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AFPM, API Continue Disagreement Over Renewable Fuel Standard

The American Petroleum Institute (API) and the American Fuel & Petrochemical Manufacturers (AFPM) continued to take divergent positions over a proposal to move the point of obligation under the Renewable Fuel Standard (RFS) program.

Earlier this month, AFPM filed a petition with the U.S. Environmental Protection Agency (EPA), urging the agency to move the point of compliance obligations from refiners to third party rack sellers (see Daily GPIAug. 11). Although the petition states the AFPM supports a repeal of the RFS by Congress, the group said the Renewable Identification Number system -- which EPA created to ensure obligated parties were meeting their renewable volume obligations (RVOs) -- isn't working the way EPA intended.

At issue is the blend wall, the point at which RFS mandates would require refiners to produce more ethanol than necessary to meet the needs for blending into E10 (10% ethanol) gasoline. The API and automakers warn that higher concentrations of ethanol, such as those found in E15 (15% ethanol) gasoline, would damage vehicle engines and void their warranties. They also argue that higher concentrations of ethanol in gasoline would be more expensive for consumers and be less efficient.

In a letter to the EPA on Monday, API CEO Jack Gerard said moving the point of obligation under the RFS would not fix the blend wall issue, and would create a regulatory burden to its members.

"Simply put, moving the point of obligation will merely shift the compliance responsibility under the RFS from the current group to a different group of entities in the fuel supply chain," Gerard said. "Moving the point of obligation would increase complexity for our members, and for EPA to administer and enforce the program."

Gerard also urged the EPA to limit the amount of ethanol blended into gasoline at 9.7% when the agency sets its final RFS volumes for 2017. That limit is also enshrined in a bill -- HR 5180, also known as the Food and Fuel Consumer Protection Act of 2016 -- currently under consideration by the House Subcommittee on Energy and Power.

But in a statement, AFPM President Chet Thompson said API misunderstood his group's petition to the EPA.

"AFPM, which represents more than 95% of the United States' refining capacity, certainly agrees with API that Congress should immediately repeal the failed RFS program," Thompson said. "But they clearly misunderstand the specifics of our administrative petition to move the point of obligation in the meantime.

"Where we propose moving the point of obligation would not increase the burden on any small entities nor the number of obligated parties. To the contrary, our proposal would reduce the number of obligated parties and make the program far more equitable."

Congress enacted the RFS program through two pieces of legislation, both of which preceded the surge in domestic oil production made possible by the shale revolution.

Under the Energy Policy Act of 2005, the EPA was tasked with promulgating regulations that ensure all gasoline sold in the U.S. contains a minimum level of renewable fuel. The program was expanded with the passage of the Energy Independence and Security Act of 2007. Today, most gasoline sold in the United States contains 10% ethanol by volume.

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