Oil, ethanol groups say EPA delay hurting their industries

Source: Christopher Doering, Des Moines Register • Posted: Thursday, November 20, 2014


U.S. ethanol producers and the oil industry responsible for mixing the renewable fuel into the gasoline supply rarely agree on anything.

But the two foes say the failure of the Environmental Protection Agency to finalize how much ethanol should be mixed into the country’s motor fuel supply in 2014, more than a year after the regulator first issued its proposal, has created uncertainty and hindered the ability of the free market to work.

“The market is kind of frozen right now because the EPA hasn’t responded,” said Bob Greco, downstream director with the American Petroleum Institute, a trade group representing more than 550 oil and natural gas companies. “The EPA, because of the way (the Renewable Fuel Standard) is structured, moves markets by making these decisions. You’ve got billions of dollars of investments threatened.”

In November 2013, the EPA proposed reducing ethanol produced from corn in 2014 to 13.01 billion gallons from 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.

The EPA has yet to finalize the number even though federal law requires the agency to complete 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 deadline since 2011.

A spokeswoman with the EPA, which is expected to restore at least some of the proposed cuts when it issues its final rule, declined to comment on the timing of the final rule or the criticism being levied by those critical of the delay.

Greco, whose group has been a long-time critic of the Renewable Fuel Standard and called for Congress to repeal a mandate they view as “unworkable,” said so far this year blenders that mix ethanol into gasoline have had only the proposed 2014 figures to use as their guide.

“The market is reacting without information,” Greco said. “It would be irresponsible (for the EPA to increase its) proposal at this point because there is just so little time left. They really can’t do anything other than go forward with the proposal at most.”

Ethanol groups have argued the delay has “flatlined” demand for the fuel.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said while the delay has not forced ethanol plants to close, it has sent a negative message about the next generation of fuel made from crop residue, grasses and wood chips and other plant materials.

It has also prevented corn-based plants from using cheap, surplus grain to boost output.

If the EPA hadn’t proposed the cut, Shaw said, “there would be a market signal out there saying let’s continue to expand. It’s what you are not seeing that’s important. You’re not seeing an ethanol plant being built. You’re not seeing production expansion at existing facilities.”

A decision by the EPA to lower the Renewable Fuel Standard would likely affect future renewable fuel production and the construction of new facilities 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 plants with the capacity to produce nearly 315 million gallons annually.

U.S. Sen. Chuck Grassley, R-Iowa, said Tuesday that constituents he spoke to recently while in the state are awaiting the EPA’s decision.

“There’s a lot of interest in the grassroots of the United States of what the EPA might do,” Grassley told reporters. He said if the EPA doesn’t restore the blend level to what Congress mandated, the ethanol industry would sue “and there would be a lot of farmers supporting that lawsuit.”