Ethanol debate could come to a head in Washington this year

Source: By Christopher Doering, Des Moines Register • Posted: Monday, March 23, 2015

The ethanol and oil industries have dug in for what could be a pivotal year for the future of the renewable fuel mandate in Washington, with the victor poised to add jobs and reap millions in profits at the expense of their bitter rival.

The debate centers on an 8-year-old mandate put in place by Congress known as the Renewable Fuel Standard. It requires increasingly greater amounts of alternative fuels, much of it made from corn, to be blended into millions of gallons of fuel pumped into cars and trucks by motorists each year.

Opponents of the mandate, led by the American Petroleum Institute, have stepped up pressure on the Republican-controlled Congress to rework or repeal a requirement they contend is fatally flawed and no longer works in today’s changing energy landscape, saying that people are driving less and cars are more fuel-efficient.

Meanwhile, ethanol advocates are aware that if they lose this battle, they may never get another chance. Changing the mandate would affect the farmers, producers and rural Americans who have invested billions of dollars into ethanol, and it would also stunt the growth of next-generation fuels made from plant materials.

“There’s no way we’ll take any of this for granted. And we’re pushing back,” said Tom Buis, chief executive with Growth Energy, an ethanol trade group. “We’re going to make this a very public campaign.”

API, a trade group representing more than 600 oil and natural gas companies, also raises alarm about the “blend wall,” the point at which the amount of renewable fuels required exceeds the amount blenders can reasonably mix in. Hit this wall, API argues, and there is no way the industry can blend enough ethanol to meet the ever-growing targets set by Congress in the Renewable Fuel Standard.

The Environmental Protection Agency, which has the flexibility to adjust the annual blending level under certain conditions, seemed to hint at the mandate’s problems when it proposed 2014 ethanol produced from corn levels that were well below the amount initially set by Congress.

But the agency pushed back the timeline for finalizing the mandate multiple times before announcing in November it would not set the fuel standards because of widespread opposition from Midwest leaders and farm groups opposed to the cuts. The EPA is expected to announce the blending rate this spring, while at the same time proposing new standards for 2015 and 2016.

Chad Hart, an associate professor of economics at Iowa State University, said Congress “had a very aggressive, far-reaching goal” when it said the country should be producing a certain amount of its fuel from ethanol. The plunge in oil prices from more than $100 a barrel as recently as July 2014 has left the two sides even more focused on defending their market share; both gasoline and ethanol have seen their prices erode during the drop.

“This debate was building even before energy prices started to drop, but that put a whole new layer on top of this,” said Hart.

Agriculture Secretary Tom Vilsack told The Des Moines Register in January that despite its strength, the renewable fuels industry still faces significant challenges. “There’s no question Big Oil is interested in limiting choices,” the former Iowa governor said. “Especially as low as they are, they will increase their efforts.”

Bob Greco, downstream director with the API, said repealing the Renewable Fuel Standard is one of its top priorities this year. The trade group, which is reaching out to new members of Congress on both sides of the aisle to educate them about the problems with the mandate, said it was optimistic it would be able to gain support to scrap the program.

The mandate “is a fatally flawed standard that doesn’t recognize today’s energy reality, and coupled with the (Obama) administration’s inability to manage what they got, I think it’s a very powerful incentive for Congress to move forward on this,” said Greco.

“We have a Congress now that’s willing to take votes and willing to consider pieces of legislation that in the past they might not have, particularly on the Senate side,” he said.

The nascent 114th Congress, sworn in Jan. 6, has wasted little time trying to alter the ethanol mandate, though it’s uncertain whether it will be able to muster enough support to make any meaningful changes.

“Few issues in Congress have such broad support for true reform,” said Rep. Bob Goodlatte, R-Va., who said the “unworkable mandate” is felt by every American through higher grocery bills and wear and tear to the family car. “Growing support from lawmakers in the House and Senate, as well as a diverse coalition of over 50 organizations, signals that there is momentum in Congress to achieve real reforms of the RFS.”

Ethanol supporters are confident that while pressure is mounting to change or end the Renewable Fuel Standard, the talking points used by proponents to defend ethanol — decreasing U.S. dependence on foreign oil, creation of jobs and environmental benefits — will be enough to quell any momentum to make a change.

“When you look at something, it takes a lot of power, a lot of cohesion … if it’s in Congress’ hands,” said Colin Johnson, a fourth-generation farmer in southern Iowa, the country’s largest ethanol producer. “I’m hopeful for the sake of Iowa and rural agriculture that (the RFS) stays where it is, and I’m pretty confident that it will.”