EPA Set To Adopt Significant Cuts In Annual RFS Ethanol Blending Mandates
According to Reuters news wire service, the Biden administration is set to move forward with significant cuts to the annual blending mandates under the RFS. If true, it would mark a significant victory for EMA and the energy marketers it represents.
According to documents obtained by Reuters, the Environmental Protection Agency will reduce blending mandates for 2020 and 2021 to about 17.1 billion gallons and 18.6 billion gallons, respectively.
These levels would be lower than the 20.1 billion gallons that had been finalized for 2020 before the coronavirus pandemic.
The agency is also expected to set the level for 2022 at about 20.8 billion gallons, the documents showed.
The EPA is setting the 2020 and 2021 mandates retroactively.
Ethanol would take the biggest hit. Levels for conventional renewable fuel, which includes ethanol, would drop from 15 billion gallons to about 12.5 billion gallons in 2020, 13.5 billion gallons in 2021 and 14.1 billion gallons in 2022.
This is good news for energy marketers for many reasons. First, lowering blending requirements below the E15 blend wall will allow marketers to choose whether to sell E15 rather than mandating its sale through adoption of blending obligations that do not reflect actual consumer demand.
Second, it will relieve pressure on marketers to make costly E15 upgrades to their UST systems.
Third, it will prevent the bankruptcy of state UST tank funds by avoiding a significant increase in claims for UST system leaks caused by E15.
Finally, reducing the blending mandate below the blend wall will reduce the value of RINs, which have soared to record highs this year, and are used to discount prices at the pump that most marketers cannot compete with.
If adopted, the lower RFS blending mandates would be a major victory for EMA which has advocated consistently over the years before Congress and the EPA for reduced blending mandates.
It appears that EPA is finally agreeing with what EMA has been saying all along; RFS blending obligations must be based on actual consumer demand for gasoline and not on wildly inaccurate statutory demand guestimates formulated back in 2005.
Tying blending obligations to actual demand for gasoline prevents E15 from being forced onto the marketplace and preserves marketer choice over the blends they wish to sell.
The EPA is expected to release the blending obligations for 2020, 2021 and 2022 within the next few days. EMA will report further once the EPA makes the blending obligation announcement.