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

These renewable feedstocks are then used as blend fuels in gasoline and diesel.
While biodiesel is typically just blended with petroleum diesel, additional efforts are
sometimes necessary and/or economically advantageous at the refiner level when adding
ethanol to gasoline. For example, ethanol’s high octane reduces the need for other octane
enhancements by the refiner, whereas offsetting the volatility increase caused by ethanol
may require removal of other highly volatile components. Section VII examines these
fuel cost impacts and concludes that the net cost to society in 2012 in comparison to the
reference case of the increased use of renewable fuels and their replacement of MTBE,
will range from an estimate of 0.3 cent to 1 cent per gallon of gasoline.
This fuel cost impact does not consider other societal benefits. For example, the
petroleum-based fuel displaced by renewable fuel, largely produced in the United States,
should reduce our use of imported oil and fuel. We estimate that 95 percent of the
lifecycle petroleum reductions resulting from the use of renewable fuel will be met
through reductions in net petroleum imports. In Section IX of this preamble we estimate
the value of the decrease in imported petroleum at about $3.5 billion in 2012 for the 7.5
billion gallon case and $5.8 billion for the 9.6 billion gallon case, in comparison to our
2012 reference case. Total petroleum import expenditures in 2012 are projected to be
about $698 billion.
The above numbers only assess those impacts of increased production and use of
renewable fuel that we can quantify at this time. The RFS program attempts to spur the
increased use of renewable transportation fuels made principally from agricultural crops
produced in the US. As a result, it is important to analyze the consequences of the
transition to greater renewable fuel use in the US agricultural sector. To analyze the
impacts on the US agricultural sector, EPA has selected the Forest and Agricultural
Sector Optimization Model (FASOM) developed by Professor Bruce McCarl, Texas
A&M University and others over the past thirty years. FASOM is a dynamic, nonlinear
programming model of the agriculture and forestry sectors of the U.S. (For this analysis,
we will be focusing upon the agriculture portion of the model.) The strength of this
model is its consideration of the full direct and indirect impacts of a shift in production of
an agricultural commodity. For example, increased ethanol use will increase the demand
for corn. The model assesses not only the impacts of increased demand for corn on acres
devoted to corn production but also where the incremental corn will be produced, what
other crops will be displaced and how corn is allocated among competing uses. Shifts in
corn production will likely impact the price of corn and other crop prices. The model can
also estimate the impacts of increased renewable fuel use on animal feed costs, animal
production, costs to consumers and US agricultural exports. Similarly, FASOM can
estimate effects on US farm employment and income (broken down by region, and farm
sector such as corn farmers versus soybean producers versus the livestock industry, for
example).
One of the effects of increased use of renewable fuel is that it diversifies the
energy sources used in making transportation fuel. To the extent that diverse sources of
fuel energy reduce the dependence on any one source, the risks, both financial as well as
strategic, of potential disruption in supply or spike in cost of a particular energy source is
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