Washington (Platts)--29May2015/354 pm EDT/1954 GMT

The US Environmental Protection Agency on Thursday proposed 2014, 2015 and 2016 Renewable Fuel Standards that call for biofuels blending below the statutory levels required by the law, but which the agency says will spur the adoption of ethanol blends higher than 10%.

The 2014 RFS calls for 15.93 billion gallons of biofuels to be blended with US transportation fuels, 16.30 billion gallons in 2015 and 17.40 billion gallons in 2016.

"The proposed volume requirements would push the fuels sector to produce and blend more renewable fuels in 2015 and 2016 in a manner that is consistent with the goals Congress envisioned," the EPA said in its proposed rule. "The proposed volumes are less than the statutory targets for 2015 and 2016 but higher than what the market would produce and use in the absence of such market-driving standards."

The ethanol industry had urged the EPA not to cut the mandates from their statutory levels, saying that doing so would be caving ion to the oil industry's recalcitrance in offering higher ethanol blends, such as E15 and E85.

"Everyone in Congress, as well as all parties in the renewables and oil industry, knew when this legislation was debated and passed into law that the only way the RFS goals could be met was by introducing higher blends into the market moving forward," Growth Energy CEO Tom Buis said. "The initial read on EPA's proposal is they have simply acquiesced to the demands of Big Oil."

The RFS' statutory requirements in the Clean Air Act call for 18.15 billion gallons of biofuels in 2014, 20.5 billion gallons in 2015 and 22.25 billion gallons in 2016.

But the law gives the EPA the authority to adjust the mandate each year, based on fuel availability and economic concerns.

The EPA has voiced concerns over the capacity of US fueling infrastructure to handle significant quantities of gasoline blends with more than 10% ethanol -- the so-called blend wall.

The 2014 rule calls for 2.68 billion gallons of advanced biofuel, 1.63 billion gallons of biodiesel and 33 million gallons of cellulosic biofuels.

The 2015 rule calls for 2.90 billion gallons of advanced biofuel, 1.70 billion gallons of biodiesel and 106 million gallons of cellulosic biofuels.

The 2016 rule calls for 3.40 billion gallons of advanced biofuel, 1.80 billion gallons of biodiesel and 206 million gallons of cellulosic biofuels.

"The 2015 and 2016 standards are expected to spur further progress in overcoming current constraints and lead to continued growth in the production and use of higher ethanol blends and other qualifying renewable fuels," the EPA said.

--Herman Wang, herman.wang@platts.com
--Edited by Maurice Geller, maurice.geller@platts.com

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