EPA increases renewable fuels standard, giving boost to Nebraska, Iowa ethanol industries

Source: By Russell Hubbard / World-Herald staff writer • Posted: Tuesday, December 1, 2015

The Nebraska and Iowa corn ethanol industries — the nation’s largest — received a small boost Monday after the U.S. Environmental Protection Agency raised the amount of renewables that must be part of the nation’s motor-fuel supply.

The EPA’s final rule for 2016 requires 18.1 billion gallons of renewable fuels to be used in powering motor vehicles; the agency has no separate requirement for corn-based ethanol as part of its Renewable Fuel Standard. But in practice, corn-based ethanol destined to be blended with clear gas accounts for 90 percent of biofuel production. Gasoline with 10 percent ethanol added — E10 — is available at almost every filling station.

“It is an overall positive for the industry,” said Todd Becker, chief executive of Omaha-based Green Plains Inc., the nation’s fourth-largest ethanol producer. Shares of Green Plains rose 5 percent Monday, to close at $23.69.

Becker said the implication of the ruling is that the EPA expects 14.5 billion gallons of corn-based ethanol to be blended next year, up from 14 billion gallons this year.

But that is still below the 15 billion gallons implied in the 2007 renewable fuels law passed by Congress, a fact noted by Nebraska Gov. Pete Ricketts on Monday.

“The decision to lower the RFS will hamper investment in existing businesses, as well as in research and development of the next generation of biofuels,” Ricketts said in a statement. “In Nebraska, we’ve already seen the impact. News of the plan to decrease the RFS earlier this year caused a major biofuels company operating in Nebraska to cool a proposed expansion project.”

Still, the year-over-year increase in corn-based ethanol makes for big news in Iowa and Nebraska, the first- and second-largest ethanol producers, respectively, and No. 1 and No. 3 in corn, its main raw material. The industry has a $5 billion-a-year economic impact in the Cornhusker State, according to an analysis by the University of Nebraska-Lincoln. Nebraska is home to 25 ethanol plants, and Iowa has 43.

A contentious issue pitting ethanol producers against oil companies in competition for space in gas tanks, objections were immediate Monday.

“The mandate distorts markets, raises gasoline prices and benefits a limited few at the expense of all Americans,” American Energy Alliance President Thomas Pyle said Monday. “Full repeal is the only option for those concerned about the interests of all Americans and not just the self-interests of the biofuel industry and its lobbyists.”

Several members of the Iowa and Nebraska congressional delegations issued press releases criticizing the EPA’s action, calling it a bureaucratic overreach that is inconsistent with the law. And they touted the benefits of having a robust Renewable Fuel Standard.

“The RFS creates consumer choice for clean fuel, spurs investment in research, production and infrastructure,” Sen. Joni Ernst, R-Iowa, said. “Furthermore, it is critical to growing our green energy sector, reducing our dependence on foreign oil and supporting the rural economy in Iowa and across the Midwest.”

Even with the modest increase for corn-based ethanol, ag producer groups objected because the overall standard for all biofuels does not meet the level set by Congress almost 10 years ago. The total biofuel requirement for 2016 envisioned by the law is for 22.3 billion gallons, not 18.1 billion.

“A slap in the face to the American farmer and another strike against the American consumer,” the Nebraska Corn Board said. The Nebraska Farm Bureau called it “a step backward.”

The change to 14.5 billion gallons of corn-based ethanol to be blended in next year, from 14 billion this year, is slight, said Will Speer, a senior petroleum analyst with GasBuddy.com. He said many other circumstances are likely to affect pump prices before the new requirements will. He said wholesale ethanol prices were little changed after the announcement Monday, meaning little impact is expected on retail prices going forward.

“The market wasn’t impressed with the announcement,” Speer said. “It is not going to have a significant impact on prices.”

The EPA also published requirements for 2014 and this year, after not being able to come up with them the first time around. Every year, either ethanol or petroleum producers have held up the rules with lawsuits after not being satisfied with the outcome.

“I am sure lawsuits will fly this time around,” said Becker, the Green Plains CEO.

Janet McCabe, the acting assistant administrator for EPA’s Office of Air and Radiation, said the renewable fuels industry is “an incredible American success story” that creates rural jobs and reduces reliance on foreign oil. McCabe said she envisions greater use of higher gas-ethanol blends.

“This is intended to push increased use and availability of those fuels,” she said on a conference call Monday. “We think there will be increased availability of E85 and E15.”

The American Petroleum Institute said any such increased use of those fuels is the result of artificially created distortions in the market for motor fuel.

“EPA’s final rule relies on unrealistic increases in sales of higher ethanol fuel blends despite the fact that most cars cannot use them,” the institute said. “Motorists have largely rejected these fuels.”

Criticism of ethanol is that it contains lower energy content, meaning lower gas mileage, and that it damages small engines. And although producers of corn-based ethanol get no tax breaks or other subsidies, critics have called the Renewable Fuel Standard a way to artificially stimulate consumer demand that would otherwise not be there.

Joseph Morton of The World-Herald Washington bureau contributed to this report.