DuPont defends ethanol requirements

Source: Written by Aaron Nathans, The News Journal • Posted: Monday, February 3, 2014

Oil industry officials have been pushing the U.S. Environmental Protection Agency to scale back ethanol blend requirements for gasoline, citing lower-than-expected gasoline usage and gas stations and cars that can’t take on higher-ethanol fuels.

But DuPont, which is building a cellulosic ethanol facility in Iowa, says that plan is ill-advised. “It sends a chilling signal to the potential investors” in cellulosic ethanol technology, designed to combat climate change by reducing greenhouse gases, said Jim Collins, senior vice president of DuPont, who oversees the company’s industrial biosciences business.

Ethanol is made from corn, but DuPont has been banking on a next-generation biofuel, cellulosic ethanol, which is made from corn stover, the leaves and stalks left over after the corn is harvested. DuPont is planning to complete the $225 million Iowa plant by the third quarter of this year. It is being built to produce 30 million gallons per year, to help satisfy federal mandates for ethanol blending into gasoline.

In 2007, the EPA set ambitious goals for adding ethanol to fuels, with 36 billion gallons of ethanol planned to be blended into gasoline by 2022. This year, that number was supposed to be 18.15 billion gallons, including an increasing amount of cellulosic ethanol.

Collins said a predictable set of requirements from the federal government has been an important part of making the economics work for DuPont’s ethanol business.

But amid higher fuel efficiency in automobiles, resulting in a lower demand for gasoline, the EPA in November proposed rolling back that requirement this year to 15.21 billion gallons. Refiners say they’ve already put 10 percent ethanol into the supply of gasoline, and can’t add more without more cars that accept gas with higher ethanol content.

Charles Drevna, president of the American Fuel & Petrochemical Manufacturers, said in a press release that the EPA’s optimism for cellulosic biofuels “appears to have been tempered by reality.” Easing up on the requirements, Drevna said, would mean “that our members will not be required to purchase credits for a fuel that does not exist.”

In making the recommendation, the EPA cited a drop in gasoline consumption since the law was enacted in 2007, as well as the limited number of gas stations that offer a 15 percent ethanol blend, which multiple car manufacturers say would void their warranties if used.

That, as well as other market factors, “combine to place significant restriction on the volume of ethanol that can be supplied to and consumed in the transportation sector,” the EPA reported in November.

The EPA’s plan, Collins said, “takes us backwards,” and allows the oil industry to press its agenda of being the monopoly supplier of auto fuel.

Collins said it makes no sense that auto manufacturers have made such distinctions, saying fuel with 15 percent ethanol content would run fine in existing cars’ engines, with no damage. He called E-15 “the most widely tested fuel to date.”

Robert Gough, director of content of the Oil Price Information Service, said only a fraction of vehicles on the road are “flex fuel” compliant – meaning, they would run on the 15 percent ethanol blend.

Gough said cellulosic ethanol was expected to be far more commercially viable by now, but “commercial scale production just isn’t reality today,” and the scaled-back EPA requirements reflect that.

A comment period at the EPA has ended, and the agency is deliberating whether to press ahead with the change, Gough said.

Companies like DuPont can talk about changing government rules, but “Anytime anybody’s business plan depends on a federal requirement, you’re playing a game with a change in policy,” or regulators or administrations, Gough said.

It isn’t just DuPont that would be affected. Gov. Terry Branstad of Iowa has been resisting the changes, saying it would risk jobs at the state’s 50 biofuel plants.

“Don’t stop now,” Collins said. “We’re on a path to make meaningful greenhouse gas reduction goals.”