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POLITICS: PennAve

Industry officials warn changes in biofuel rule would hurt investment

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White House,EPA,PennAve,Energy and Environment,Zack Colman

Investment in biofuels could plummet if a leaked Environmental Protection Agency proposal to reduce the amount of biofuels refiners need to blend into gasoline next year is true, industry officials warned Wednesday.

"That change in method would change the way we at Abengoa consider our investment," Chris Standlee, executive vice president with biofuel firm Abengoa, said during a media call. "I think the United States could potentially lose a lot by taking a step like this."

At issue are the 2014 blending targets for the Renewable Fuel Standard, the EPA-administered biofuel blending mandate Congress passed in 2005 and expanded in 2007 as a way to reduce carbon emissions and dependence on foreign oil.

An EPA draft leaked last month suggested lowering next year's biofuel blending target to 15.21 billion gallons, down from 18.15 billion. Officially, though, the White House and the EPA have remained mum on the targets.

The leak has invited lobbying from both supporters and detractors, as officials — including Republican Iowa Gov. Terry Branstad — have met with administration officials in recent weeks to discuss the matter.

The draft shows the EPA acknowledging an argument the oil industry has long made: that refiners are approaching a "blend wall." Refiners say that will require them to churn out fuel with a higher ethanol concentration than the standard 10 percent to keep up with the mandate's increasing targets.

While the EPA has approved the use of E15 — gasoline with 15 percent ethanol — in cars made in 2001 or later, the auto and oil industries warn that the fuel harms engines. On top of that, most auto firm warranties don't cover E15-related damages, and most gas stations lack the infrastructure to handle the fuel.

Biofuel companies, however, have said the oil industry is trying to defend its market share from competition.

"What we do see here is just a typical market that's under the influence of the powerful incumbent industry," said Jan Koninckx, global business director of biorefineries for DuPont. "In the long run, those barriers get knocked down."

The rule calls for mixing 36 billion gallons of biofuel with traditional transportation fuel by 2022. Lawmakers intended it to catalyze biofuel investment, seeing such fuel as a way to reduce greenhouse gas emissions and dependence on foreign oil.

Biofuel industry advocates argued the changes floated in the leaked draft could be disastrous for investment in next-generation biofuels, which have been slow to get off the ground but are starting to come online in commercial volumes.

It also could have consequences for "conventional" — corn-based ethanol — biofuels, said Geoff Cooper, vice president of research and analysis with the Renewable Fuels Association.

He argued that the EPA has the flexibility to lower the overall blending target by the same amount it reduces that of next-generation biofuels. But he said the agency would exceed its authority if it lowers the mark for corn-based ethanol — which supplies an overwhelming majority of the U.S. biofuel market — based on blend wall concerns, as proposed in the leaked draft.

"There is nothing in the statute that would allow the EPA to reduce or adjust the conventional renewable fuel piece," he said. "I think one of our key asks to the EPA is to go back and look at the statute."

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