The reduction (technically, a not-as-big-as-possible increase) was proposed Friday (PDF) and, according to The New York Times, represents something of a head-scratcher for the ethanol industry, despite being expected. Basically, what's happening is that enough ethanol is being produced to fulfill the EPA's current ethanol requirement. Most of the ethanol is used to make a 10-percent blend with gasoline (E10), and some is used to make E85. The Energy Independence and Security Act of 2007 and the Renewable Fuels Standard say an ever-increasing level of ethanol should be used in the national fuel supply, but the EPA has had to adjust the biofuel mix because of the "blend wall." This is the level where we can't pour any more ethanol into the gasoline supply because it would push the overall blend above 10 percent (plus limited use of E85 and E15). Therefore, the EPA is recommending that the US add 15.21 billion gallons of ethanol to the gasoline supply in 2014. That's still within the 15-15.52 billion gallon projected range, but in the lower half. In the proposal's language:
In other words, since y'all aren't using enough ethanol, we're going to cut back. The move was applauded by the oil industry and scoffed at by many farmers.
[The] EPA is proposing to adjust the applicable volumes of advanced biofuel and total renewable fuel to address projected availability of qualifying renewable fuels and limitations in the volume of ethanol that can be consumed in gasoline given practical constraints on the supply of higher ethanol blends to the vehicles that can use them and other limits on ethanol blend levels in gasoline.
Most of the ethanol in the commercial supply is made from corn, but the EPA also regulates cellulosic ethanol, and there the news is even worse for biofuel supporters. The EPA said, "Based on an assessment of the available volumes of cellulosic biofuels, EPA is proposing to set the cellulosic biofuel standard at 17 million gallons, significantly lower than CAA target of 1.75 billion gallons (PDF).
Since this is just a proposed rule, there is still time for the public and private companies to weigh in. The EPA will release details on an upcoming hearing in the future.