White House may see no reason for pre-election biofuel move

Source: By Erica Martinson, Politico • Posted: Wednesday, October 8, 2014

The Obama administration is nearly a year late in setting its 2014 biofuels mandate, but both ethanol supporters and critics say with politics at play, the White House may delay its decision until after the midterm elections.

EPA received a flood of criticism from the biofuels industry last November when it proposed rolling back the volume of renewable fuels that must be blended into the U.S. gasoline pool in 2014. Since then, EPA Administrator Gina McCarthy has made it clear in several public statements that the agency does plan to boost the ethanol volume from its initial proposal based on higher-than-expected U.S. gasoline demand this year.

But raising the mandate won’t be enough to satisfy many ethanol supporters in Iowa, and a crucial Senate race there has complicated the timing of the final decision for the Obama administration, which is hoping a victory for Democrat Bruce Braley over Republican Joni Ernst will help keep the chamber in Democratic hands.

“The White House seems to be focused on one goal: keeping control of the Senate after next month’s election,” said Bob Greco, a director at the American Petroleum Institute, which opposes the biofuel mandates. “Namely, they want to give cover to the Democrat running neck and neck with his opponent in the Iowa Senate race.”

API has been joined by a coalition of groups, including some environmentalists who worry about the impact of increased corn planting as well as world health organizations, restaurant owners and pig and poultry producers who say it raises the price of corn. And those groups have contended that the White House — where many expect the decision will be made — is more concerned with the outcome of the Senate race than setting a clear path for the future of biofuels.

Sen. Al Franken (D-Minn.) has said he’s gone straight to the top with his efforts to win support for the biofuels makers, and renewable fuels groups have run print ads in an effort to sway the president during his August vacation in Martha’s Vineyard and last month’s climate rally in New York City.

Opponents of the ever-increasing volume mandates for ethanol and other biofuels have complained of a so-called blend wall that prevents refiners from meeting the EPA requirement that would push ethanol above a 10 percent level in the gasoline supply. Although gasoline demand has turned higher this year, it had declined for several years, which the oil industry said was limiting the amount of ethanol it could absorb.

For biofuel supporters, that 10 percent blend wall limit is a false barrier that must be surpassed if biofuels are to meet the goals that Congress laid out when it enacted the legislation in 2007.

Several sources following the issue closely say that the White House hoped that boosting the overall volumes would be enough to act as a boon to Braley. But renewable fuels advocates in the state aren’t happy with that compromise, so anything short of a clear victory for ethanol makers could hurt Braley’s campaign.

With Democratic control of the Senate hanging by a thread, the administration most likely doesn’t want to endanger the candidate’s election.

“If they increase the number, but it’s still tied to the blend wall, in our view, they will have killed the program, and that will be seen as a huge loss for Braley, and they’ll wait until after the election,” said one person in the biofuels industry.

“If it’s good for Braley, it’ll be before the election. If it’s bad for Braley, it’ll be a punt. And people will see the punt.”

Several sources following the White House deliberations say the administration is still waffling over whether the final rule will be a problem for Braley at the polls, aligning him with an administration that isn’t completely behind the ethanol industry. But many expect it may come after Nov. 4.

Since EPA issued its proposal last November — near the time it was supposed to set the final 2014 volume mandate — the time frame for the final rule has slipped from springtime to June and then August.

There has been a flurry of activity at the White House in recent weeks, which is usually an indication that a final regulatory decision is imminent. Last month, the White House Office of Management and Budget held at least 18 meetings with scores of interested parties.

Republican Iowa Gov. Terry Branstad and Lt. Gov. Kim Reynolds got a private audience with White House budget chief Shaun Donovan, and OMB records show that API has visited twice. Refiners, farmers, environmentalists, gas station owners, renewable fuels industry groups and advanced biofuels groups have trooped through the halls of OMB to weigh in on the proposal. Oil refining giant Marathon Petroleum lobbyists have squeezed into three separate meetings, according to public records.

Sources in contact with the EPA and the White House say the administration has so far shown little interest in backing away from a reinterpretation of the requirements for setting the biofuels mandate. When the statute was enacted seven years ago, Congress expected growing consumption of gasoline that hasn’t come to pass. So the agency dialed back the amounts, reasoning that the lack of a market for more biofuels is equal to possible supply restrictions referenced in the law.

Much of the discussion last month centered around the assertion that the changing rationale behind the program hurts advanced biofuels, which are made from cellulosic materials that are often a waste product for farmers. The advanced biofuels industry says the change sends a bad signal to investors who are trying to develop the next generation of alternative fuels and move away from corn ethanol, just as the first wave of those plants are starting up.

Jonathan Lewis, senior counsel at the Clean Air Task Force, said the meeting he attended last month was his second talk with OMB staff about the issue after a brief discussion in May.

The Clean Air Task Force is concerned about the climate impact of corn ethanol production, and Lewis argued that “if EPA wants to effectively promote the development of advanced biofuels,” the agency has to find a way to clear some space because “right now, corn ethanol is soaking up that entire market.”

A decision on the rule “feels like it’s imminent, but now we’re in October,” Lewis said.

For the White House, making any decision now comes with political peril that is likely to last beyond the current political cycle, said Stephen Brown, vice president of federal government affairs at refiner Tesoro.

“Since late May, the White House has hijacked the 2014 RFS rule making for political purposes only to subsequently find out that there is no clear, winning ‘political’ answer to be had in Iowa, either for Braley in four weeks or Hillary in fifteen months,” he said.back