EPA proposal on biodiesel regulations draws concerns from Nebraska, Iowa ethanol producers

Source: By Russell Hubbard, Omaha World Herald • Posted: Friday, July 14, 2017

New proposals for biofuel requirements in 2019 have ethanol folks in Nebraska and Iowa asking what the regulators in Washington are thinking.

This month the U.S. Environmental Protection Agency released proposed requirements for biofuels in coming years, an annual figure known as the Renewable Fuel Standard. The proposal would allow for 15 billion gallons of conventional corn-based ethanol — unchanged from the previous standard — to be blended into the nation’s fuel supply and dispersed at neighborhood gas pumps as a clear gas/ethanol blend. That’s fine and good with ethanol supporters, bad and misguided as far as detractors are concerned.

Todd Becker, chief executive of Omaha-based Green Plains, the country’s second-largest ethanol producer, said the 15 billion gallon standard is good news for the business, providing confidence for investors.

“It validates the commitment of the administration,” he said, referring to President Donald Trump.

But it is the biodiesel part that really has people asking what is going on. The EPA has proposed that 2.1 billion gallons of diesel produced from sources such as corn oil and soybean oil be used as a motor fuel in 2019, also unchanged from the previous standard. The problem is, that is already below last year’s consumption nationwide of 2.9 billion gallons, mostly courtesy of fleet vehicles such as buses that use biodiesel.

People in Iowa and Nebraska, the top two ethanol producers nationwide and major corn oil suppliers, are wondering why the biodiesel target is almost 30 percent below the level of demand that has already booked and paid for.

“It is hard to figure,” said Brian Cahill, chief executive of Council Bluffs-based ethanol plant Southwest Iowa Renewable Energy, which also produces about 90,000 pounds a day of corn oil, a byproduct of distilling the grain into the motor fuel. “The industry certainly has the ability to produce more than 2.1 billion gallons. We thought that number would have been an increase over and above, not a cutback.”

Corn oil has become a key product for Midwest ethanol plants, for use in biodiesel and animal feed. Todd Sneller, administrator of the Nebraska Ethanol Board, is also puzzled at the drawdown for biodiesel. (Corn oil of a motor-fuel specification can be added to regular diesel fuel in any mixture and put right in diesel-burning engines without any modifications to the machinery.)

“A robust target for biodiesel is important to sustaining growth in the use of domestically produced, renewable bio-oils that can improve performance and significantly reduce emissions from diesel vehicles,” Sneller said. ”Setting volume requirements that encourage investment in new technologies is consistent with the goals of the Renewable Fuel Standard.”

The federal laws that led to the RFS were passed in 2005 and 2007 with the overwhelming support of both parties and houses of Congress, with the stated aims of encouraging clean air and independence from imported oil.

And though some people call foul on any encouragement of ethanol, biodiesel or other non-petroleum motor-fuel sources, you won’t find a lot of them in ag and government circles in Iowa and Nebraska. The ethanol industry has an economic impact of about $5 billion a year in Nebraska from the business activities of about two dozen plants, according to an analysis by the University of Nebraska-Lincoln.

In Iowa, the annual economic impact is about $6 billion from 42 plants.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, agrees that the limper biodiesel proposal is a puzzler.

“This would be the first time biodiesel has not had a year-over-year increase,” Shaw said.

Of course, for some, any form of federally legislated renewable fuel requirements is verboten. Detractors say ethanol is a mirage for the motorist: cheaper, but of lower energy content and therefore lower mileage.

The American Petroleum Institute this month said renewable fuel requirements come “with only hypothetical benefits and added costs to consumers.” In particular, higher blends, such as 15 percent ethanol/clear gas called E15, are bad policy, according to API, a trade group representing oil companies.

“Studies show that higher ethanol volumes under the RFS would raise fuel costs for consumers and damage car engines,” the group said in a statement. “It is essential that Americans have access to fuels they want and can safely use in their vehicles. Congress must fix this broken, outdated program.”

Ethanol producers dispute this, and say that, among other advantages, there are tax incentives for biodiesel end users — such as fleets of trucks — that make the fuel profitable for them and producers.

The EPA — caught every year at RFS time between the petroleum and ethanol camps — isn’t saying anything about the biodiesel requirement other than this: Anyone is free to register objections to any aspect of the proposal during a comment period ending next month.