32-character numbers assigned to each
gallon of qualified renewable fuel. Obligated parties subject to the mandate
(i.e., refiners, blenders and importers) must obtain enough RINs to satisfy their obligated volumes by either
blending sufficient quantities of qualified renewable fuels or purchasing
RINs from others. In this market, marketers can generate RINs by blending
renewable fuels with base gasoline or
diesel fuel and then selling RINs back
to the obligated parties.
The RINs system is intended to create liquidity in the market and facilitate compliance with the RFS. Unfortunately, the market is struggling to
accommodate the annually increasing
mandated volumes with traditional
fuel blends (i.e., E10, E85, B2). For example, the total volume mandated for
2012 is 15. 2 billion gallons ( 14. 2 billion
excluding biodiesel). Given that total
finished gasoline consumption in 2010
was 137.8 billion gallons, ubiquitous
blending of 10% ethanol in every gallon will only satisfy 13. 8 billion gallons
of the mandate.
Clearly, a substantial volume of fuel
will have to be blended with greater
than 10% ethanol to meet the standard.
This is referred to as the blend wall —
the volume beyond which the market
cannot satisfy the mandate with E10
and E85 alone. It has given rise to debate concerning the use of mid-level
ethanol blends, like E15 and E25, topics
addressed later in this paper.
EFFECT ON FUEL RETAILERS
Given these developments and program requirements, how will convenience retailers accommodate this type
of market, in which nearly half of their
customers stop visiting their stores and
nearly half of their remaining fuel sales
must be renewable fuels? What can
FUTURE OF UELS REPORT PART 1 OF 4
NACS to Congress:
Revise Your Approach to National Energy Policy
The “Future of Fuels” report clearly demonstrates that the objectives of the re- newable fuels standard (RFS) and the proposed revisions to Corporate Average Fuel Economy (CAFE) standards cannot be met without dramatic and expen- sive revisions to the nation’s refueling and vehicle infrastructure. Congress must set aside preconceived perceptions and historic prejudices and work to create a balanced national fuels policy. According to Energy Information Administration (EIA) projections, the amount of renewable fuels required to be blended into every gallon of gasoline in order to satisfy the RFS, as the nation reduces its consumption of uels due to CAFE, would exceed 50%. However, EIA projects that flexible fuel vehicles, capable of running on fuel containing up to 85% ethanol, will only represent 16% of the vehicle pool in 2035. In simple terms: There will not be nough vehicles to absorb the required renewable fuels. Further, the majority of the nation’s 120,950 convenience stores that sell fuel are equipped with dispensers and tanks legally certified to sell fuels containing no more than 10% ethanol. Even if NACS is successful in changing the certifica- tion procedures for this equipment, it is unlikely that many units would be recertified to more than 15% or 20% ethanol — far below the required blend rate of more than 50%. Replacing the nation’s refueling infrastructure will be expensive. Assum- ing each underground storage tank and dispensing system costs an average of $180,000 per location (a conservative estimate), retrofitting the nation to accommodate these two competing regulatory programs will cost the retail community more than $21.7 billion — and even then the vehicles required to burn the fuels will not exist. Given this reality, Congress must take a new look at the required volumes in the RFS and the fuel efficiency standards of the proposed CAFE regula- tions. NACS is meeting with legislators to point out the challenges these two programs create and to advocate that Congress begin convening hearings of stakeholders to determine how to best harmonize federal programs to achieve national objectives. NACS does not believe that the desire to promote renewable energy, reduce dependence on foreign oil, enhance domestic energy security and protect the nvironment are mutually exclusive — but balancing the objectives in a way that will not impose unnecessary economic hardship on businesses and con- sumers will require a new approach to comprehensive energy policy. It’s in this direction NACS will urge Congress to move.
MARCH 2012 NACS Magazine 37