Biofuels RFS jumps up as a hot topic again

Source: By Rich Keller, Ag Professional • Posted: Tuesday, October 7, 2014

The Renewable Fuel Standard (RFS) jumped up as a hot topic around the nation again last week as 33 state governors asked the Obama administration to increase the blending mandates for biodiesel and ethanol from sources not previously receiving much attention.

This was happening at the same time as U.S. ethanol prices hit four-year lows and profits were sharply lower than the excellent earnings being obtained for most of 2014. The Wall Street Journal reported ethanol futures dropped 28 percent last month due to falling domestic demand, and U.S. ethanol producers are holding the largest inventories they’ve had for more than a year.

Illinois Gov. Pat Quinn (D) and Iowa Gov. Terry Branstad, the leaders of the Governors’ Biofuels Coalition told the administration on behalf of the coalition that the Environmental Protection Agency’s expected downward adjustment of the RFS is unacceptable, and if anything the volumes of renewable fuels should be increased, not lowered.

The EPA proposed last year to lower the ethanol that refiners have to blend into their petroleum-based fuels in 2014 and keep the biodiesel level at the same as 2013, which would use less than the industry actually produced. The storm around this proposal seems to have slowed the agency from acting because no mandate has been issued in 2014.

The governors want to make sure that the mandate doesn’t all of a sudden find the light of day, especially as ethanol from corn is in such a financial bind. Corn prices that are lower than last year could go lower as ethanol facilities are reportedly cutting production in response to weaker profit margins.

The governors also noted that the proposed cuts in the RFS, even before any final action, have curtailed investment in biodiesel and cellulosic ethanol, and this has hurt rural economies relying on industries associated with biofuels production.

The governors are interested in more than corn-based ethanol production. The letter was sent to the White House Office of Management and Budget, which is known to be reviewing the EPA’s proposed volume cuts to the RFS.

The governors’ letter pointed out the potential for “advanced biofuels,” or those from waste products generated by our economy, could create thousands of jobs and further decrease the U.S. reliance on imported oil.

“However, the adoption of EPA’s proposed 2014 RFS volume requirements threatens to have a negative economic impact on the rural economy and on the biofuels industry, specifically on biodiesel and cellulosic ethanol,” the letter states.

Editorials in support of the governor’s stance and the biofuels industry again began showing up around rural America, as they did back in 2013 when the EPA made its proposed adjustment strategy. An editorial by Bartholomew McLeay, an Omaha, Neb., attorney practicing agriculture and energy sector law, appeared in The Kansas City Star. He noted, “The law is clear RFS is not to be reduced through 2022 unless it is shown to harm the economy or environment or there is an inadequate domestic supply. None of these conditions exist.”

He further suggests, “No farmer or ethanol producer will receive a single penny from taxpayers if RFS is unchanged.”

What McLeay brought back into the discussion what the Renewable Fuels Association and other organizations have pushed for—an increase in the limit of ethanol blended into fuel to 15 percent from the current “blend wall” of 10 percent. It is this blend wall that at times has meant a glut of ethanol and large volumes of ethanol being exported that triggered the EPA to propose lowering of the RFS.

“There would be no blend wall or RFS reduction if E15 was not suppressed by certain Big Oil interests,” McLeay contends.

“E15 is acceptable in 75 percent of cars, trucks and SUVs on the road. Numerous studies have found no ‘meaningful differences between E15 and E10 in any performance category. NASCAR uses E15 on ‘every lap.’”

The controversy hasn’t ended but only seems to be firing up again.

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