OREANDA-NEWS. The Environmental Protection Agency expects sales of high-ethanol gasoline blends to climb next year but will not use federal mandates to compel retailers to offer the fuels.

The distinction, laid out in a lengthy explanation of mandates finalized last week, deals a blow to ethanol industry supporters who insist the agency rewards the oil industry by not compelling much higher volumes of their product in the US fuel supply. EPA instead said that biofuel producers should take greater steps of their own to make their fuels available to consumers.

"We do not believe the statute should be interpreted to require that refiners and importers change the nature of their businesses so as to comply with RFS requirements, as this would be a far-reaching result that congress can be expected to have clearly specified if it was intended," the agency wrote in its final rulemaking.

EPA must set minimum blending volumes each year under the Renewable Fuel Standard. Volumes finalized last week included two missed years — 2014 and 2015 — as well as requirements for 2016.

The mandates require specific volumes for a non-food blendstock called cellulosic ethanol, for biomass-based diesel, and for advanced biofuels generally, as well as total biofuel blending.

The program does not require any volumes of corn ethanol. But because the fuel is both widely available and easily consumed at certain rates by the modern US auto fleet, corn-based ethanol is an essential part of meeting total biofuel requirements.

The two leading ethanol industry advocacy groups, the Renewable Fuels Association (RFA) and Growth Energy, would not discuss the EPA outlook with Argus, but RFA blasted the EPA soon after the agency published the rule, saying it benefited the oil industry. Congress intended the rules to drive higher consumption, not reflect what was possible at the time, the group said.

"This final rule directly contravenes the statute and places the potential growth for biofuels like ethanol in the hands of the oil companies," RFA chief executive Bob Dinneen said in the statement just after the rule publication.

Yet the RFS was not meant to increase the use of corn ethanol, EPA said in the rulemaking, chiding parties that assumed ethanol was the only path to meeting total blending requirements. Ethanol producers would need to take greater action to spur the growth of their fuels, the agency said.

"This is a strength of the RFS program, as it lets the market, rather than EPA, decide which fuel holds the most promise for future growth," the agency wrote.

And the agency saw the market working poorly for E85, a high-ethanol blend used in specially-tuned vehicles, and E15, which the ethanol industry argues can be used by most vehicles on the road today.

Too few blenders and retailers offered higher-ethanol blends to present sufficient competition to make prices attractive to drivers, the agency said. A steep drop in oil prices have led US gasoline prices to fall too fast this year to keep ethanol competitive. Ethanol has traded at a premium to major gasoline benchmarks since September, based on Argus assessments.

The program as it stands will not change that, both the agency and retail industry said. The mechanism traded and used to show compliance with those mandates, called renewable identification numbers (RINs), will not entice retailers or consumers to soon increase consumption of higher ethanol blends in a meaningful way, the EPA said.

RINs, which blenders sell to obligated parties, should become more expensive as the mandates become more difficult to meet. But refiners with significant retail operations, such as Marathon Petroleum's 2,760-store Speedway system, do not yet plan to increase blending in response to the mandates.

"It's an abomination," not an opportunity, chief executive Gary Heminger said last week on the sidelines of the company's analyst Day in New York.

Refiner HollyFrontier, one of several US refiners that does not operate retail networks, similarly showed little interest in adding blending or retail to meet mandates.

"We're probably negatively inclined on that area," chief operating officer George Damiris said.

"This is a consumer mandate, when you think about it," American Fuel and Petrochemical Manufacturers executive vice president Brendan Williams told Argus. "And you can't force consumers to buy something they don't want."