crew foia 2014-006851-0001156
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Correspondence Management System
Control Number: AX-14-000-1206
Printing Date: November 13 2013 08:25:16
Citizen Information
Citizen/Originator: Drevna Charles T
Organization:
Address:
American Fuel Petrochemical Manfacturers
1667 K Street, N.W., Washington,
D
20006
Constituent: N/A
Committee: N/A
Sub-Committee:
N/A
Control Information
Control Number:
AX-14-000-1206
Alternate Number:
N/A
Status: For Your Information Closed Date: N/A
Due Date: Nov 26, 2013
of
Extensions: 0
Letter Date: Nov 4, 2013 Received Date: Nov 12, 2013
Addressee: AD-Administrator Addressee Org: EPA
Contact Type: LTR (Letter) Priority Code: Normal
Signature: SNR-Signature Not Required Signature Date: N/A
File Code: 401_127_a General Correspondence Files Record copy
Subject:
Instructions:
Daily Reading File- Letter to President in support
of
2014 Renewable Fuel Standard
For Your Information -- No action required
Instruction Note: N/A
General Notes:
N/A
CC: N/A
Lead Information
Lead Author: N/A
Lead Assignments:
Assigner
Office Assignee Assigned Date Due Date
Complete Date
Ken Labbe OEX OAR Nov 12, 2013 Nov 26, 2013
N/A
Instruction:
AA-OAR-Prepare draft response for signature by the Assistant Administrator for OAR
Sabrina Hamilton OAR OAR-OTAQ Nov 13, 2013 Nov 22, 2013 NIA
Instruction:
OTAQ - Prepare response for the signature
of
Christopher Grundler, Director
of
the Office
of
Transportation and Air Quality (OTAQ).
Supporting Information
Supporting Author: N/A
Supporting Assignments:
I ssigner
l ttice
History
I ssignee
No Record Found.
I ssigned Date
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November 8, 2013
The Honorable Barack Obama
President
United States ofAmerica
The White House
Washington, DC 20500
Olarles T Drevna
A-esident
Re: 2 14 Renewable Fuel Standard blending requirements
Dear Mr. President,
Anerican
Fuel PetrochaTical
l\llarufaclurer
1Ei67Kstreet NN
SL.ite
700
\N:Ehirgtm, oc
am
aQ.457.0400office
aQ.552.8457direct
aQ.457.0400
fax
Qjre v11:@3fpnorg
The American Fuel
&
Petrochemical Manufacturers ( AFPM) writes in support
of
the
Environmental Protection Agency's (EPA) indication that it plans to partially waive the 2014
Renewable Fuel Standard (RFS) in order to address concerns with the market's ability to
accommodate higher levels
of
ethanol.
1
Such action would find solid grounding in both the
realities
of
the fuel market and in the law.
Despite the biofuel industry's sustained campaign to frame this debate
as
a battle for
market share,'' the reality remains that the RFS boils down to a simple math problem: the 2014
RFS -
if
fully implemented - would require more biofuel than consumers demand, and than
current vehicles and infrastructure are designed and warrantied to handle. Refiners are thus
faced with a series
of
difficult choices - either force more biofuel into the market knowing that it
damages consumers' engines and compromises infrastructure (bringing with it significant
liability concerns), or reduce domestic supply of gasoline and diesel to limit the obligation to buy
compliance credits (Renewable Identification Numbers, or RINs ) needed to sell gasoline and
diesel in the United States. Neither
of
these options
is
good for the American consumer.
Recognizing this problem, on August 13, 2013, AFPM and the American Petroleum
Institute ( API) filed a petition on behalf
of
its members seeking a partial waiver
of
the 2014 RFS.
In its petition, AFPM detailed the technical and marketplace challenges associated with
increasing the volume ofbiofuel in the fuel supply, and requested a waiver that would set the
ethanol content in gasoline at an average of 9.7 percent, for a total 2014 RFS
of
12.9 billion
gallons
of
ethanol and 1.9 billion ethanol-equivalent gallons
of
biomass-based diesel. In
particular, a 9.7 percent cap would retain a market for neat gasoline (i.e., gasoline containing
no ethanol) required for some applications (such
as
boating), promote liquidity in the RIN
1
See 78
ederal Register
49794, 49798 (August 15, 2013) ( EPA anticipates
th t
adjustments
to
the 2014 volume
requirements are likely to be necessary based o
the
projected circumstances for 2014, taking into account ...
the
ElO blendwall, and cur rent infrastructure, and market-based limitati ons to the consumption
of
ethanol in gasoline
- ethanol blends above ElO )
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market, and account for historical differences between the Energy Information Administration's
(EIA) projections
o
gasoline demand and actual demand.
The U.S. consumed approximately 12.9 billion gallons o ethanol in 2012 and is on pace
to consume approximately
13
billion gallons in 2013. In fact, obligated parties are only able to
comply with the 2013 mandate because o banked RINs from previous years. In other words,
AFPM's waiver petition simply recognizes that the RIN bank will be depleted and requests a
continuation o the same consumption levels in 2014 that occurred in 2012 and 2013. A large
portion o AFPM' s request is a waiver o the 666 million gallons o imported Brazilian
sugarcane ethanol expected to be used for the advanced biofuel mandate in 2013. Given these
facts, the biofuel industry's claims that not raising the mandate next year will somehow lead to
widespread layoffs and plant closures ring particularly hollow.
Unfortunately, in its rush to scapegoat the refining industry, biofuel producers continue to
ignore the reality o the blendwall and its potential impacts on consumers. The blendwall is a
function o consumer demand, engine compatibility, infrastructure constraints, and the biofuel
industry's failure - despite nearly a decade ofbiofuel mandates - to deliver promised drop-in
biofuel that are compatible with existing engines and infrastructure. Given the heated rhetoric
surrounding this issue, AFPM would also like to take the opportunity to correct some recent
mischaracterizations about the blendwall and EPA' s legal authority to grant a waiver.
1
Infrastructure
nd
retail ownership The biofuel industry claims that refiners failed to
invest in infrastructure continue
to
ignore the realities
o
how the fuel distribution
system actually functions. While refiners and importers o gasoline are the obligated
parties under the RFS, they are often not the entities actually blending the fuel or selling
it to end-use consumers. In many cases, third-party blenders or others actually blend the
renewable fuel into the petroleum blendstock, thereby capturing the RIN that the third
party sells back to an obligated party.
Moreover,
95
percent o retail gas stations are owned by independent businesses, many o
which are single-store operators. In addition, more than half o the gas stations are
actually unbranded and unaffiliated with refining companies. Even those stations that are
franchised, however, are largely responsible for their own equipment and investment
decisions. These stations are free to sell higher ethanol blends (such as E85 or EIS) so
long as they continue to sell the branded product (a key feature
o
a franchise), but they
generally have chosen not to carry these higher ethanol blends because
o
a lack o
consumer demand and fear o potential liability. In general, franchisees get the benefit o
a steady fuel supply at a contracted price, marketing assistance, and the ability to use a
refiner's trusted brand to help sell fuel. Typically, in return, franchisees must sell at least
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two grades
of
the refiner s product. Put another way, franchisees are getting the benefit
of
a contractual bargain between two private parties - the definition of a free market. Those
franchisees may invest in additional tanks and dispensers to carry additional fuel types, or
may terminate their franchise agreements and sell unbranded fuel.
One of the largest issues for fuel suppliers are potential liabilities stemming from vehicle
and small engine incompatibility with higher ethanol blends like EIS, discussed more
below. Given the massive potential liability or injury associated with EIS for consumers,
the retail community, engine manufacturers, and refiners, it
is
no surprise that EIS s
market penetration is limited to a few dozen stations in the Midwest. Most important,
however, is the consumer liability resulting from potential engine damage that would
occur
as
result of EIS, which cannot be used in nearly
9S
percent
of
cars or any lawn
equipment, motorcycles, boats, or countless other engines.
In addition to the infrastructure and liability issues, challenges remain including with
certification of underground storage tanks for higher blends, conflicting states laws, and
the fact that EPA has not granted a I-pound Reid Vapor Pressure (RVP) waiver for
summer EIS like it has for summer EIO.
2
Vehicle Compatibility
Although some auto companies have recently announced that
20I2-20I4
models will be compatible with EIS, there are still hundreds of millions of
cars on the road that are not compatible with that fuel. In general, it takes about a decade
for the auto fleet to tum over, meaning we will not see these changes for some time, and
implementation of the 20I4 volumes will not be significantly affected by new car sales.
Moreover, hundreds of millions of off-road/non-road vehicles and engines are unable and
unapproved to use more than I 0 percent ethanol regardless of
EIS
s availability.
2
3
E85 Sales The biofuel industry claims that E8S sales can bridge the gap between
EI
0
saturation and the RFS requirements, but unfortunately this claim ignores refueling
infrastructure compatibility issues and consumer acceptance
of
E8S. Importantly, only
I
S
percent of stations carry E8S and even where it
is
widely available, consumer
acceptance remains low. In fact, data from Iowa and Minnesota (two states with the most
developed E8S infrastructure) show that there has been virtually no growth in E8S sales.
Minnesota s
E8S
sales peaked in 2007 and Iowa s in
20I l
2
Rep F James Sensenbrenner
U S
House
of
Representatives to EPA
Administrator Lisa
Jackson 5 July 2011
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Correspondence Management System
Control Number: AX-14-000-1267
Printing Date: November 13 2013 02:31 :39
Citizen Information
Citizen/Originator: Enderson Taryl P
Organization: Minnesota Soybean Processors
Address:
121
Zeh Avenue, Brewster,
MN
56119
Constituent: N/A
Committee: N/A
Control Information
Control Number:
Status:
Due Date:
Letter Date:
Addressee:
Contact Type:
AX-14-000-1267
Pending
Nov 27, 2013
Nov 6
2013
AD-Administrator
LTR (Letter)
Sub-Committee:
Alternate Number:
Closed Date:
of
Extensions:
Received Date:
Addressee Org:
Priority Code:
Signature: AA-OAR-Assistant Administrator Signature Date:
OAR
N/A
N/A
N/A
Nov 12, 2013
EPA
Normal
N/A
File Code: 404-141-02-01_ 141_a(2) Copy
of
Controlled and Major Correspondence Record
of
the EPA
Administrator and other senior officials - Electronic.
Subject: Daily Reading File- Urging to release a 2014 biodiesel requirement consistent with today s
production level
of
1.7 billion gallons
Instructions:
Instruction Note:
AA-OAR-Prepare draft response for signature by the Assistant Administrator for OAR
N/A
General Notes: N/A
CC: OEAEE - Office
of
External Affairs and Environmental Education
OP - Office
of
Policy
RS - Region 5 -- Immediate Office
Lead Information
Lead Author: N/A
Lead Assignments:
Assigner Office
Assignee Assigned Date
Due Date Complete Date
Ken Labbe
OEX
OAR Nov 13, 2013 Nov 27, 2013 NIA
Instruction:
AA-OAR-Prepare draft response for signature by the Assistant Administrator for OAR
Supporting Information
Supporting Author: N/A
Supporting Assignments:
I ssigner
l ttice
History
I
ssignee
I ssigned Date
No Record Found.
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