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API remarks on 2014 RFS requirements

Hydrocarbon Engineering,

Below are comments from Bob Greco, API downstream group director from a recent press briefing on the 2014 RFS requirements.

"Given the uncertainties in gasoline demand projections, continued consumer demand for gasoline with no ethanol, known as E0, and very limited demand for E85 fuel, a 9.7% limit represents the minimum buffer needed to protect consumers against the economic harm and safety issues associated with exceeding the 10% blend wall.

"We need regulatory certainty to plan for compliance with the rule and supply the fuels Americans demand. That’s why Congress set the deadline of November 30th for finalising the next year’s RFS requirements.

In recent press accounts, McCarthy indicated that final rule volumes will be higher than those in the proposal. She said 'we will definitely be using the most up to date data, and it will result in a difference in the RFS amounts.' But I point out in our comments that predications about gasoline demand and consumption often miss the mark."

Margin for error

"So EPA must build in an adequate margin for error. For example, in 2013, gasoline consumption was more than 17 billion gal. lower than what was projected in 2007, when Congress passed the RFS we use today. But the inexactness of projections is not limited to the long term. Annual EIA projections since 2007 have missed the mark by an average of 220 million gal./y. And EIA’s 2014 Annual Energy Outlook Retrospective Review found total petroleum consumption was overestimated almost 70% of the time.

"Even short term projections can misjudge consumption patterns. It’s not that EIA doesn’t do as good a job as possible predicting gasoline. But looking into a crystal ball isn’t a science. So EPA shouldn’t try to micromanage ethanol mandates based on slight changes in gasoline demand forecasts. Instead, the agency must be conservative with ethanol mandates to provide consumers with a buffer against the consequences of the blend wall."

Closing remarks

"In closing, the 2014 Final Rule is being issues very late and will be applied retroactively. So it’s especially important that the agency finalise the rule as soon as possible and include an adequate margin for error in order to protect consumers and preserve consumer choice."

Adapted from a press briefing by Claira Lloyd.

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