Iowa officials back delay on ethanol mandate

Source: Christopher Doering, Des Moines Register • Posted: Monday, November 24, 2014


Ethanol and other biofuel groups declared victory Friday, as the federal agency in charge of telling refiners how much renewable fuel must be blended into the gasoline supply announced another delay setting targets for 2014.

The Environmental Protection Agency said a decision to finalize the blending requirements for 2014, first proposed more than a year ago, “has been significantly delayed” and would not be completed by year end. Instead, the EPA said it could act on the 2014 numbers next year, possibly in conjunction with “action on the 2015” requirements.

Iowa officials backed the delay of the mandate, but warned it only serves to exacerbate the challenges that have dogged renewable producers the past year.

A decision by the EPA to change the Renewable Fuel Standard would likely affect future renewable fuel production and the construction of new plants around Iowa, the nation’s leader in renewable fuels production. The state has 42 ethanol refineries capable of producing more than 3.8 billion gallons annually and 12 biodiesel facilities able to produce almost 315 million gallons annually.

The agency said the proposal generated “significant comment and controversy,” most notably on “the proposal’s ability to ensure continued progress toward achieving the law’s renewable fuel targets.”

Shortly after the EPA announcement Friday, the American Fuel and Petrochemical Manufacturers, which represents gasoline, diesel and other energy suppliers, said it planned to sue the agency for failing to issue the 2014 requirements, citing harm to its members who must comply with the rule.

In November 2013, the EPA proposed reducing ethanol produced from corn in 2014 to 13.01 billion gallons from the 14.4 billion gallons initially required by Congress in the 2007 Renewable Fuel Standard, a law that requires refiners to buy alternative fuels made from corn, soybeans and other products to reduce the country’s dependence on foreign energy.

Ethanol groups charged the White House with violating the congressional mandate and stunting future growth of next-generation fuels made from crop residue, grasses, wood chips and other plant materials by lowering the blending requirement.

“Today’s announcement is a clear acknowledgment that the EPA’s proposed rule was flawed from the beginning. There was no way the methodology in the proposed rule would ever work, as it went against the very purpose and policy goals of the RFS,” said Tom Buis, chief executive with Growth Energy, an ethanol trade group. “The decision to withdraw the rule is a win for the renewable fuels industry.”

Iowa Gov. Terry Branstad has criticized EPA Administrator Gina McCarthy for being misleading in her support of renewable fuels.

“We’re pleased the Environmental Protection Agency and the Obama administration halted their ill-advised proposed rule for the time being, but unfortunately, this decision only creates more uncertainty,” Branstad said.

Bill Northey, Iowa’s secretary of agriculture, noted that the first commercial-scale cellulosic ethanol plants have come on line this year. “However, we have missed opportunities for even more growth in the industry due to the uncertainty created by EPA’s initial RFS proposal,” he said.

The EPA has pushed back the timeline for announcing the 2014 numbers several times this year, drawing ire from ethanol producers as well as blenders responsible for mixing the renewable fuel into the gasoline supply. The agency is required by federal law to finalize the blending requirements for the following year by Nov. 30; so in the case of 2014, the end of November of last year. An oil trade group said the agency hasn’t met the annual deadline since 2011.

Obama administration officials have said the final rule would likely increase the blending level above the 13 billion gallons proposed last year, a nod to an uptick in gasoline consumption across the United States.

The American Petroleum Institute, a trade group representing more than 550 oil and natural gas companies, said the decision to “punt” on this year’s Renewable Fuel Standard is further proof that the mandate is unworkable and needs to be repealed by Congress.

Most gasoline contains 10 percent ethanol. The oil industry has warned that increasing the amount of ethanol in gasoline as required by the 2007 Renewable Fuel Standard to 15 percent or higher would damage car engines, and that consumers have not shown demand for these blends. As a result, the gradual increase in renewable fuels required to be used exceeded how much blenders could reasonably mix in, a challenge known as the blend wall.

“The Renewable Fuel Standard was flawed from the beginning, horribly mismanaged, and is now broken,” said Jack Gerard, head of API. “The only real solution is for Congress to scrap the program and let consumers, not the federal government, choose the best fuel to put in their tanks.”

Lawmakers outside ethanol-producing states have tried unsuccessfully to roll back or repeal the mandate in Congress. They are expected to try again next year.

Ethanol consumption rises

U.S. ethanol consumption in 2014 through August has averaged 1.113 billion gallons a month, up slightly from 1.098 billion averaged during the prior year. Most of the fuel produced in the United States is used domestically, but a small amount is exported.