Both supporters and opponents of ethanol have had a lot to say since the EPA announced a proposal to cut the Renewable Fuel Standard, the rules that force oil companies to buy and use certain levels of ethanol. But they’re just warming up. The agency’s first hearing on the proposal is Thursday in Arlington, Va., and advocates from both sides will line up for a chance to give regulators a piece of their minds.
The EPA reduced the mandate in response to the “blend wall,” a situation where gasoline demand is too small to accommodate the amount of ethanol gasoline refiners were required to mix into it. Most gasoline contains about 10 percent ethanol and with consumers buying less gas, the oil industry says it’s having trouble meeting the amount of ethanol required by federal mandate. Not enough stations are selling higher blends of ethanol like E15 and E85 to make up the difference.
“The infrastructure simply cannot handle a gasoline supply containing more than E10 [10 percent] ethanol,” said Charles Drevna, president of American Fuel and Petrochemical Manufacturers on a conference call with reporters before the hearing. “Folks, the ‘blend wall’ is here and if it isn’t fixed it’s going to be breached.”
Drevna said that could mean gas refiners would potentially lower production or export more fuel to lower their ethanol blending requirements, either of which could result in higher fuel prices in the U.S.
So the EPA stopped short of the blend wall and reduced the overall mandate for 2014 from 18.15 billion gallons to 15.21, including a first-ever reduction of corn ethanol from 14.4 billion gallons to about 13 billion gallons.
Ethanol trade groups, Midwest politicians and corn state farmers plan to voice their concerns over the cuts.
The first issue for farmers is what ethanol cuts mean for corn prices. Although still high relative to historic standards, corn prices – already on the wane -- have fallen to near a 3-year low since the EPA’s announcement. A study from Iowa State University predicts that if the mandate stays at revised levels, corn prices would stay around $4.50 per bushel over the next 5 years.
Lower corn prices means less money for Corn Belt farmers. Joel Grams, a farmer from Minden, Neb., told Brownfield News that lower levels of ethanol production could spell a bad trend for rural communities.
“(Ethanol) brings in a lot of revenue and a lot of taxes,” said Grams, who is also president of the Nebraska Corn Growers Association. “It provides a lot of jobs, especially in the rural economies. It would be sad to see that be rolled back.”
Ethanol advocates also claim curbing corn ethanol puts off development of future fuels like cellulosic ethanol made from corn stalks or wheat chaff. Brooke Colemen of the Advanced Ethanol Council said on NPR’s Diane Rehm Show that the EPA’s decision “dampens innovation.”
“Before we came upon this new decision by the Obama administration we were commercializing second generation ethanol, second generation biofuels, and now our deals are really put on hold to see what the Obama administration decides to do,” Coleman told Rehm.
The ethanol issue isn’t so cut-and-dried, however, even in the Heartland. A coalition of environmental advocates, livestock groups, food industry representatives and oil industry organizations plan to tell the EPA to go farther with their cuts, especially to corn ethanol. Joel Brandenburger with the National Turkey Federation plans to keep that message before Congress, as well.
“EPA took an important first step that we applaud, but our message will be that Congress needs to make a permanent fix,” Brandenburger said.
EPA will take comments at Thursday’s hearing and then online until January 28, 2014, before finalizing the ethanol mandate levels for 2014.