The Environmental Protection Agency proposed a reduction in the levels of ethanol to be blended into gasoline and to keep the current volume of biomass-based diesel for 2014 and 2015, saying that the objectives were difficult if not impossible to meet. The move marks the first time that the agency has reversed course in its move to replace fossil fuels with renewable sources of energy.

The news was met with derision by environmentalists and farmers alike.

The EPA’s move is a reality check given that the fuel systems in today’s cars are not designed to run on fuel that is more than 10% ethanol. In addition, there has been little consumer demand for fuel with a higher percentage of ethanol. The EPA said it was trying to address a problem known as the “E10 blend wall,” a problem that occurs when the Congressionally-mandated amount of ethanol exceeds that which can be mixed into gasoline. Refiners have been warning that they would hit the blend wall in 2014 for the first time if the rules weren’t changed

The Energy Independence and Security act of 2007 calls for a yearly increase in the use of renewable fuel but the need to replace imported oil with ethanol has dropped in lockstep with a decline in oil imports and a sharp increase in domestic production. In October, domestic oil production exceeded oil imports for the first time in close to a decade. When coupled with a decline in the demand for transportation fuel that is expected to continue, oil refiners are arguing that the mandated system of yearly increases be dropped.

The EPA’s proposed changes will be open for public comment for 60 days, before becoming final next spring.

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