EPA proposes adding power for electric vehicles to ethanol, biodiesel mandate

Source: By Donnelle Eller, Des Moines Register • Posted: Monday, December 5, 2022

In a historic and potentially controversial move, the Biden administration is calling for adding energy used to produce power for electric cars and trucks to a federal mandate that has, for nearly two decades, dictated how much ethanol, biodiesel and other renewable fuel should be blended into the nation’s fuel supply.

The U.S. Environmental Protection Agency on Thursday proposed making electricity generated from biogas — produced at landfills, sewage treatment plants and other sources — and used to charge electric vehicles part of the nation’s Renewable Fuel Standard.

Congress first enacted the RFS in 2005 to reduce the U.S. dependence on foreign oil by requiring that U.S.-produced ethanol and biodiesel be blended into the national fuel supply.

The Renewable Fuel Standard is vitally important in Iowa, which is both the nation’s largest ethanol and biodiesel producer. The state also is the top U.S. corn grower, with about half the state’s crop used to make ethanol, and the second-largest grower of soybeans, a major biodiesel feedstock.

This is the first time the EPA has had a free hand in deciding the renewable fuel blending requirements. The volumes previously dictated by Congress under the RFS expire this year.

Ethanol producers express support for proposal

Ethanol supporters on Thursday generally praised the proposed rule, which outlines blending requirements for the next three years, saying it strongly supports corn-based ethanol. The rule calls for 15 billion gallons of conventional or corn-based ethanol to be blended in the nation’s fuel supply in 2023, as well as an additional 250 million gallons to meet a 2017 court order. It would require the same amount ― 15.25 billion gallons ― in both 2024 and 2025.

The proposed rule would reduce U.S. oil imports by 160,000 to 180,000 barrels of oil per year, valued at $200-$223 million annually, the EPA estimated.

“Today’s proposed increase in biofuel volumes is a win for drivers, a win for farmers, and a win for the environment,” Denny Friest, a central Iowa farmer and the Iowa Corn Growers Association board president, said in a statement. “The stability and certainty provided by today’s proposal sends a positive signal to corn growers and establishes a firm foundation to build on for even greater growth in higher biofuel blends.”

Geoff Cooper, the Renewable Fuel Association’s CEO, said in a statement that the proposed rule “will significantly accelerate growth and investment in the low-carbon renewable fuels that will help decarbonize our nation’s transportation sector, extend domestic fuel supplies, and bolster the rural economy.”

But there was also dissatisfaction with the proposal, particularly among biodiesel and renewable diesel advocates who said the measure would significantly shortchange their industry. U.S. Sen. Chuck Grassley, an Iowa Republican, said he saw a lost opportunity to hold down the cost of diesel fuel, which the AAA fuel survey said averaged almost $5 a gallon in Iowa on Thursday.

“Month after month, Americans have seen prices rise as the cost of energy needed to move goods has soared,” said Grassley. “Diesel prices in particular — the critical freight fuel — have skyrocketed, pushing sticker prices up on all kinds of consumer goods.

“While the EPA announcement brings some consistency and certainty to blend levels for gasoline, it fails to take advantage of a growing supply of advanced biofuels that are used to move freight,” Grassley said.

The EPA’s proposed mandate for biomass-based diesel is less than 3 billion gallons through each of the next three years and is “below the industry’s existing production and ignores the clean fuels industry’s significant investments in new capacity,” Clean Fuels Alliance America, an industry advocacy group, said in a statement.

The industry produces more than 3 billion gallons annually now, the group said, with the U.S. Energy Information Administration predicting demand for 500 million more gallons of biodiesel and renewable diesel in 2023.

“While we recognize that the EPA’s proposed 2022 Renewable Fuel Standard volumes include some growth for the biodiesel industry, by any measure it is very conservative growth, and that will be detrimental,” said Dave Walton, an Iowa soybean farmer who serves as a director on the Iowa Biodiesel Board and Iowa Soybean Association.

Altogether, the EPA proposes requiring 20.82 billion gallons of renewable fuel in 2023, 21.87 billion gallons in 2024, and 22.68 billion gallons in 2025.

Impact of adding credits for electric vehicles is unclear

In a call with reporters, Cooper, the Renewable Fuels Association CEO, said the proposed electric vehicles program is complex and the group is still trying to determine how it would track biogas use to power electric vehicles.

Under the Renewable Fuel Standard, refiners and fuel importers use tradable credits — known as renewable identification numbers, or RINs — to prove they have satisfied annual quotas for blending biofuels into their products. Renewable electricity used to power electric cars and trucks would qualify for a new category of credits, called eRINs, beginning as soon as 2024.

President Joe Biden is pushing the nation toward electric vehicles to reduce carbon emissions that contribute to climate change.

“With this proposal, EPA seeks to provide consumers with more options while diversifying our nation’s energy mix,” EPA Administrator Michael Regan said in a statement. “EPA is also focused on strengthening the economics of our critical energy infrastructure, needed to maintain and boost our energy security.

“We’re eager to continue the dialogue on how biofuels can bolster U.S. energy security, protect consumers from high fuel costs, strengthen the rural economy, and help reduce greenhouse gas emissions,” he said.

The proposed rule indicates that part of the credits could go to Elon Musk’s Tesla and other electric vehicle makers, a move that’s likely to be controversial.

Monte Shaw, the Iowa Renewable Fuels Association’s executive director, said in a statement that the EPA needs to ensure eRINS are trackable, add to the RFS goals and do not “cannibalize other renewable fuels.”

Shaw added that the “proposal to let automakers generate eRINs makes no sense. … The eRINs should be tied to the production of renewable electricity from a biomass feedstock,” with the benefits going to farmers and ranchers, who can generate the biogas through manure digesters and other efforts.

Geoff Moody, an American Fuel & Petrochemical Manufacturers executive, criticized the proposal in a statement, saying the EPA “must also hold true to the legacy of RFS as a liquid fuels program — not an electric vehicle program — by rejecting yet another massive regulatory subsidy for electric vehicle manufacturers.”

Cooper said he believed the renewable fuel proposal will drive demand for gasoline with higher blends of ethanol. He also said it would support legislation introduced Wednesday by Grassley, Sen. Joni Ernst, another Iowa Republican, and other Midwestern members of Congress to make gasoline blended with 15% ethanol available year-round. In past years, the blend has been taken off the market during warmer months because of concerns it may contribute to smog.

In April, Biden, under pressure to lower prices at the pump, lifted the ban on summer sales of E15 through an emergency waiver during a visit to Iowa. The bipartisan legislation would make that waiver permanent.

Gov. Kim Reynolds, who was among eight Midwest governors who pushed EPA for a permanent waiver, said she welcomed the legislation, adding that she hopes Congress passes it quickly.

Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at deller@registermedia.com or 515-284-8457.