Iowa Ethanol producers criticize new EPA fuel standard

Source: Christopher Doering, Des Moines Register • Posted: Tuesday, December 1, 2015

WASHINGTON — Renewable fuel and corn producers, along with Iowa officials, are widely criticizing the Obama administration’s new requirement for the amount of ethanol that must be blended into the nation’s gasoline, saying it falls far short of the aggressive production targets that Congress set nearly a decade ago.

The required level for 2016, announced Monday, is above what the industry is on target to produce this year and higher than a proposed level the Environmental Protection Agency had recommended in May. But Iowa leaders lashed out at any reduction from levels set by Congress in 2007.

“I am extremely disappointed that the EPA’s final decision failed to follow the renewable volume levels set by Congress,” Gov. Terry Branstad said in a news release. “Unfortunately, today’s decision shows the lack of interest in providing consumers choice at the pump, creating jobs and increasing incomes in rural America, and reducing our dependence on foreign oil.”

The EPA said refiners will be required to blend 18.11 billion gallons of renewable fuels in 2016, an increase from the agency’s 17.4 billion gallons proposed in May, but well below the 22.25 billion target set by Congress in 2007. The increase largely reflects rising gasoline consumption tied to low pump prices and does not mean more ethanol would be added to each gallon of gas.

Similar changes also were made by the EPA in advanced biofuels — which includes cellulosic ethanol made from grasses, corn stalks, wood chips and other materials — with 3.61 billion gallons mandated for next year, an increase from the 3.4 billion previously proposed and about half of what Congress approved in 2007.

The Environmental Protection Agency on Monday defended its new requirement as a realistic expansion of renewable fuels that it said would put the industry on “stable ground” to support further investment and innovation.

Janet McCabe, the acting assistant administrator for the EPA’s Office of Air and Radiation, said in an interview that the ethanol quotas follow Congress’ intent to promote increased use of renewable fuels. But she said slower-than-expected growth in the nascent cellulosic ethanol industry meant that the mandate would not be able to realistically meet the levels Congress approved in 2007.

The new numbers set by the EPA will “really drive the volumes significantly beyond where they have been in the last couple of years, which is what Congress intended, and that’s substantial growth, achievable growth,” McCabe said. “The industry is going to really have to push to achieve these but it provides the signal they’ve been asking for.”

The uptick in ethanol consumption likely won’t have a noticeable impact on food prices or drivers who use gasoline containing the largely corn-based product. A glut of corn has suppressed market prices.

Still, any meaningful change in the Renewable Fuel Standard, or RFS — the 2007 law requiring increasing amounts of alternative fuels to be blended into fuels used by cars, trucks and other vehicles — could have a sweeping impact in Iowa, where farmers, ethanol producers and the rural economy are tied to the mandate, state business and government leaders say. Iowa is the nation’s largest producer of the renewable fuel.

The revised ethanol target drew largely negative reviews from ethanol and corn groups.

The Iowa Renewable Fuels Association said the EPA’s decision to set the final Renewable Fuel Standard below what Congress intended in 2007 would result in fewer choices and higher fuel prices for consumers. It also would hurt farmers already struggling with low farm income and commodity prices that in many cases are at or below their cost of production.

“Today’s announcement by the EPA was a gut punch for consumers and farmers,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association. “The adverse impacts of this rule on rural economies across Iowa and the Midwest cannot be overstated. We’re in the closing stages of a bin-busting harvest. I fear that more agribusiness job losses are on Iowa’s horizon.”

Bob Hemesath, a farmer from Decorah and president of the Iowa Corn Growers Association, said the group will fight to protect the mandate and hold the EPA accountable.

“We should be strengthening our commitment to renewable fuels, not taking a step backward,” said Hemesath, who called the Renewable Fuel Standard the organization’s top priority.

But Growth Energy, an ethanol trade group, said that while the final rule relies on a flawed methodology, it is a positive step for the industry. The EPA’s requirement for 2016 will help drive demand for gasoline with higher ethanol blends such as E15 — fuel that is 15 percent ethanol and 85 percent gasoline — said Tom Buis, co-chair of Growth Energy. Most gasoline now has 10 percent ethanol.

“We do want to give credit (to those in the administration) who had a hand in obviously improving the final rule over the proposal,” Buis said.  “Did we get 100 percent of what we were asking for? No. Oftentimes with any decision made in Washington … that’s pretty rare.”

Oil, restaurant and environmental industries have been among the most vocal critics in calling for Congress to repeal or significantly reform the Renewable Fuel Standard. Efforts to change the mandate, including ending the corn component responsible for the lion’s share of production, have languished on Capitol Hill.

The American Petroleum Institute, which represents more than 625 oil and natural gas companies, has favored capping the total ethanol mandate at 9.7 percent of motor fuel demand. Next year, ethanol will capture about 10.4 percent, based on the EPA’s final rule, according to Growth Energy.

Jack Gerard, president of the American Petroleum Institute, said the EPA needs to do more to protect consumers from unreasonably high ethanol mandates, predicated on higher ethanol blends that he said cannot be used in most cars and have been largely rejected by motorists.

“Today’s announcement makes clear that, in order to protect consumers, Congress must step in to repeal or significantly reform the RFS,” Gerard said. “Members on both sides of the aisle agree this program is a failure, and we are stepping up our call for Congress to act.”