Question 1 : What Will 2015's RVO Be?

Under the RFS, the RVO for ethanol in 2015 is 15 billion gallons. It was supposed to have been 14.4 billion gallons for ethanol this year. But as we know, the EPA initially wanted to reduce this year's target of 14.4 billion gallons to 13.01 billion gallons before eventually abandoning that ill-advised proposal.

This, however, raises serious questions on what the agency will set for 2015.

Will the EPA stick to the original RVOs stipulated in the RFS? The U.S. Energy Information Administration states that ethanol production this year has averaged 927,000 barrels a day, which translates to 14.2 billion gallons for the whole year. This includes exports, which as of end-September has hit 600 million gallons. Should exports continue on a similar trend, total domestic consumption of ethanol could be between 13.3 billon and 13.4 billion gallons this year.

This in turn would represent a marginal increase from 2013 which totaled 13.1 billion gallons. But it has to be emphasized that the increase was achieved despite the lack of guidance from the EPA. The number of E15 stations in states like Minnesota have been increasing even the absense of a final rule from the EPA. This shows that there IS demand for fuels with higher blends of ethanol like E15. Imagine what could be accomplished if the EPA enforced the RFS as written, and intended, by Congress.

And if the EPA decides to stick to the 15 billion gallon target for next year, it would push the oil industry and more retailers to offer E15. The American Petroleum Institute's claims about harms E15 will cause are bogus. Witness the extensive testing before E15 was appoved for use in 2001 and newer vehicles. The millions that have been driven trouble free since 2012 and carmakers are now explisitly telling owners new car warranties will cover the use of E15.

Q. How Big Of A Fight Can We Expect From The Oil Industry?

If the EPA's announcement on Friday was a victory for the ethanol industry, it was a major rebuff to the oil industry. One group, the American Fuel and Petrochemical Manufacturers is already suing the EPA. But the industry's biggest lobby of all, the American Petroleum Institute, hinted on what they are going to seek: A repeal of the 2007 Energy Independence and Security Act (EISA). The RFS was expanded in 2007 under EISA. This expansion led to the RVOs. 

This certainly isn't the first time the oil industry has sought to get rid of the RFS. But with a shift in power in Washington, don't be surprised if another vote on the RFS goes to the floor. Indeed, as pointed out by some, the new incoming chairman of the Senate Environment and Public Works Committee, Sen. James Inhofe, has previously said that climate change is the biggest hoax perpetrated by mankind.

Q. When will the EPA announce the 2014 and 2015 RVOs?

One thing is clear so far. The EPA will announce the 2014 and 2015 RVOs in 2015 at the same time. As to when that will be is anyone’s guess. But there’s a high chance it won’t happen on Jan 1, 2015. This then means that the industry will once again have to operate on ‘autopilot’ mode until the agency announces the 2015 RVOs. And when it does, it should stick to the original RVO for 2015 which is 15 billion gallons.

Would increasing consumption to 15 billion gallons in 2015 be too much of a jump? Not necessarily if the availability of E15 and E85 increases. Increasing availability of E15, in particular, would easily meet the target. But for that to happen, major retailer chains will have to offer E15. More fuel refiners and marketers will need to offer blends of E15. Simply put, if the oil industry got onboard with E15, we would easily exceed the 15 billion gallon minimum target.