Ethanol ruling would have big Indiana impact

Source: By Maureen Groppe, Indianapolis Star Washington Bureau • Posted: Tuesday, November 17, 2015

In the decade since the federal government has required ethanol be blended into gasoline, Indiana’s ethanol industry has prospered.

Ethanol plants in the state have increased from one to 14, most of them in rural communities that often struggle with job creation.

The state now ranks 5th for ethanol production. Hoosier farmers are benefiting from a new market for their corn, with about one-third of the state crop converted into ethanol. And the federal government recently announced Indiana is getting nearly $1 million to help install 110 new ethanol pumps around the state to increase the availability of gas with higher amounts of ethanol than the standard 10 percent blend.

But the Renewable Fuel Standard program created by Congress is in a transition period – and under attack.

The amount of ethanol blended into fuel for cars, trucks and other vehicles is supposed to increase each year. But the Environmental Protection Agency, which can adjust the requirements based on market conditions, has run into “real-world limitations” in meeting the higher levels set by Congress.

Advanced biofuels that are better for the environment than ethanol made from corn are still expensive and challenging to produce. And older cars can’t take the higher levels of ethanol that would have to be mixed into fuel.

The EPA is behind in setting the levels – even for 2014 — and is under a court order to act by the end of the month.

Meanwhile, a coalition that includes the oil industry, some environmental groups, food processors, taxpayer watchdog groups and others are trying to kill, or significantly scale back, the requirement. They argue a policy sold in part as a boon for the environment has actually hurt it.

“Mandating corn for ethanol doubles greenhouse gas emissions compared to gasoline over 30 years,” charges an ad running in Indiana. “Tell Congress and the administration to end ethanol mandates.”

Herb Ringel, a farmer from Wabash who is president of the Indiana Corn Growers Association, said the ads “are deliberately misleading consumers by attacking cleaner burning fuels like ethanol.”

The nation’s ethanol industry emerged during the 1970s, when lead was being phased out as an oxygenator for gas, and the turbulence in the oil market raised the price of gas. Gas supplies were extended by blending in 10% ethanol, most of which is made from corn.

The industry received various incentives from states and the federal government, but growth leveled off in the 1980s.

Congress created the Renewable Fuel Standard in 2005, and expanded it in 2007, as part of a broader effort to reduce the nation’s dependence on foreign oil and curb greenhouse gas emissions.

Under the law, ethanol made from corn is supposed to produce at least 20% fewer greenhouse gas emissions than gas.

Critics, including some environmental groups and John DeCicco, a research professor at the University of Michigan Energy Institute who used to work for the Environmental Defense Fund, charge corn ethanol is increasing — not decreasing – greenhouse gas emissions compared to oil.

DeCicco told a House science committee panel this month that government models used to show ethanol reduces greenhouse gas emissions improperly give corn credit for the carbon dioxide corn absorbs from the air as it grows. That shouldn’t be counted, he argues, because the corn would be grown for other purposes – for animal feed, exports, to make food products – if it weren’t being used for ethanol.

“I certainly realize that my criticism of these biofuel policies does fly in the face of piles of publications, but unfortunately those publications got it wrong,” DeCicco said. “I’m not aware that we’re getting most of our corn from land that used to be barren deserts.”

An independent evaluation by the National Research Council in 2011 concluded the extent to which biofuels reduce greenhouse gas emissions is uncertain, and the emissions impact depends how biofuels are produced and how that changes land use.

But there is a reduction, said Wally Tyner, the agricultural economist at Purdue University who co-chaired that report.

“I think he’s completely wrong,” Tyner said of DeCicco’s view.

Tyner said the highest reduction in greenhouse gas emissions – about 60% or more — will come from the next generation of biofuels, such as fuel made from trees, grasses and farm waste products.

While three plants in Iowa and one in Kansas have started producing cellulosic ethanol, the industry has taken longer to develop than anticipated.

And it won’t develop, Tyner argues, if the market the government created for ethanol by the Renewable Fuel Standard is taken away or substantially reduced.

“Everybody is waiting to see what happens with the RFS before they build that next plant,” said Ken Parrent, biofuels director for the Indiana Corn Growers.

Democratic and Republicans lawmakers have proposed doing away with just the mandates for corn ethanol, but those bills haven’t advanced.

In addition to the greenhouse gas argument, some environmental groups also complain that ethanol made from corn harms water quality, water supply and wildlife.

A group opposed to the ethanol mandate cited 2007 concerns from the Hoosier Environmental Council in a report released Friday arguing the law has hurt Indiana’s economy and environment.

Jesse Kharbanda, executive director of the Hoosier Environmental Council, said in response that his group would “need to scrutinize the most recent environmental and economic literature” to meaningfully weigh in on the debate.

“In general, we’re concerned about how implementation of the RFS has affected the plowing of marginal lands along rivers, thereby affecting both soil health and water quality, and what the net impact of the RFS has been on transportation-related greenhouse gas emissions,” he said in a statement.

Opponents, including chain restaurants, chicken growers, and the makers of snack foods, complain the law has increased the cost of food.

But the nonpartisan Congressional Budget Office reported this month that changing the law would have little effect on food prices. Even if the mandate is repealed, food prices would decline by less than 0.1%, the CBO said.

The EPA argues it can raise ethanol use levels, but not as much as the 2007 law anticipated. That’s because of the lag in developing advanced biofuels, and because gasoline usage has grown more slowly than projected as cars have become more fuel efficient. In addition, higher ethanol blends such as E15 and E85 have not been widely accepted, the agency said when releasing its draft proposal in May.

Parrent, of the Indiana Corn Growers, blames that last obstacle on the petroleum industry. When the law was passed, he said, it was understood that two things had to happen. The ethanol industry would have to be built up and the petroleum industry would have to put in the pumps and other infrastructure to get gas with higher blends of ethanol to consumers.

“We built up the ethanol industry but the petroleum industry didn’t follow through on their part,” he said.

Only about 2% of filling stations in the country sell high-ethanol blends.

The oil industry says most cars and trucks on the road can’t handle fuel with more than 10% ethanol. The EPA has approved the use of a 15% blend in cars built since 2001. Fuel made from 85% ethanol is designed for “flexible fuel” cars specifically designed for that high level.

“Current mandates try to force more ethanol into gasoline than is safe for the majority of cars on the road,” Bob Greco of the American Petroleum Institute said in September. “While API continues to press for full repeal or significant reform of the RFS, we understand that will take time.”

The updated usage mandates the EPA proposed that will be finalized this month would require either a significantly greater use of ethanol from sources other than corn, or require blending corn ethanol at levels significantly higher than 10%. Which route is taken, the EPA has said, will depend on “how the market responds to the standards we set.”

Contributing: Christopher Doering, USA TODAY.

Contact Maureen Groppe at or @mgroppe on Twitter.

Estimated ethanol production in Indiana by crop year:

Ethanol production in Indiana has increased ninefold since the federal government began mandating annual consumption levels for renewable fuels.

2005-2006: 118 million gallons

2006-2007: 245 mg

2007-2008: 497 mg

2008-2009: 707 mg

2009-2010: 710 mg

2010-2011: 1,004 mg

2011-2012: 1,004 mg

2012-2013: 799 mg

2013-2014: 899 mg

2014-2015: 1,015 mg

2015-2016: 1,050 mg

Source: Indiana Corn Growers Association

Breakdown of Indiana corn usage as a percentage of corn supply, 2014.

Net exports (out-of-state and international): 33%

Ethanol production: 32%

Feed and residual: 16%

Held for future use: 9%

Starch and food production: 6%

Other uses: 3%

Breakdown of Indiana corn usage as a percentage of corn supply, 2005:

Net exports (out-of-state and international): 50%

Feed and residual: 22%

Ethanol production: 4%

Held for future use: 9%

Starch and food production: 9%

Other uses: 6%

Source: Indiana Corn Growers Association, U.S. Department of Agriculture, ProExporter