More than nine months past deadline, we’re still awaiting the EPA’s 2014 ruling on the Renewable Fuel Standard (RFS)—an outdated policy requiring refiners to annually blend increasing volumes of biofuels like ethanol into domestic gasoline. While the EPA typically increases volume requirements each year, 2014 marked the first time the agency proposed a reduction from the statutory requirements—correctly citing the fuel market’s inability to sustain further increases without harming motorists, retailers and refiners. If the agency, under heavy political pressure, doesn’t uphold this sensible proposal, American consumers will ultimately lose.
Implemented in 2005 amid the height of American energy consumption, the RFS aimed to provide a renewable fuel source to meet domestic demand. However, aggressive expansion of the policy in 2007 and incessant volume increases every year since—all while U.S. gasoline use declined—puts the policy at odds with its original intent. Today, virtually all U.S. gasoline contains 10 percent ethanol to create E10—the only blend proven safe for mass consumption. Yet the RFS continuously increases blending volumes, consequently pinning refiners against what’s known as the blend wall—the point at which no more ethanol can be blended without creating blends higher than E10.
In fact, chance of damage is so great that major automakers, including Ford, General Motors, Honda, Toyota and Volkswagen, have stated that engine damages related to these fuels will void consumers’ warranties, and AAA has publicly objected to E15 sales. Furthermore, adequate warning labels do not exist for higher blend dispensers. AAA estimates that 95 percent of consumers aren’t familiar with these blends or the damages they can cause. This means nearly 295 million motorists are unknowingly at risk for costly repairs.
Among those motorists are owners of the nation’s 11 million motorcycles, none of which are approved for use of blends higher than E10. In fact, federal law prohibits motorcyclists from using such fuels.
The American Motorcyclist Association (AMA) has repeatedly told lawmakers and the EPA that inadvertent use of E15 in motorcycles causes engine and fuel system failures. The AMA remains concerned that availability of ethanol-free gasoline continues to dwindle due to the RFS, and that the proliferation of E15 will threaten the availability of E10.
Retailers similarly risk damaging their equipment because most underground storage tanks are incompatible with midlevel ethanol blends. If the RFS continues to mandate more ethanol, it could flood the market with higher blends, potentially forcing retailers to sell these damaging fuels. Station owners would then have to prematurely replace equipment that would otherwise last 30 years just to avoid potential damages—costing $180,000 or more on average per upgrade. Since over 80 percent of fueling stations are actually convenience stores, and nearly 60 percent of those are locally owned small businesses, such a financial burden can be deleterious.
These risks give refiners little incentive to produce higher blends. Yet, in order to meet the mandate—non-compliance carries hefty fines—refiners must blend more ethanol to generate enough credits called Renewable Identification Numbers (RINs) to show compliance, or buy them from competitors who have a surplus.
Unfortunately, RIN supply is finite, raising demand and therefore prices, which ultimately increases fuel production costs. The Congressional Budget Office recently concluded that these costs will raise gas prices by up to 26 cents per gallon by 2017.
The RFS also lowers fuel economy. Ethanol contains 33 percent less energy than gasoline, meaning the higher the ethanol concentration, the lower the gas mileage. If the RFS continues to increase blending requirements, higher blends may become more prevalent, leaving consumers paying more by the mile.
Retailers also worry about liability as higher blends enter the market, because under the Clean Air Act, the EPA can fine station owners upwards of $37,500 per day if their customers misfuel on these blends.
The RFS harms motorists, retailers and refiners, and the EPA was right to propose a reduction. As the White House Office of Management and Budget reviews the 2014 ruling, we urge the Administration to remember that aligning the RFS with market realities is the only way to protect American consumers and truly satisfy our energy needs.
Allard served in the Senate from 1997 to 2009, and is currently vice president of Government Relations for the American Motorcyclist Association. Drevna is president of the American Fuel & Petrochemical Manufacturers.