Proposed ethanol mandate stirs food vs. fuel debate

News
Nov 25, 2013
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Ethanol and ag groups lined up to take their sides after the U.S. Environmental Protection Agency (EPA) released its proposal to cut the Renewable Fuel Standard’s (RFS) from the statutory level of 14.4 billion gallons to 13 billion gallons and cut the total RFS volumetric requirement from 18.15 billion gallons to 15.21 billion gallons.

On Nov. 15, the EPA proposed for public comment the levels of renewable fuels to be blended into gasoline and diesel as required by Congress under the Energy Independence and Security Act of 2007.

Developed with input from the U.S.D.A., the proposal seeks public input on annual volume requirements for renewable fuels in all motor vehicle gasoline and diesel produced or imported in 2014.

According to EPA, “The proposal seeks to put the Renewable Fuel Standard program on a steady path forward—ensuring the continued long-term growth of the renewable fuel industry— while seeking input on different approaches to address the E10 blend wall.”

The proposal has done nothing short of stir the already boiling ethanol debate.

Purdue University energy policy specialist Wally Tyner said the plan would reduce incentive for biofuels growth.

Tyner, the James and Lois Ackerman Professor of Agricultural Economics, commented on the EPA’s proposal to trim total production of biofuels from the current mandate of 18.15 billion gallons to 15.21 billion. Tyner recommends the total be set at 16.4 billion.

“I think something in that area does a better job of fulfilling the original intent of Congress in the RFS, but adjusted for current market and technology realities,” Tyner wrote in a blog posting titled “The Biofuels Renewable Fuel Standard at a Crossroads” at http://www.pennenergy.com/index/blogs/energy-and-environmentaleconomics.html.

Congress enacted the Renewable Fuel Standard in 2005 and expanded it in 2007, setting required production goals for various biofuels to stimulate production of alternative fuels and reduce U.S. dependency on foreign oil. The EPA had been considering revising its 2014 mandate in part because declining demand for gasoline has led to a corn ethanol “blend wall,” the point at which the market cannot consume as much ethanol as the EPA requires to be produced.

The EPA’s proposal lowers corn ethanol production from the current 14.4 billion gallons to 13.01 billion.

“I think it is a mistake to put the RFS that low,” said Tyner, who recommended that the corn ethanol requirement be set at 13.9 billion gallons to provide incentive for refiners to blend and sell more E85 fuel, a mixture of 85 percent ethanol and gasoline that can be used only in “flex fuel” cars. Other cars use gasoline that contains 10 percent ethanol. That level also would not put undue pressure on corn prices.

Refiners have incentive to produce more E85 because the ethanol price is falling compared with gasoline and they may be able to get added revenue from their blending credits called RINs, short for renewable fuel identification numbers.

The consequence of setting the RFS at 13.01 billion gallons for corn ethanol would be to “destroy that incentive,” Tyner said. In passing a fuel standard, Congress intended to provide a strong incentive to bring more renewables into the market. The proposed level of 13 billion is even less than the blend wall at 13.3 billion gallons.

Tyner also said the EPA’s target of 1.28 billion gallons of biodiesel fuel next year could be increased to 1.5 billion gallons because production this year likely will exceed 1.6 billion.

Further, Tyner recommended that the EPA increase its 2014 proposal for production of cellulosic biofuels, which come from such sources as corn stover and switchgrass, from 17 million gallons to 30 million gallons, closer to his expectation of actual production. The legislated level of the mandate for next year is 1.75 billion. Tyner noted that there is little cellulosic biofuel today because of lack of technical progress in producing it and investment in it.

“Thus, essentially all the cellulosic category must be waived because the product simply does not exist,” he said.

Tyner is suggesting that the 2014 RFS level be decreased only by 1.75 billion gallons, the amount of the current cellulosic mandate for next year.

“The basic change since the RFS was passed is that we have not achieved the cellulosic biofuels production desired,” he noted.

“Thus, it makes sense to reduce the RFS by no more than the level of the cellulosic category.”

The National Corn Growers Association expressed their dissapointment over the EPA’s announcement.

“This recommendation is ill-advised and should be condemned by all consumers because it is damaging to our tenuous economy and short-sighted regarding the nation’s energy future,” said NCGA President Martin Barbre. “Agriculture has been a bright spot in a failing U.S. economy, but current corn prices are below the cost of production. EPA’s ruling would be devastating for family farmers and the entire rural economy.”

In a joint news conference last Tuesday, two newcomers joined the debate; VoteVets.org and Americans United for Change held a press teleconference to announce their participation in the counteroffensive against what they are calling, “Big Oil’s lies about the renewable fuel industry’s remarkable record of creating nearly 400,000 American jobs that can’t be outsourced, revitalizing rural communities, innovating next-generation renewable energy, and making us safer by reducing reliance on oil from unstable foreign regions and regimes that hate us.”

On the call were Jon Soltz, Co-Founder and Chairman of the 360,000 supporter veterans group, VoteVets.org; Brad Woodhouse, President, Americans United for Change; and Myrna Heddinger, Mayor of Emmetsburg, IA, the site of a current POET ethanol plant and the location of Project LIBERTY, a commercial scale cellulosic biorefinery under construction by POET-DSM and expected to go into production by mid-year, 2014.

Woodhouse announced the joint campaign between Americans United for Change and VoteVets. org to “join the fight against big oil and standing up for common sense, bipartisan policies that are helping America become more energy independent.” He noted that the RFS has cut America’s dangerous dependence on foreign oil and because of this bipartisan law, the U.S. now gets 10 percent of its energy from clean renewable sources.

“For the last several months, the oil industry has been waging a misleading and self-serving scare campaign against this policy,” Woodhouse added. He said their campaign will be focused on key markets and consists of advertising as well as grassroots and grasstop efforts.

Woodhouse said the two groups will mobilize their membership base but also intend to buy advertising in key areas of the country to support the RFS.

“The Renewable Fuels Standard—which was signed into law with wide, bipartisan support by President George W. Bush—has helped cut America’s dangerous dependence on foreign oil,” he said.

Woodhouse said the oil industry has targeted the RFS because of its “record of success.”

In addition, the Michigan Corn Growers Association started an online petition in support of the RFS.

According to the association website, “Since 2007, the Renewable Fuel Standard has required that more renewable fuel be blended into transportation fuels. The increased use of homegrown biofuels has significantly benefited consumers across the country.”

Citing a recent study done at Michigan State University, the association points out the potential losses with the proposed changes: • $260.5 million in economic activity from lower corn prices; • $172.8 million in economic activity from reduced ethanol Production; • 288 jobs in the ethanol industry and general economy.

The Environmental Working Group (EWG) last Tuesday posted a study on its website making what the group says is a connection between the RFS and dust storms.

“Dust storms have reemerged across much of Kansas, Oklahoma, Colorado and Texas, fueled by the same combination of persistent drought, plowing up fragile land and poor public policy that led to the Dust Bowl years of the 1930s,” the group claims.

EWG said that from 2008 to 2012, higher crop prices driven by biofuels production sparked by the RFS led to farmers expanding crop production to more than 5.3 million acres of highly erodible land.

The North American Meat Association (NAMA) put in its two cents on the proposal, urging reform through elimination of the mandate, and allowing the free market to determine the best use.

“We support the efforts of Senator (Dianne) Feinstein (D-CA) and Senator (Tom) Coburn (R-OK) to pass the Corn Ethanol Mandate Elimination Act of 2013,” said NAMA CEO Barry Carpenter. “This bipartisan legislation will create a level playing field for the agricultural feed supply.”

“The current standard has proved inflexible and damaging even under the most extreme circumstances. During 2012, when the U.S. experienced one of its worst droughts, there was no adjustment to the rigid RFS. The result was significant economic hardship for America’s livestock producers,” NAMA shared in a press release.

“The common sense approach taken by Senators Feinstein and Coburn would maintain the cellulosic and advanced biofuel mandates, providing the incentive for the development of next generation biofuels that do not rely on food-based feedstocks.” — Traci Eatherton, WLJ Editor

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