Time is running out: Government shutdown threatens national debut for E-15 ethanol blends

Source: By Aaron Sanderford and Joseph Morton, Omaha World Herald • Posted: Monday, January 14, 2019

COUNCIL BLUFFS — President Donald Trump chose the setting for his announcement last October of federal plans to allow E-15 ethanol blends of gasoline year-round, picking this city on the borders of the top two ethanol-producing states.

His Iowa-Nebraska speech at the Mid-America Center here was a shot in the arm for corn farmers who had been whipsawed by Washington’s trade disruptions with major customers, including China and several allies.

But making E-15 blends possible nationwide requires more than a presidential act. The Environmental Protection Agency must set a regulatory framework for how the often-cheaper blend should be handled by gasoline retailers.

[[Read more: Trump to allow year-round sales of E-15 fuel]]

The federal rule-making process typically takes months of staff time. Meeting the president’s pledge to have E-15 rules and regulations ready for the fuel to be sold in time for this summer’s driving season, starting June 1, was already on a tight timeline. That’s before the standoff between the president and Congress over additional funding for a wall along the border with Mexico and the partial government shutdown.

Much of the EPA staff that would be working to pave the way for the 15 percent ethanol blends has been furloughed during the shutdown, leading to concerns that the agency won’t have the ability to hammer out the new guidelines in time for the June roll out.

The EPA, in a Tuesday evening statement to The World-Herald and others, said it would complete the rule before this summer’s driving season, that “the ongoing partial shutdown will not impede EPA’s ability to keep to our deadline,” said Michael Abboud, an agency spokesman.

But the new EPA statement contradicted a Reuters and CNBC report that cited at least two lawmakers who said they had been told by EPA officials that the shutdown was delaying progress on the E-15 rule.

Corn and ethanol producers in Nebraska and Iowa are getting worried that a skeletal staff at the EPA might not be able to get the proposed rule ready for the February or March release it needs to survive a 30- or 45-day public comment period and expected legal challenges from the oil industry.

The timeline is getting serious, even though a lot of work on the rule was done before the the shutdown, said Dawn Caldwell, who heads government affairs for the Aurora Co-Op, a Nebraska-based business that sells goods and services to farmers and ranchers at 82 locations in seven states.

“We definitely need this done right,” she said. “To be fully prepared and legal by June, we’re approaching a challenge.”

U.S. Sen. Chuck Grassley, R-Iowa, said the exact timing of when the shutdown needs to end to allow for the rule making in time isn’t clear. But EPA has told him it plans to get the rule done in time for June, he said.

Sen. Joni Ernst, R-Iowa, who serves on the Environment and Public Works Committee that oversees the EPA, brought up the E-15 situation when she met privately Thursday with acting EPA chief Andrew Wheeler, she said. Wheeler has been nominated to permanently head the agency, a nomination that will be reviewed by Ernst and the rest of the committee.

“The president has said we will have E-15 year-round and I’m going to hold Andrew Wheeler’s feet to the fire in that regard,” Ernst told reporters. “Even though we have a government shutdown, he knew and understood the president’s push to have this done by about that May time frame so that consumers could purchase E-15 during the summer months … really in my mind there’s no room for excuses there.”

And Sen. Deb Fischer, R-Neb., delivered a Senate floor speech in which she she said reports of a potential delay in the E-15 roll out were causing anxiety among some corn and ethanol producers. She sought to allay the concerns.

“I would like to reassure our fuel producers that this is simply not true,” Fischer said of a possible delay to the rules, flagging the EPA’s statement that it would meet its E-15 deadline.

Timing matters, because June, July, August and the first half of September are the largest months for American gasoline use, industry statistics show. E-15 is already available in about 1,700 gas stations in 30 states, said Chris Bliley, vice president of regulatory affairs for Growth Energy, a national ethanol and biofuels trade group that lobbies for ethanol expansion.

Another reason June 1 is important is because current rules and regulations require some retailers who sell E-15 to label E-15 pumps for so-called flexible-fuel vehicles only during the summer months, based on concerns about the blend’s ability to increase smog, concerns the EPA no longer expresses, said Jim Stark, vice president of investor relations for Omaha-based Green Plains Energy Inc. His company produces about 1.1 billion gallons of ethanol a year at 13 plants in Nebraska, Iowa and five other states.

The EPA under the Obama administration said E-15 blends were safe for use in nearly all vehicles 2001 or newer. Several automakers, in an oil-industry backed study, cited some concerns for vehicles built before 2012.

The pace of change toward E-15 important because corn farmers like Guy Mills, who farms about 3,800 acres around Ansley, Nebraska, say they feel squeezed on several sides — with trade disruptions amidst a spat with China and a newly signed farm bill to prepare for.

Regulatory certainty for E-15 would give corn farmers and ethanol producers greater ability to plan their planting and purchases, Mills said. The policy could lead to 2.5 billion more bushels of ground corn, per estimates.

And it could give the more than 138,000 gasoline retailers nationwide who haven’t yet sold E-15 the confidence to offer a product that often sells for about 5 to 15 cents a gallon less than traditional E-10, or 10 percent blends. For retailers, the higher ethanol blends often improve their profits on fuel.

“We need EPA to step up, even though they have a skeleton crew,” Mills said. “That’ll send a message to retailers that it’s OK to sell E-15.”

If the draft rule isn’t released in February, that’s when producers and ethanol industry observers will worry, said Pam Miller, director of industry and investor relations at Siouxland Ethanol, which produces about 90 million gallons of ethanol a year at a plant near Jackson, Nebraska.

Farmers, many of whom support the president, believe he will come through for them, she said. The question is whether either side in Washington, the president or the Democratic-led House of Representatives, will blink to end the shutdown.

“We do have President Trump’s word,” Miller said. “He made a huge promise on this, right here in Council Bluffs. For him to not be able to deliver on that promise, he would suffer consequences in 2020.”

Chuck Woodside, chief executive officer of KAAPA Ethanol in Minden, Neb., said most rank-and-file farmers “really thought that when Trump said he was going to E-15 year-round, that it was a done deal.”

Now, he said, “I’m still optimistic, but I’m less confident every day in getting things done in Washington as a whole. From my seat in central Nebraska, it looks dysfunctional.”