, not finding ways to embrace advanced biofuels," she said in a statement.

"Shifting the point of obligation would only interrupt America's progress toward making clean, renewable biofuels available to consumers. The RFS is working as designed and industry participants are taking advantage of the opportunity and incentives to offer higher ethanol blends," Skor said. "Attempts to rewrite the RFS would only yield higher consumer costs, new burdens on small businesses, and fewer renewable options at the pump."

GOVERNORS SEEK EPA'S HELP TO EXPAND E15 MARKET

Also on Tuesday, eight Midwest governors asked the U.S. Environmental Protection Agency to do more to expand markets for E15, in a letter to EPA Administrator Gina McCarthy.

The letter is signed by Iowa Republican Gov. Terry Branstad; Gov. Mark Dayton, D-Minn.; Gov. Jack Dalrymple, R-N.D.; Gov. Dennis Daugaard, R-S.D.; Gov. Pete Ricketts, R-Neb.; Gov. Sam Brownback, R-Kan.; and Gov. Jay Nixon, D-Mo.

The biggest obstacle to gasoline station owners offering E15, the governors said, is the Reid Vapor Pressure, or RVP, regulation of E10 and E15. RVP is the measurement used to determine gasoline volatility. Because of the way EPA treats RVP in E15, retailers have trouble offering E15 year-round in some areas of the country.

"EPA's disparate handling of E10 and E15 with regard to fuel volatility regulation is stifling the widespread adoption of E15 and mid-level ethanol blends," the governors said in the letter.

"Today, E10 receives a 1 pound-force per square inch (psi) Reid Vapor Pressure (RVP) waiver during the summer blending season (from June 1 to Sept. 15 each year), while E15 does not receive a 1 psi summertime RVP waiver. This inequitable RVP treatment of E10 and E15 has no scientific basis since E15 and higher blends are lower in volatility than E10 when blended with the same base gasoline.

"We strongly urge you (EPA) to take immediate action to establish a volatility regime that allows a uniform gasoline blend stock to be suitable for blending both E10 and E15 (and higher blends) year round," the governors said.

Currently, there are more than 300 stations offering E15, according to the letter, or just a fraction of the 150,000 stations across the country.

Read the governors' letter to EPA here: http://bit.ly/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(AG/SK)