IS THE DEMISE OF THE RFS IN EISA 2007 AT HAND?

Anyone else notice anything strange about Trump’s cabinet appointment process? There is only one secretary level cabinet appointment left: Secretary Of Agriculture. Why is SOA the last appointment? Is there some controversy within the new administration already?

Remember, Trump campaigned in the heartland, pandering to the corn state voters, promising he would not repeal the RFS.

But he has packed his cabinet with Big Oil stooges: Pruitt at EPA, Perry at DOE and Tillerson at State, all opponents of government mandated ethanol blending. Ironically, Pruitt at EPA has challenged the RFS in past legal battles with the EPA. These appointments do not bode well for the ethanol mandate. And when you consider that Trump has no qualms about lying to voters, I’m wondering if this is why the Trump team can’t find the right candidate at Agriculture. Who wants to be known as the Ag Secretary who couldn’t protect the RFS? Especially after Trump promised it wouldn’t be touched. Of course, he also promised that Medicare and Social Security were sacred, yet House Speaker Ryan is already gleefully wringing his hands to introduce the bill to privatize Medicare. As a retiree on Medicare, I doubt anything is sacred in his administration.

Considering some of his other picks, I believe they are searching for some clueless billionaire who is totally unqualified to run a cabinet level department and knows nothing about agriculture. They’ve certainly done that with a number of other departments. If you don’t know who I’m talking about, you are probably one of the Gullibles who couldn’t tell when candidate Trump was lying to you, so you voted for him. Hint: it was when his lips were moving.

For those of you who believe that Congress won’t repeal the RFS, consider this. Many in Congress don’t believe you should be forced to buy medical insurance if you don’t want it. Let the market decide, they say. So why should they believe you should be forced to buy gasoline laced with ethanol if you don’t want it. Shouldn’t the market decide?

Update 01/04/2017: Trump’s cabinet is still: Big Oil 3 – Big Ag 0

Update 02/17/2017: Anyone getting nervous out there in the Corn Belt?

Southerner, Sonny Perdue, Veterinarian, nominated for Secretary of Ag

Big Oil confirmed at Department Of Energy: Rick Perry; vowed to abolish EPA, anti RFS

Big Oil confirmed at Department Of State: Rex Tillerson

Big Oil confirmed at Environmental Protection Agency today: vowed to abolish EPA, anti RFS

Bill to terminate EPA (H.R. 861) introduced in Congress 02/03/2017.

WILL E0 DISAPPEAR?

For the first time in several years, the EPA has published the ethanol blending quotas for next year in accordance with the schedule set in the law, EISA 2007. The EPA Final Renewable Fuel Standards for 2017 can be found here at the EPA website.

Suffice it to say, the upbeat tone of the announcement masks the serious problems with mandating ethanol blending into the nation’s gas supply. There are many ironies in this announcement, but to give you a little insight into the absurdity that abounds, I’ll present just one fact. EISA 2007 mandated that the amount of renewable fuels that must be blended into our fuel supply in 2017 shall be 24.0 billion gallons, yet this announcement specifies that only 19.28 billion gallons shall be blended. If you want more information about this divergence, you might peruse this article in the Ethanol Producer Magazine. Be warned, there is a pile of gobbledygook in the article.

There are a couple of interesting sidelights in the Renewable Fuel Standards. Number one: we are essentially at the blending wall. In order to blend more ethanol into our gasoline, it will have to be E15 or higher. Number two: we have finally reached the corn ethanol ceiling of 15 billion gallons of corn ethanol. Or course, we’re a couple of years late according to the Act. All increases in renewable fuel for auto gasoline must now be made up by “advanced ethanol,” and there isn’t much of that around because it can’t be made by any known commercially viable process. All of this is monumentally ironic since EISA 2007 is not a mandatory E10 law and E10 is nowhere defined as “renewable fuel” in the Act.

The result of this announcement is: the availability of ethanol free unleaded auto gas (E0) may be coming to an end. According to this article in Hemmings Daily, the days of ethanol free auto fuel are numbered. The EPA wanted to do away with it in 2017, but that doesn’t look likely. If you don’t want to take the time to read the article, here is the pertinent quote: “Despite worries that the Environmental Protection Agency would put an end to ethanol-free gasoline sales with its Renewable Fuels Standard ruling for 2017, the agency permitted E0 a reprieve at the same time it declared its intention to transition the entire nation’s fuel supply to E10 and above.“

So we’ve been warned. (Actually, there are some scarier statements by the EPA in that article about what is coming.)

Wonder if the new administration which claims to be more attuned to unleashing free enterprise will recognize the largest federally mandated market manipulation program in history for what it is, corporate socialism, and repeal EISA 2017. One can always hope.

12/8/2016: Whoa there. Maybe more than hope. Team Trump is proposing Scott Pruitt, AG of Oklahoma, waterboy for big oil as head of EPA. Yes, that Scott Pruitt “… who filed a friend of the court brief in a lawsuit against EPA over the RFS, arguing that using corn for ethanol increased food prices, and that the biofuel posed a risk to automobile engines. “The evidence is clear that the current ethanol fuel mandate is unworkable,” Pruitt said.”

Damn Lies And Statistics

The EPA has published the ethanol blending quotas for 2014, 2015 and 2016 as required by their consent decree. Apparently, their statistics are made up by the same elves that work in U.S. Department of Labor. They make about as much sense as our unemployment and inflation numbers. If you believe that the unemployment rate is about 5% and the CPI is less than 2%, stop reading this blog because the statistics herein will give you brain hemorrhoids.

Lets take a look at the just published EPA renewable fuels mandate for 2014: 16.8 billion gallons. Now remove the bio-diesel component, 2.67 billion gallons and you are left with about 14.65 billion gallons of “ethanol”, plus or minus a fraction since it is almost impossible to account for cellulosic and “advanced” biofuel which can be almost anything, including swamp gas.

Now look at the EIA production statistics. The US produces about 153 billion gallons of Finished Motor Gasoline / year. Production in 2014 was less than that, but it appears to be increasing slowly. You have probably heard that the U.S. is exporting finished gasoline lately. This is pretty obvious if you look at the annual sales of Motor Gasoline for 2014: about 126 billion gallons, which is down a little from 2013. The data seems to confirm the U.S. is exporting a lot of finished gasoline.

So, here’s the problem: 14+ billion gallons of ethanol was enough to make every single drop of gasoline consumed in the U.S. in 2014, E10, with a couple of billion gallons of ethanol left over. But that did not happen. I know that because I can still buy some E0 for my airplane here in Oregon and the number of stations pumping E0 rises every month on pure-gas.org. Since gasoline consumption is essentially flat, or declining, and it has been for years, there is nowhere to blend the almost 500 addition millions of gallons of ethanol outlined in the 2015 quota. Obviously another billion+ gallons of ethanol in 2016 is not going to be blended. Wonder where it will be stored. (Maybe there will be an ethanol cotango just like there is an oil cotango. I’ll leave it to the reader to figure that one out. Maybe you could make a buck.)

Luckily there is a loophole in the RFS that allows producers to push 20% of their quota into the next year. Otherwise, this whole fiasco would have imploded years ago. But it still will. As my favorite Vulcan would say, “This is not logical.” RIP Leonard Nimoy.

You Can’t Make This Shit Up

Another year has passed and nobody is willing to admit the Federal ethanol mandates in EISA 2007 aren’t working and should be terminated. What I said a year ago still apples today: “As 2014 comes to a close, it is interesting to note that the ethanol mandate in EISA 2007 is all but dead, though nobody seems to have a silver bullet to put it out of its misery or the nation’s misery. No one is willing to drive a stake through its heart, so we will pretend that it’s still a viable program.”

I earnestly believed that EISA 2007 would be put out of its misery by congress this year. But I was wrong. Since the EPA waffled on setting the quotas as required in the act, in 2013, 2014 and 2015, the American Petroleum Institute (API) and the American Fuel and Petrochemical Manufacturers (AFPM) sued them and they settled the suit this way: with a Proposed Consent Decree. Pretty damned ironic that the EPA had to be sued by the oil industry to do what they are mandated by congress to do to implement the Renewable Fuel Standard which forces oil companies to blend ethanol into their product.

However, if you read all of the press articles carefully, it is obvious we are hard up against the blending wall. Everyone can see that the only way to blend even the reduced amount of ethanol mandated for 2016 is to increase the consumption of E85 and E15. Of course, as I’ve said for years, EISA 2007 is an E85 corporate welfare law. After all, the only places in the Act that mention Renewable Fuel are those sections dealing with E85 and all of the corporate welfare in the act was only for E85. In fact, E10 is never mentioned in the Act.

So, now the Department of Agriculture (USDA) has come up with a corporate welfare project to boost the usage of E15 – E85: a “Blender Pump” subsidy … that doesn’t have to be used for “Blender Pumps.” The summary in this Farm Futures article should give one pause for concern.

First of all, it is a state “grant” system. States are going to get grants, match them and then spend the money any way they want. There is no requirement that they actually install a single pump: “The matching contributions may be used for these items or for related costs such as additional infrastructure to support pumps, marketing, education, data collection, program evaluation and administrative costs.”

Secondly, you need to understand what is not explained. Statements like this: “USDA estimates that this investment will more than double the number of stations that offer intermediate blends of ethanol, mainly E15 fuel levels, nationwide.” are patently false. No station that doesn’t already pump E85 is going to benefit from this subsidy. They don’t have a tank to receive E85. You can’t put E85 in just any gasoline storage tank. You must also have stainless steel manifolds to deliver it to the special pump designed to handle corrosive E85. So, only stations with E85 already are going to participate in this program, by replacing their E85 only pump with a blender pump.

There is a list of the projected number of stations in 21 states that will benefit from this program. Notice there is not one state west of the Rockies and most of the winners are corn states. Neither California nor New York is on the list, the most populous states in the nation. Somehow, I doubt putting 74 blender pumps in South Dakota is going to significantly change the amount of ethanol blended in the U.S. In fact, since the program does not require the money to be spent on any new stations, or even on infrastructure, I’m betting there will be no increase in the amount of ethanol blended in our gasoline, whatsoever.

WHAT EVER HAPPENED TO SECTION 203

Not only does the EPA not follow the law in managing the ethanol quotas as outlined in Section 202 of EISA 2007 it appears to be completely ignoring SEC. 203. STUDY OF IMPACT OF RENEWABLE FUEL STANDARD and SEC. 204. ENVIRONMENTAL AND RESOURCE CONSERVATION IMPACTS

According to Section 203 the EPA is supposed: ” to assess the impact of the requirements described in section 211(o) of the Clean Air Act on each industry relating to the production of feed grains, livestock, food, forest products, and energy.

According to Section 204 the EPA is supposed to study: “Environmental issues, including air quality, effects on hypoxia, pesticides, sediment, nutrient and pathogen levels in waters, acreage and function of waters, and soil environmental quality.” It’s supposed to also study: “Resource conservation issues, including soil conservation, water availability, and ecosystem health and biodiversity, including impacts on forests, grasslands, and wetlands.”

These studies are supposed to insure that: “… in the case of any such renewable fuel produced from new facilities that commence construction after the date of enactment of this sentence, achieves at least a 20 percent reduction in lifecycle greenhouse gas emissions compared to baseline lifecycle greenhouse gas emissions.”

Well, what do you know? According to this study, things aren’t going so well:

http://www.ewg.org/agmag/2014/12/corn-ethanol-lump-coal-your-christmas-stocking

If anyone believes that corn ethanol is achieving: “… at least a 20 percent reduction in lifecycle greenhouse gas emissions compared to baseline lifecycle greenhouse gas emissions.” is smoking some pretty good shit and I want them to share.

Pretty damn hilarious.

NO END TO MADNESS

As 2014 comes to a close, it is interesting to note that the ethanol mandate in EISA 2007 is all but dead, though nobody seems to have a silver bullet to put it out of its misery or the nation’s misery. No one is willing to drive a stake through its heart, so we will pretend that it’s still a viable program.

Funny thing happened on the way to the funeral. Not only did the EPA fail to fulfill its legal responsibility for issuing the 2014 quotas, it has now said it won’t set quotas for 2015 until some indeterminate time in 2015 (if ever), according to this article in Bloomberg Businessweek. Seems the EPA has decided the 2014 quotas will be whatever the gasoline producers used; somewhere around 13.3 billion gallons of ethanol, not the 14.4 billion gallons proscribed in the table in Section 202 of EISA 2007.

Of course, once that table became meaningless when the EPA couldn’t enforce the advanced biofuel quotas back in 2011, I guess it naturally became easy to ignore it completely in 2014 and now 2015.

It’s time to cease the charade that anything in the RFS in EISA 2007 is legally meaningful. The quota table gets more absurd every year. In 2015 the table requires 3 billion gallons of cellulosic biofuel, yet the industry can’t make even 100 million gallons after 30 years of trying to find a commercially feasible process. The funniest thing is that 2015 marks the cap of corn based ethanol, the amount of which cannot be blended into our gasoline production because nobody wants to buy E85, which was the whole intent of the law. But nobody wants to talk about that problem. After 2015 all of the increases in the quota table are supposed to be satisfied with cellulosic ethanol, which can’t be made.

Oh, and on more slight little snag, that nobody is willing to talk about. Pretty soon, ethanol will cost more to blend into gasoline than the gasoline itself. This has happened twice since 2007 when the RFS was passed. So now, instead of reducing the price of gasoline, which the ethanol industry promised when oil was $100 / barrel, it will raise the price of gasoline while reducing mileage.

I TOLD YOU SO!

I’ve been waiting for the “I told you so” moment, so I could stop writing about this lunacy.

An article in the Well Servicing Magazine a couple of months ago, probably one among many because I haven’t done much research on this topic lately, sums it up pretty well. (Pun intended) The Renewable Fuel Standard (RFS) in EISA 2007 is imploding. After a search of the Internet I can’t even find where the EPA finalized this years ethanol blending quota, which was supposed to be set by the end of December last year. They don’t even follow their own rules. Here is the EPA proposed 2014 RFS and it is indeed the 2012 quota, but I can’t locate the finalized version.

As any fool could have seen, the constantly increasing quota to blend ethanol in gasoline was unsustainable. And finally this year, the EPA, which has sole authority to set the blending quota, blinked. Instead of increasing the quota as proscribed in the blending table embedded in the act, they decreased mandatory blending levels.

WE HIT THE BLENDING WALL

I doubt there is anywhere to go from here. Without producing copious amounts of E85, which isn’t going to happen, there is no way to fulfill the ethanol blending quota table in the RFS. E15 was dead on arrival when the EPA made it voluntary. The auto producers have wisely refused to warranty their products for anything above E10 in a non flex-fuel vehicle car. Producers and gas station chains will not sell it because they can’t afford the liability. Congress isn’t about to give them a liability waiver. If anything, Congress is trying to repeal the RFS.

On top of everything else, corn ethanol production would be capped next year anyway, so there is no use building more plants. There will be no increase in production, unless they can export it. Cellulosic ethanol was supposed to carry all of the increased ethanol production burden demanded by the quota table, but there are no commercially viable cellulosic ethanol plants, and without a market, which would have been available if E85 took off, there is no incentive to even try to perfect a process, unless it can be produced at a lot less cost than corn ethanol, which appears unlikely after three decades of trying.

I just hope the grownups in the EPA and the Congress will end this charade. Hmmm, “grownups” used in the same sentence as EPA and Congress? Disregard that, because it’s an oxymoron.

FLORIDA: Last In / First Out of Ethanol Madness But Nothing Will Change

While some may celebrate the repeal of the state mandatory E10 law in Florida, I see nothing to celebrate because absolutely nothing will change in Florida.  The Florida law was actually passed and invoked long after it was obvious that the federal RFS mandate in EISA 2007 was going to swamp every state with E10, which is happening.  The repeal was a grandstand symbolic gesture to give drivers a choice.  The Florida politicians are patting themselves on the back for winning the battle but they lost the war before the state mandatory E10 law took effect in 2010, two year after EISA 2007 went into effect.

While the legislators may believe that the residents of Florida will now see more E0 at their corner gas stations, absolutely nothing will change.  One only has to look at the blending quota table in EISA 2007 and the gasoline terminal stock reports to know that there is no E0 generally available for autos.  While there is some premium ethanol free gasoline at most of the terminals in Florida, it is obviously for marine and off road use.  The primary supplier is Marathon Oil with their 90 AKI “Sport Fuel” which is intended for the marine, off road and small engine user.  The 90 AKI fuel is not legal to sell as premium unleaded fuel at gas stations, although it could be sold as mid-grade, but most modern fuel stations have 3 button pumps with tanks for regular and premium and mix the two to provide mid-grade, so most stations don’t have a separate tank for mid-grade.  It isn’t likely that Marathon means for this fuel to be sold for normal auto use and in fact when looking at the availability of E0 in Florida at Pure-Gas.org, most of this fuel is being sold at marinas.  It would only make sense for Marathon to sell this gasoline to known non road uses so that it wouldn’t have to account for any of it in their fuel quota for ethanol blending.  Otherwise, as we hit the blending wall this year, it would be costly to sell gasoline without ethanol and the price of this fuel would rise dramatically.

The other reason that I know that this was only symbolic is because the ethanol lobby didn’t crush this repeal.  There were only five states with mandatory state E10 laws and none of them has any purpose now that all of our gasoline will be E10 anyway.  Actually repealing the mandatory state ethanol laws might be a blessing in disguise for the ethanol lobby because most state mandatory E10 laws limit the ethanol blending level to E10 for non flex-fuel vehicles, thus prohibiting the sale of E15 in those states.

Finally, the ethanol lobby has a much bigger problem to worry about.  We will hit … no, we will crash into the blending wall this year and after this year there will be a requirement to blend ever increasing billions of gallons of ethanol into auto fuel, with nowhere to put that ethanol except in storage tanks because Renewable Fuel as described in EISA 2007 is E85 for which there is no demand. Strange thing is, E10 is not Renewable Fuel as defined in the act, in fact it is never mentioned in the act.  So how is it we are going to meet the Renewable Fuel Standard in EISA 2007?  EPA?  Any congress critter that voted for EISA 2007?  Anyone care to explain how this is going to work?

CAN YOU SAY BLENDING WALL?

Apparently I’m not the only fool who can see that we are crashing into the blending wall.

This informative article in Platts arrives at the same conclusion.  (Platts is a leading global provider of energy, petrochemicals and metals information, …)

One slight problem in the article, the authors completely misunderstand the cause. Here is their excuse:

“When the volumetric blending levels were set for the RFS in 2007, lawmakers, as well as industry representatives, didn’t expect the level of ethanol produced to exceed 10% of the national gasoline supply until much later this decade. But steadily declining gasoline demand coupled with increased fuel efficiency mean that benchmark, called the “blend wall,” will hit this year and, for some refiners, may have already been reached.”

Are you kidding me? Clearly the four people attributed at the end of this article never read the RFS mandate in EISA 2007, or having read it, did not understand it. My guess it is the former.

Nowhere in the act is there any discussion of a 10% level of ethanol blending. E10 is NOT mentioned in the act and the act is not a mandatory E10 law.  Gasoline with 10% ethanol is NOT a Renewable Fuel as defined in the act. The entire act is obviously targeted towards increasing the production and distribution of E85 and the increased production of flex-fuel vehicles.  All of the corporate welfare granted by the act is for these three objectives. The only Renewable Fuel defined in the act is E85 in several places, and in one place it is defined as any blend of E11 and above. Since the blending quota table in the act continues to require ever increasing amounts of ethanol be blended out through 2022, the only possible way of ever meeting the blending quotas was to produce copious amounts of E85.

It is going to be absolutely hilarious in the next couple of years when the blending quotas, which are cast in stone in the law, completely swamp the gasoline pool, with no place to put billions of gallons of excess ethanol and there will finally be no way to strip RINS because every producer will have to purchase a quota of ethanol that will exceed 100% of the amount that they can put in their gasoline production.  All I can imagine is a tank farm boom to store the excess ethanol at our terminals and a steady increase in gasoline price to cover the ethanol that the producers will be forced to buy with nowhere to use it.  I guess they are hopeful they can sell it in the international market.

Of course the supreme irony is that the ethanol production increases demanded for every year from 2015 to 2022 must be met essentially by cellulosic ethanol production which nobody can make in economically viable commercial amounts.  So it isn’t just a blending wall we are finally crashing into, it is also a production wall.

I wonder when the EPA, the politicians, the media and the American people are going to finally figure what a ridiculous, unworkable  sham the RFS mandate in EISA 2007 really is.  I may be a fool, but I figured it out as soon as I actually read the act back in 2009.  If you would like to read the act, you can find it here.

2013 RFS QUOTAS PUBLISHED — ONLY 3 MONTHS LATE

The EPA is supposed to publish the proposed annual RFS quotas in November of each year, then there is a mandatory 45 day comment period and then the proposal is enacted.  I might add that it is enacted as proposed no matter what the comments are, as the request for waiver of the RFS by five states proved last year during the drought.  If the EPA followed their own rules that would mean that everyone would know the annual quotas on the first day of the year.

To see a full copy of the 2013 RFS NPRM click here.

Here is the pertinent information as it applies to blending levels of ethanol into our total gasoline supply:

Advanced biofuel 1.60%
Renewable fuel     9.63%

If you add those two blending levels you will note that the total blending percentage is 11.23%, which means that every drop of gasoline sold in the U.S. will have to be E10 and there will be ethanol left over since the amount of E85 and E15 is totally insignificant and neither of them is growing.  The only reason we didn’t hit the blending wall hard last year was that there is a loophole in the law that allows gasoline producers to carry forward 20% of their RINS into the following year.

I wonder if one reason that the NPRM is three months late is because it is becoming glaringly obvious that the blending quotas are unsustainable and it will become embarrassingly obvious that the RFS is going to implode soon, as anyone with an ounce of math skills can figure out … DUH!