Ethanol group downplays study calling for long-term RFS waiver

Des Moines Register  • Posted: Thursday, September 20, 2012

The Renewable Fuels Association downplayed a report released this week that found a waiver of the renewable fuel standard by federal regulators wouldn’t lower prices or significantly curtail corn demand as much as expected.

A study made public this week by the Energy Policy Research Foundation said a near-term waiver of the blending requirement by the U.S. Environmental Protection Agency would have little effect on the corn demand. The group also said the energy security claims and cost savings from ethanol have been exaggerated. To offset the loss in ethanol supply, it proposed boosting gasoline imports and reducing the production of other refined products in order to extract more gasoline from crude oil.

“Any waiver that does not push off the blendwall, perhaps by as much as 2-3 years, will not substantially reduce current blending demand. Unless the blendwall is pushed off by several years, obligated parties will continue to face a strong economic incentive to continue blending ethanol at up to 10% concentration and acquire (renewable identification numbers) in the current period to apply to future obligations,” EPRINC said in its report.

The Renewable Fuels Association, a trade group that represents the industry, said on Thursday doing away with the RFS for a long period would leave “a gaping hole in the gasoline supply.” The ethanol industry has countered the oil industry has used the drought as an excuse to reduce production of the renewable fuel.

“Ironically, the EPRINC report actually underscores why the RFS is so important; it highlights the fact that cutting ethanol out of our gasoline supply would result in increased dependence on imported oil and refined products, or would force refiners to make a choice between maximizing gasoline or diesel production,” said RFA President Bob Dinneen. “Consumers lose in either case. Clearly, the best option is not to tinker with the RFS and let it continue to work as intended.”

Ethanol has come under fire this summer as drought has swept over much of the United States, including the Midwest where much of the country’s corn is grown. Five state governors, nearly 200 lawmakers from the U.S. House and Senate, and the livestock and poultry industry have asked the EPA to suspend or lower the mandate this summer. Most fuel used by motorist is a blend of 10 percent ethanol and 90 percent traditional gasoline.

Proponents calling for a waiver in the Renewable Fuel Standard contend the seven-year-old measure, which requires 13.2 billion gallons of corn-based ethanol to be blended into the vehicle fuel supply in 2012, has made it even more expensive to acquire the feed they need, and a waiver could help lower prices by freeing up millions of bushels of corn. About 40 percent of the country’s corn supply goes to make ethanol.

The EPA in August opened a 30-day public comment period on whether to waive the renewable fuel standard. The agency, which is required to make a decision by November 13, rejected a similar request by Texas Gov. Rick Perry in 2008.