The EPA's Proposed 2017 RFS Standards: Is a Push Still a Push?

The EPA released the preliminary 2017 RFS Standard on May 18. The preliminary rulemaking also established biomass-based diesel (BBD) volume requirements for 2018. Here, we first re-examine the magnitude of the likely conventional biofuels push contained in the final rule making for 2014-2016 and then the likely magnitude of the push in the preliminary rulemaking for 2017. Those calculations will indicate if the EPA is continuing the policy of providing a measurable push for conventional biofuel consumption beyond the E10 blend wall. That analysis requires a forecast of domestic gasoline consumption. Finally, we briefly examine the RINs market reaction to the preliminary rulemaking to judge if the rulemaking came as a surprise to the market. We start with a review of the statutory mandates before proceeding to the analysis. A key question is whether the 2017 standard continues the recent EPA policy of providing a measurable push for conventional biofuel consumption beyond the E10 blend wall. After updating projections for gasoline and diesel consumption, we estimate the conventional ethanol mandate gap to be 275 million gallons in 2014, 371 million gallons in 2015, 453 million gallons in 2016, and 510 million gallons in 2017. Since the estimates of the conventional mandate gap are relatively large, particularly for 2016 and 2017, this suggests the EPA is continuing to provide a substantial push above the E10 blend wall for conventional biofuels. A key question going forward is how long this push can last in the face of rising gasoline consumption.