Why the Renewable Fuel Standard has Iowa politicians so hot

Source: By Donnelle Eller, Des Moines Register • Posted: Friday, October 20, 2017

Iowa political leaders are hot about a proposal from the U.S. Environmental Protection Agency to recalculate the Renewable Fuel Standard.

Sen. Chuck Grassley said Tuesday that he may seek to block President Donald Trump’s nominees for key posts at the EPA unless the agency backs off the proposal.

“It would hurt rural America and also hurt Iowa,” Grassley told reporters.

Iowa Gov. Kim Reynolds spoke with Trump and EPA Administrator Scott Pruitt by phone Wednesday about preserving the federal mandate that requires ethanol and biodiesel to be blended into the nation’s fuel supply.

Here’s why they are others are so concerned:

BAIT-SWITCH? After EPA proposed ethanol and biodiesel levels in July, the agency released a “notice of data availability” in October, asking for comment on cutting 2018 and 2019 biodiesel levels.

The notice explores whether 2018 biodiesel levels, set at 2.1 billion gallons, should be cut 15 percent — or by 315 million gallons.

It’s unclear how much the 2019 biodiesel levels would have been cut under EPA’s recent notice, RFS supporters say.

EPA had proposed 2019 biodiesel levels at 2.1 billion gallons, unchanged from the 2018 level.

“EPA has never done this before. It’s unprecedented,” said Grant Kimberley, executive director of the Iowa Biodiesel Board.

WHY CHANGE THE RENEWABLE FUEL STANDARD? “Certain factions” in the oil industry are pushing EPA Administrator Scott Pruitt, Oklahoma’s former attorney general, to reduce the mandate, Kimberley said.

Why? It eats into big oil’s market and profits, said Monte Shaw, the Iowa Renewable Fuels’ executive director.

“It’s not because we don’t have production capacity,” Kimberley said.

U.S. plants could produce 3.1 billion gallons of biodiesel annually. “Plants aren’t working at capacity because of the uncertainty in the marketplace,” he said.

IMPORTS PLAY A ROLE: EPA is exploring whether a trade case involving Argentina and Indonesia, countries that highly subsidizes biodiesel production, would reduce biodiesel’s availability and push prices up.

“That’s wrong on five different levels,” Shaw said. “We don’t know what’s going to happen with the case.

“If it’s approved, we don’t know how much countervailing duties might reduce biodiesel imports. It certainly won’t shut them off.

“And we’re sitting with half our biodiesel industry idled in the United States, so it’s not as though we couldn’t increase production,” Shaw said.

COUNTING ETHANOL EXPORTS: Bloomberg and other news outlets have reported that Pruitt also seeks to change how ethanol exports are factored into the Renewable Fuel Standard.

It’s effect, Shaw said, would be to reduce U.S. ethanol mandate levels by 1.2 billion gallons.

The mandate now calls for 15 billion gallons of corn-based ethanol. “It would be devastating to our economy,” Shaw said. “Given where corn prices are now, it would not be pretty.”

Corn prices are nearly 60 percent below 2012 highs, trading close to $3.50 per bushel nationally.

WHY ARE IOWA LEADERS ANGRY? Iowa is the leading producer of both ethanol and biodiesel.

Iowa has 43 ethanol plants, capable of producing 4 billion gallons annually, including nearly 55 million gallons of annual cellulosic ethanol production capacity, the industry says.

It also has 12 biodiesel facilities with the capacity to produce about 400 million gallons a year.

Ethanol uses close to 40 percent of Iowa’s corn production.

President Donald Trump reassured Iowa leaders, both before and after he was elected, that he would support the Renewable Fuel Standard.

“EPA’s proposals are so over-the-top, I believe the president will step in and honor his commitment,” Shaw said.