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:
American Fuel & Petrochemical Manfacturers
Address:
1667 K Street, N.W., Washington, DC 20006
Constituent:
Committee:

N/A
N/A

Sub-Committee:

N/A

Control Information
Control Number:
Status:
Due Date:
Letter Date:
Addressee:
Contact Type:
Signature:
File Code:
Subject:
Instructions:
Instruction Note:
General Notes:
CC:

AX-14-000-1206
Alternate Number:
N/A
For Your Information
Closed Date:
N/A
#of Extensions:
0
Nov 26, 2013
Nov 4, 2013
Received Date:
Nov 12, 2013
EPA
AD-Administrator
Addressee Org:
Normal
LTR (Letter)
Priority Code:
SNR-Signature Not Required
Signature Date:
N/A
401_127_a General Correspondence Files Record copy
Daily Reading File- Letter to President in support of 2014 Renewable Fuel Standard
For Your Information -- No action required
N/A
N/A
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:

IAssigner

lattice

IAssignee

IAssigned Date

No Record Found.

History

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CREW FOIA 2014-006851-0001156

Olarles T. Drevna
A-esident

Anerican
Fuel&PetrochaTical
l\llarufaclurer
1Ei67Kstreet, NN
SL.ite 700
\N:Ehirgtm, oc

am3

November 8, 2013

aQ.457.0400 office
aQ.552.8457 direct
aQ.457.0400 fax
Qjre'v11:@3fpnorg

The Honorable Barack Obama

President
United States of America
The White House
Washington, DC 20500
Re: 2014 Renewable Fuel Standard blending requirements
Dear Mr. President,
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 Federal Register 49794, 49798 (August 15, 2013) ("EPA anticipates that 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 current infrastructure, and market-based limitations to the consumption of ethanol in gasoline
- ethanol blends above ElO")

CREW FOIA 2014-006851-0001157

market, and account for historical differences between the Energy Information Administration's
(EIA) projections of gasoline demand and actual demand.
The U.S. consumed approximately 12.9 billion gallons of 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 of 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 of the same consumption levels in 2014 that occurred in 2012 and 2013. A large
portion of AFPM' s request is a waiver of the 666 million gallons of 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 of the blendwall and its potential impacts on consumers. The blendwall is a
function of 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 and retail ownership. The biofuel industry claims that refiners "failed to
invest" in infrastructure continue to ignore the realities of how the fuel distribution
system actually functions. While refiners and importers of 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 thirdparty sells back to an obligated party.
Moreover, 95 percent of retail gas stations are owned by independent businesses, many of
which are single-store operators. In addition, more than half of 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 of a franchise), but they
generally have chosen not to carry these higher ethanol blends because of a lack of
consumer demand and fear of potential liability. In general, franchisees get the benefit of
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

CREW FOIA 2014-006851-0001158

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

CREW FOIA 2014-006851-0001159

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
121 Zeh Avenue, Brewster, MN 56119
Address:
Constituent:
Committee:

N/A
N/A

Sub-Committee:

N/A

Control Information
Control Number:
Status:
Due Date:
Letter Date:
Addressee:
Contact Type:
Signature:

Alternate Number:
N/A
AX-14-000-1267
Closed Date:
N/A
Pending
#of Extensions:
0
Nov 27, 2013
Nov 12, 2013
Received Date:
Nov 6, 2013
AD-Administrator
EPA
Addressee Org:
Priority Code:
Normal
LTR (Letter)
N/A
AA-OAR-Assistant Administrator Signature Date:
-OAR
404-141-02-01_ 141_a(2) Copy of Controlled and Major Correspondence Record of the EPA
Administrator and other senior officials - Electronic.
Daily Reading File- Urging to release a 2014 biodiesel requirement consistent with today's
production level of 1.7 billion gallons
AA-OAR-Prepare draft response for signature by the Assistant Administrator for OAR
N/A
N/A
OEAEE - Office of External Affairs and Environmental Education
OP - Office of Policy
RS - Region 5 -- Immediate Office

File Code:
Subject:
Instructions:
Instruction Note:
General Notes:
CC:

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:

IAssigner

lattice

IAssignee

IAssigned Date

No Record Found.

History

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