US ethanol lobby urges brake on biofuels

Source: By Gregory Meyer , Financial Times • Posted: Friday, April 19, 2013

The US ethanol lobby has asked Washington to put the brakes on government biofuels targets, in an acknowledgment of a widening gap between policy goals and reality at petrol stations.

The request is a significant policy reversal by the Renewable Fuels Association, which was a powerful force behind the passage of the US’s aggressive ethanol mandate in 2007.

The mandate has helped the ethanol industry to double output and increase its corn consumption to more than 40 per cent of the domestic crop. Known as the Renewable Fuel Standard, the requirement is under attack by the oil and meat industries and some food policy experts.

This year’s draft mandate requires the sale of 16.55bn gallons of biofuel inside the US. Citing “uncertainty” over how to meet this goal, the Renewable Fuels Association advised the government to pursue a “reduction in the overall RFS” in a letter to the Environmental Protection Agency.

This was the first time the association recommended cutting the total renewable fuel mandate, the association confirmed. “We’re trying to be reasonable,” Bob Dinneen, president, told the Financial Times.

The mandate has become increasingly hard to achieve. Flat US gasoline demand limits how much ethanol can be blended. Oil companies refuse to sell fuel containing more than 10 per cent ethanol, creating a “blend wall”.

The fuels association said it asked Washington for the reduction because production of “advanced biofuels” made from biomass other than grain was falling short of its 2.75bn-gallon portion of the mandate.

Sugarcane-based ethanol imported from Brazil can also satisfy the advanced biofuels requirement. The Renewable Fuels Association argues this supply is too irregular to meet the mandate.

“Brazil has not been a terribly reliable supplier. I want EPA to take a real hard look at the potential for Brazil, and make a determination,” Mr Dinneen said

Unica, Brazil’s sugar and ethanol industry group, wants the mandate upheld, saying the country “will be able to meet and, if necessary, surpass” US import projections.

Bill Lapp, of agricultural consultancy Advanced Economic Solutions, said that the mandate’s supporters until recently spoke with one voice on the mandates.

“Upon reaching the blend wall, we find the different factions first favouring their share of the pie, ahead of any support for the overall biofuel policy objectives,” he said.

CME May ethanol futures were at $2.469 per gallon Thursday, up 0.5 per cent. Nymex May gasoline was at $2.7249 per gallon, down 0.2 per cent.

The biofuels mandate, which stood at 4.7bn gallons in 2007, is scheduled to keep rising beyond this year’s level to 36bn gallons in 2022. The EPA has never before reduced the overall mandate.