Pending EPA move sets off ethanol alarm

Source: By ART HOVEY / Lincoln Journal Star • Posted: Sunday, October 13, 2013

The Environmental Protection Agency is considering rolling back the Renewable Fuels Standard, a move that could threaten the vitality of Nebraska’s ethanol industry.

The unprecedented strategy surfaced Friday in internal EPA documents provided to national news outlets by industry sources. Draft language alludes to “both availability of qualifying renewable fuels and constraints on their consumption.”

Apart from document details, the agency is confronting a dilemma in which annual increases in the renewable fuels mandate called for under a 2007 law have gotten beyond the scope of renewable fuel usage, which is based heavily on 10 percent ethanol blends.

Ethanol advocates want to solve the problem by placing greater emphasis on the 85 percent ethanol products used by flex-fuel vehicles and on the 15 percent ethanol blends approved by the EPA last year for vehicles no older than the 2001 model year.

Todd Sneller of the Nebraska Ethanol Board said the circumstances behind EPA deliberations were no surprise.

“When the law was passed, it was clear that we would have to go beyond 10 percent (blends),” Sneller said Friday.

He and others in ethanol ranks see a potential mandate rollback from 13.8 billion gallons to 13 billion gallons of corn-based product as the wrong response for several reasons.

Among the negative effects on the ethanol industry and the agricultural economy would be “backing off a federal law that provides clear and consistent signals to investors and farmers.”

Sneller noted that news of a possible change in strategy at EPA comes as Nebraska farmers push hard on what appears to be an ample 2013 corn harvest “and it comes at a time when it’s really important for the agricultural economy to have a (price) driver.”

It’s no surprise either that the leadership of the American Petroleum Institute sees the situation very differently.

The institute’s Bob Greco pointed to the so-called “blend wall,” the point at which the renewable fuels mandate gets beyond the reach of virtual 100 percent market penetration for 10 percent ethanol blends.

“Our concern is that the blend wall is a very real obstacle,” Greco said, “and that, going beyond 10 percent, there are significant market acceptance and really liability issues, particularly from an E-15 standpoint. There are not attractive options to go beyond E-10.”

One implication of fluid circumstances in the Nebraska fuel market is the big drop-off recently in the number of stations that offer 87 octane unleaded fuel, as opposed to ethanol blends, at their pumps.

Nationally, less than 5 percent of drivers with flex-fuel vehicles equipped to burn E-85 fuel typically use it. E-15 potential is also constrained by the number of underground tanks service stations have in place, by possible confusion among consumers about fuel choices, and by a drop in overall usage of highway fuel.

Greco also cited billions of dollars in costs to refiners for complying with what they see as an unrealistic standard.

He cautioned that he has seen only “snippets” of the EPA document that set off a new round of debate between ethanol advocates and petroleum refiners.

“But directionally, what we’re hearing, what we would say is that the EPA is heading in a positive direction.”

After Bloomberg News and Reuters reported on internal EPA matters, a prepared statement from Administrator Gina McCarthy cautioned against reading too much into a pending policy outcome.

“At this point, EPA is only developing a draft proposal,” McCarthy said. “The agency has made no final decision on the proposed renewable fuel standard for 2014.”

And that won’t happen, she said, “without a full opportunity for all stakeholders to comment.”

Jim Stark of Green Plains Renewable Energy in Omaha underscored that point as he spoke on behalf of a company that owns ethanol plants at Atkinson, Ord and Central City, as well as in other states.

“It’s way too early to think that the 13 billion-gallon number will be what EPA will actually issue,” Stark said.

Stark also noted that the age limitation on cars that can use E-15 is not based on testing but on the absence of testing of older models.

“If EPA was able to say E-15 is OK for all cars,” he said, “I think this would be a much different scenario.”