EPA proposal would hand farmers’ cash to oil companies — ethanol group
Source: Amanda Peterka, E&E reporter • Posted: Thursday, November 7, 2013
The Renewable Fuels Association said refiners would reap up to a $15.2 billion windfall if EPA lowers RFS targets, while farmers would be paid less for corn and spend more on fertilizers.
“When you peel back the onion, this all boils down to money,” said Geoff Cooper, the association’s chief economist.
Lowering the targets, he said, “would be a huge step backward for the corn ethanol industry, would amount to a substantial transfer of wealth away from America’s farmers and small businesses to oil and gas companies and foreign producers.”
EPA is considering pulling back 2014 renewable fuel targets, largely on concerns raised by the oil industry over the amount of ethanol that can be blended into today’s petroleum-based fuel supply, according to a leaked draft (Greenwire, Oct. 9). The draft showed EPA setting the overall renewable fuel target at 15.21 billion gallons, down from the target of 18.15 billion gallons written into the 2007 Energy Independence and Security Act.
The EPA proposal is being reviewed by the White House Office of Management and Budget. It’s expected to be released soon for public comment.
The Renewable Fuels Association said it analyzed the impact of just the corn ethanol portion of the proposal, where EPA is considering a target between 1.22 billion and 2.04 billion gallons lower than the 14.4 billion level anticipated by the 2007 statute. Ethanol is currently used in about 10 percent of the nation’s fuel supply.
Cutting the target by that much would reduce oil industry purchases of ethanol by between $2.1 billion and $3.6 billion next year. At the same time, refiners would pocket an extra $2.3 billion to $4 billion in extra revenue from selling petroleum-based gasoline to fill the ethanol gap.
The nation’s overall demand for gasoline would increase, raising gas prices by between 5 and 9 cents a gallon, the group said. And by not having to invest in infrastructure to blend higher levels of ethanol into gasoline, refiners would net an extra $200 million to $400 million.
The impact on the agricultural community, on the other hand, would be “monumentally scary,” given the uncertain prospects of the farm bill and federal supports for farmers, Cooper said.
Reducing the corn ethanol mandate to 13 billion gallons would reduce corn prices by 20 to 25 percent, according to a Deutsche Bank study released after the EPA draft proposal was circulated. Corn prices are already at a low point of $4.25, down from the $7- and $8-a-bushel range seen during last year’s drought.
The American Petroleum Institute, which is calling for even lower renewable fuel targets next year, disputed the new ethanol industry analysis.
API spokesman Carlton Carroll warned that the “blend wall,” or the name given to the 10 percent technically feasible limit to the amount of ethanol that can be blended into petroleum-based fuel, stands to cost consumers even more.
“This so-called analysis is just another distraction,” Carroll said. “Because of rigid ethanol mandates, consumers are now faced with putting more ethanol in their tanks than their engines were designed to accommodate. Passing the blend wall could cause a drastic reduction in America’s fuel supply, possibly leading to dramatic fuel cost increases and fuel supply disruptions rippling adversely though the economy.”
The oil industry released a study earlier this year by NERA Economic Consulting that found consumers would see a 30 percent increase in gasoline costs by 2015 because of the renewable fuel standard (E&ENews PM, March 20).