Leaked proposal irks both oil and ethanol groups

WASHINGTON — The Obama administration isn’t giving U.S. refiners enough “wiggle room” to comply with federal renewable fuel mandates, the oil industry’s leading trade group said Thursday.

Despite signs that the Environmental Protection Agency is responding to the oil industry’s concerns about the eight-year-old requirements — and is poised to lower renewable fuel quotas next year — regulators just aren’t going far enough, said Bob Greco, downstream director for the American Petroleum Institute.

“We are guardedly optimistic that the EPA is at least moving in the right direction,” Greco said in a conference call with reporters. But, he added, the EPA still needs to “provide a little breathing room.”

Greco was responding to a widely circulated draft of the still-to-be-proposed renewable volume requirements for 2014, which would slash requirements from statutory levels. The draft proposal, which leaked earlier this month, would set the requirements for corn-based ethanol at 13 billion gallons, while lowering quotas for advanced biofuels and other categories.

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But the oil industry — led by API and the American Fuel and Petrochemical Manufacturers — is asking next year’s number be set no higher than 12.9 billion gallons, which would represent about 9.7 percent of of the nation’s projected gasoline demand. Greco said that levels essential to preserve the availability of zero-ethanol gasoline for some consumers, while avoiding the blend wall, a point where the required renewable volumes force refiners to mix in more ethanol than has been approved for use in all cars and trucks.

EPA’s draft is “an acknowledgment that the blend wall is a reality,” Greco said, “however, we don’t think EPA has gone far enough if the leaked proposal is accurate.”

In particular, Greco cited his concern that the blending of sugarcane-based ethanol from Brazil could force a bump in the overall percentage of ethanol in U.S. gasoline, breaching the blend wall at the risk of gasoline shortages and price hikes.

But biofuel backers say the oil industry is merely trying to protect its turf.

“The issue is not that they can’t blend more renewable fuel, but that they won’t,” said Fuels America, a coalition of biofuel producers, in an Oct. 22 letter to President Barack Obama.

Growth Energy, a coalition of ethanol producers and supporters, called the leak draft of 2014 quotas extremely troubling and said that the proposal “would reward the oil companies for refusing to comply with the program.”

“If true, this is a step backwards that will harm the environment and the economy,” the group said.