Bill changes ethanol mandate

Oct 7, 2011

Legislation was introduced in the House last week that would reduce the federal mandate to use fuel ethanol when corn supplies are tight. Livestock and dairy producers say the current mandate gives a financial advantage to ethanol makers and unfairly boosts the cost of livestock feed.

Reps. Bob Goodlatte, R- VA, and Jim Costa, D-CA, introduced the Renewable Fuel Standard Flexibility Act. The bill would reduce or eliminate the volumes of renewable fuel use required by the Renewable Fuels Standard based upon corn stocks-to-use ratios.

It would allow for a reduction of up to 25 percent when the corn stocks-to-use ratio is projected to be less than 7 percent and reduce it by 50 percent when the ratio would be 5 percent or less, a barebones level for supplies.

The U.S. ethanol mandate, which began five years ago and triggered a rapid expansion of the ethanol industry, requires gasoline retailers to use 12.6 billion gallons of corn-derived ethanol this year. The mandate grows to 15 billion gallons in 2015 for corn-derived ethanol.

The Renewable Fuels Association warned that if the Goodlatte and Costa bill “were to be successful, the loss of ethanol in the fuel supply would hammer American consumers at the pump.”

The U.S. also spends about $6 billion per year subsidizing ethanol-blended gasoline with a tax credit of 45 cents per gallon. There is also a tax of 54 cents per gallon on imported ethanol.

Most gasoline sold in the U.S. contains as much as 10 percent ethanol, but the En vironmental

Protection Agency recently cleared the way for gasoline companies to add as much as 15 percent so long as the fuel is used for “2001 and newer passenger vehicles.”

The ethanol mandate for this year is 12.6 billion gallons. Production is expected to exceed 13.5 billion gallons due to exports and high oil prices which make ethanol attractive.

A dozen bills involving ethanol have been filed in the House. Some promote ethanol use while others limit the portion of ethanol in fuel or repeal tax credits. — Traci Eatherton, WLJ Editor