Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

strategy. Accordingly, a reduced amount of ethanol was allocated to oxy-fuel areas in
2012. The remaining ethanol was distributed to conventional gasoline (CG) in different
states based on a computed ethanol margin (rack gasoline price minus ethanol delivered
price adjusted by miscellaneous subsidies/penalties). The methodology is described in
DRIA Section 2.1.4.3.
The main difference in the four resulting ethanol consumption scenarios was how
far the ethanol penetrated the conventional gasoline pool. A summary of the forecasted
2012 ethanol consumption (by control case, fuel type and season) is found in Table
VI.A.4-2.
Table VI.A.4-2
2012 Forecasted U.S. Ethanol Consumption by Season
OXY a
CG RFG
2012 Control Case Summer Winter Winter Summer Winter Summer Winter
7.2 Bgal / Max-RFG 1,269 1,537 72 1,932 2,389 3,201 3,999
7.2 Bgal / Min-RFG 2,144 2,571 72 244 2,168 2,388 4,812
9.6 Bgal / Max-RFG 2,356 2,830 73 1,941 2,400 4,297 5,303
9.6 Bgal / Min-RFG 3,223 3,881 73 246 2,178 3,468 6,132
b
Ethanol Consumption (MMgal)
Total
a
Winter oxy-fuel programs
b
Federal RFG plus CA Phase 3 RFG and Arizona CBG
As expected, the least amount of ethanol was consumed in conventional gasoline
in the 7.2 billion gallon control case when a maximum amount was allocated to RFG.
Similarly, the most ethanol was consumed in CG in the 9.6 billion gallon control case
when a minimum amount was allocated to RFG. For more information on the four
resulting 2012 control cases, refer to DRIA Section 2.1.4.6.
B. Overview of Biodiesel Industry and Future Production/Consumption
1. Characterization of U.S. Biodiesel Production/Consumption
Historically, the cost to make biodiesel was an inhibiting factor to production in
the U.S. The cost to produce biodiesel was high compared to the price of petroleum
derived diesel fuel, even with consideration of the benefits of subsidies and credits
provided by federal and state programs. Much of the demand occurred as a result of
mandates from states and local municipalities, which required the use of biodiesel.
However, over the past couple years biodiesel production has been increasing rapidly.
The combination of higher crude oil prices and greater federal tax subsidies has created a
favorable economic situation. The Biodiesel Blenders Tax Credit programs and the
Commodity Credit Commission Bio-energy Program, both subsidize producers and offset
production costs. The Energy Policy Act extended the Biodiesel Blenders Tax Credit
program to 2008. This credit provides about one dollar per gallon in the form of a federal
excise tax credit to biodiesel blenders from virgin vegetable oil feedstocks and 50 cents
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