Blend wall
The fuel standard has created unintended consequences and is ripe for overhaul.
The 2016 presidential campaign has included lots of talk about walls but little discussion of one that is central to an ongoing debate around U.S. energy and environmental policies.
That figurative barrier is called the blend wall — the threshold beyond which the U.S. gasoline supply contains more than 10 percent ethanol. Oil industry and small government advocates point to the wall in criticizing the Renewable Fuel Standard, a decade-old law requiring an increasing volume of ethanol and other renewable liquids in the nation’s fuel supply.
Automakers say they can’t guarantee that any but a few of their engines will run properly on mixes of less than 90 percent gasoline, and many fuel suppliers say it’s difficult and expensive to comply with the federal mandate. Biofuel advocates respond that competing industries have been deliberately slow in developing infrastructure to accommodate higher blends.
The leading presidential candidates give the subject little prominence in their online position papers. The blend wall lacks the visceral voter appeal of debating physical barriers for walling out illegal immigrants and terrorists.
The ethanol threatening to breach the blend wall is a pure form of alcohol, about the same as the kind we use to lubricate social occasions, and typically derived from corn. Producers mix other chemicals into fuel alcohol to make it undrinkable and therefore exempt from alcoholic beverage rules and taxes.
But like corn-squeezings in a glass, fuel ethanol can become too much of a good thing. The complex renewable standards are as mind-numbing as a double shot of pure grain spirits, and the topic also is political white lightning.
Democrat Hillary Clinton and Republican Donald Trump have voiced support for continuing some version of the mandate. During the lead-up to Iowa caucuses that kicked off the nomination process for both parties, Trump attacked Sen. Ted Cruz of Texas, the eventual runner-up in the GOP race, for insufficient fealty to the Renewable Fuel Standard.
The U.S. began subsidizing ethanol production in response to energy shortages of the 1970s that raised worries about U.S. dependence upon imported oil. The Renewable Fuel Standard was born in 2005, when concerns about air pollution and climate change prompted Congress to mandate annual increases in the volume of biofuels in the nation’s tanks.
Because the required volume increases annually regardless of overall fuel demand, ethanol’s proportion in the total increases as fuel efficiency and market conditions keep annual U.S. gasoline consumption flat at around 140 billion gallons.
However well intended, the Renewable Fuel Standard has created unintended consequences that underscore the need for an overhaul.
For one thing, it breeds uncertainty. The Environmental Protection Agency, which administers the program, has fallen behind in setting annual volume requirements for ethanol — partly because the industry hasn’t been able to meet previous targets for non-cornbased fuel. So refiners and fuel blenders don’t know how much biofuel the government will expect them to swizzle into their products, or whether they’ll be able to get the amounts required.
And if they can’t meet the requirement, they’re at the mercy of a costly and unregulated market for credits that they must purchase when their fuel cocktails fall short on biofuels.
The head of the Renewable Fuels Association, which represents producers and others in the $20-billiona-year ethanol industry, told the Houston Chronicle’s James Osborne recently that the overall renewable fuel program is successful. But he also has asked the EPA to investigate possible manipulation in the market for the credits, called Renewable Identification Numbers.
The oil industry’s biggest trade association, the American Petroleum Institute, has proposed limiting the mandate to 9.7 percent of gasoline demand rather than continuing the rigid volume requirements. Some members of Congress back that approach.
The Renewable Fuel Standard isn’t likely to figure much in the heated run-up to the November election and lawmakers almost certainly won’t act before then. But the new administration and Congress that begin next year should take a hard look at whether the ethanol happy hour has become too generous.