EPA Said to Consider Changes to Advanced Biofuel Draft

Obama administration officials, under pressure from advanced-biofuel producers, have told industry representatives that they’re considering raising the quota for their product next year above what was contained in an August draft plan.

Officials from the U.S. Environmental Protection Agency told them they plan to offer a range for the mandate that would allow it to increase from the 2.21 billion gallons set in the draft plan that was leaked, according to two people who participated in the meetings and would only speak on the condition of anonymity because the discussions were private. The range could still leave the final quota below the 3.75 billion gallons set by the 2007 legislation establishing the program.

Depending on the specifics, “that would be a huge change, particularly for domestic biodiesel makers,” said Scott Irwin, a professor at the University of Illinois and expert on renewable fuels who has not seen the proposal. “In the longterm it would not be seen as quite the negative signal as the leaked document.”

Advanced biofuel, such as biodiesel and Brazilian ethanol, is part of a larger program for renewable fuels that is anchored by corn-based ethanol. Corn growers and the ethanol industry are also pushing for an increase in the 13 billion-gallon quota called for in the August plan, which is below the 14.4 billion gallons in the law. The EPA has the ability to adjust the quotas in response to market pressures.

Refiner Complaints

The EPA, responding to complaints from refiners and fossil-fuel oil producers, has proposed a reduction in the amount of renewable fuels that refiners must blend into gasoline and diesel next year, according to the August draft obtained by Bloomberg on Oct. 10.

Refiners, fast-food restaurants, motorboat makers and chicken farmers have all pushed the EPA to scale back the ethanol mandate, saying it risks ruining engines by forcing more ethanol to be blended into gasoline.

The administration of President Barack Obama has held 22 meetings with outside groups about the 2014 mandates, according to Office of Management and Budget records. Seventeen have been since the draft emerged -- 11 with renewable fuel makers such as DuPont Co. (DD) and Abengoa SA (ABG) trying to fend off the reductions. Those companies say they will begin to make fuels from corn stalks and other waste products next year, which would qualify them as advanced renewable fuels.

Next Generation

The industry officials said the EPA is listening to those concerns and has pledged to preserve a market for what a dubbed “next generation fuels.” In presenting a range, it would allow outside groups to weigh-in over the next two months, and EPA to make its final decision later.

Refiners, which have waged battle against the corn ethanol mandate haven’t fought so hard against biodiesel, as it doesn’t present the same constraints as ethanol. Escalating the required amount of ethanol could force refiners to sell blends with more than 10 percent of the corn-based fuel, a phenomenon known as “hitting the blend wall,” according to the American Petroleum Institute.

Fuel with more than 10 percent ethanol can cause engine materials to break down and damage emission-control systems, according to the Washington-based group that represents companies such as Exxon Mobil Corp. (XOM)

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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