March 8, 2013 Testimony of
David Whikehart
Marathon Petroleum Co mpany LP

For
US EPA’s RFS 2013 R enewable Fuels Standards Proposed Rule Hello. My name is Dave Whikehart. I am the Director of Product Supply and Optimization for Marathon Petroleum Company LP. I am responsible for our company’s purchase and distribution of biofuels, including our compliance with the Renewable Fuel Standard. Our company has been one of the nation’s largest blenders of biofuels for nearly thre e decades. Through our subsidiaries, we are the nation’s fourth largest refiner and produce roughly 10 percent of the nation’s gasoline and diesel fuel. Simply put, we are a major obligated party under RFS2.
Speaking as a major obligated party, it is diff icult to understand why we are just discussing this proposal on March 8 when this rule was required to be finalized by November 30 of last year. EPA is effectively proposing to make this rule retroactive to the beginning of 2013. Regardless of court ruli ngs, retroactive rulemaking is inherently unfair and poor public policy. At a time when obligated parties and other market participants involved in the RFS need clear signals, proposing a rule nearly one third of the way through the year and finalizing it with retroactive application in April or May of this compliance year is unacceptable. EPA should withdraw this proposal and begin to work on the 2014 renewablefuels standard so it can be proposed in a timely manner and finalized by

November 30, 2013, s o that EPA is in compliance with the Clean Air Act.
2013 is likely to be the year when all of the impracticalities of the RFS2, especially the E10 blendwall, start to hit home and it will only get worse in the future. Eventually, nearly all provisions of the RFS2 will become unworkable and will bring about its demise. The 2013 renewable fuels standards proposal is not only very late; it also appears to be poorly constructed. It aggravates rather than helps the situation. However, there are steps that EPA can take to mitigate the 2013 problems and we recommend that EPA focus on addressing these steps immediately. In addition to addressing the E10 blendwall, EPA needs to adjust the mandated volumes based on the reduced ethanol production experienced in
201 2. The 2012 drought caused the shutdown of many ethanol plants. These plants are unlikely to return to full operation until after the 2013 corn crop has been harvested and distributed in October of this year.
Concerning cellulosic biofuels, the volume re duction EPA has proposed is not sufficient to keep obligated parties from having to purchase credits from EPA for fuel that does not exist. There continues to be insufficient quantities of cellulosic biofuel to meet the obligated parties’ requirements. E PA continues to rely on the forecasts of cellulosic biofuel producers which have been consistently wrong in the past. Additionally, EPA repeatedly fails to account for the fact that startup operations can be erratic and unpredictable. EPA needs to set th e cellulosic biofuel renewable fuels standards on an “outcome neutral methodology over an aspirational one” as was stated by the D.C. Circuit Court of Appeals in its recent opinion.In a February 22, 2013 article, EIA revised its 2013 cellulosic biofuel estimate

downward to 5 million gallons. When EIA reduced this estimate, it acknowledged that it has overestimated the actual cellulosic production for every year that the RFS has been in place. Given the obvious difficulty and inaccuracy in forecasting

ce llulosic biofuel production, we recommend that EPA set the cellulosic ethanol mandate for 2013 at a level consistent with actual cellulosic biofuel production for the last 3 months of 2012 and the annual quantity should be pro

- rated to reflect that the rul e will not be final until April or May of this compliance year.
With the E10 blendwall having a significant market impact in 2013, it is imperative that EPA exercise its discretion to reduce the total and advanced mandated volumes by the same amount as th e cellulosic biofuel mandated volumes are reduced. There is insufficient production of other US biofuel to make up for the cellulosic biofuel shortfall.
We believe that Congress set the total and advanced targets for 2013 assuming that the cellulosic targ et of 1 billion gallons would be met with cellulosic gallons. We all agree that 1 billion gallons of cellulosic won’t be present in 2013, so in order to keep the total and advanced requirements for non

- cellulosic biofuels at the levels that Congress envis ioned in EISA, the total and the advanced biofuels requirements must be reduced by the expected shortfall of cellulosic. Leaving the total and advanced at 16.55 and 2.75 billion gallons, respectively, essentially raises the requirements for non

- cellulosic biofuels above the levels specified by Congress in EISA.
We believe it’s important for EPA to understand the unintended consequences for consumers that can occur when RIN prices escalate rapidly due to theestablishment of unobtainable mandated volumes. These increased costs have a

direct impact on the US economy. Corn ethanol RINS traded as high as 90 cents per RIN yesterday, an increase of 83 cents per RIN since January 3. A 90 cent corn ethanol RIN along with the current other RIN prices will increa se transportation costs borne by US consumers by about $17 billion per year.
On the subject of biomass

- based diesel, we believe a 28 percent expansion of the 2012 biomass

- based diesel mandated volume is extremely aggressive. On March 4, Department of Ene rgy announced the 2012 biodiesel production volumes. The industry’s production was on par with the 2011 volumes and below the mandated volume for 2012 of one billion gallons. Similar to the cellulosic mandate, the EPA is setting the volume requirements a t levels that are not in line with historical production. This seems contradictory to the recent court ruling that held that EPA must set renewable fuel mandate volumes based on reality and not on aspiration.
In addition, EPA will be at least five to six months late in setting the 2014 biomass

based diesel standard. EPA needs to meet its legislated deadlines and it needs to establish realistic standards. Another source of uncertainty is Congress’s reestablishment of the $1.00 per gallon biodiesel blending credit could encourage the importation of palm oil as a feedstock. Most of this palm oil would use biodiesel production capability but would not generate RINs. EPA needs to evaluate not only biomass

- based diesel production capability but also the biomas s
- based diesel RIN production capability. This added uncertainty further in another reason to keep the biomass

- based diesel mandated volume for 2013 and 2014 at 1 billion gallons.And finally, EPA needs to reduce the advanced biofuel 2013 requirement to t he

point where imports of Brazilian sugarcane

- based ethanol are no longer required for compliance. The sugarcane ethanol exported from Brazil to the US must be replaced by US corn ethanol or gasoline imported by Brazil. Swapping US corn ethanol for Braz ilian sugarcane ethanol to meet an artificial regulatory requirement defies logic.

In conclusion, EPA should withdraw this proposal as it is untimely and it will be impractical to implement. If the proposal is not withdrawn EPA should:

Set a cellulosic b iofuel standard based on the actual production in the last three months of 2012 and reduce the annual mandate 40% to reflect that the rule will not be final until April or May of the compliance year. Reduce the Advanced and Total standards by an amount eq uivalent to the cellulosic biofuel standard reduction
Set the biomass

- based diesel standard for 2013 and 2014 at 1 billion gallons. EPA needs to reduce the advanced biofuel 2013 requirements to the point where imports of Brazilian sugarcane

- based ethanol are no longer required for compliance

In 2013 RFS 2 will reach a critical juncture. EPA clearly needs to more fully understand and consider the potentially damaging impact of the overall program to our struggling economy before mandating the 2013 volumes

.Renewable fuel volume mandate levels must be established on time based on

verifiable facts and proven performance rather than grossly inaccurate forecasts, unrealistic assumptions, and aspirational goals.