Food vs. fuel redux
The Environmental Protection Agency on Nov. 15, under its Renewable Fuel Standard (R.F.S.), proposed that the volume of renewable fuels refiners must add to the nation’s fuel supply be reduced in 2014. The proposed adjustment would be the first lowering of renewable fuel volume obligations since the enactment of the Energy Independence and Security Act of 2007.
The E.P.A. proposed refiners add around 15.21 billion gallons of renewable fuels to the fuel supply in 2014 compares with 16.55 billion gallons as required in 2013 and 18.15 billion gallons as the level mandated by Congress for 2014 in E.I.S.A.
The E.P.A.’s action breathed new life into the long-standing “food versus fuel” debate that has pitted corn growers and the biofuels industry against not only the petroleum industry but those alarmed too much grain was being diverted from food uses, raising supply concerns and forcing food prices higher.
The E.P.A. in its announcement pointed to what it called an “E10 blend wall” as a reason for the lower target.
“Nearly all gasoline sold in the United States is now E10, which is fuel up to 10% ethanol,” the E.P.A. said. “Production of renewable fuels has been growing rapidly in recent years. At the same time, advances in vehicle fuel economy and other economic factors have pushed gasoline consumption far lower than what was expected when Congress passed the R.F.S. in 2007. As a result, we are now at the ‘E10 blend wall,’ the point at which the E10 fuel pool is saturated with ethanol. If gasoline demand continues to decline, as currently forecast, continuing growth in the use of ethanol will require greater use of higher ethanol blends such as E15 and E85.”
The largest source of renewable fuel is corn refined into ethanol. The E.P.A. proposal would reduce the renewable fuel obligation for refiners to add corn-based ethanol to the national fuel supply in 2014 to 13.01 billion gallons from the EISA target of 14.4 billion gallons.
The publication of the E.P.A. proposal in the Federal Register will open a 60-day comment period. The proposed downward adjustment in the renewable fuel obligations elicited both ire and praise. Some critics questioned whether the agency had the authority to make the reduction given the 2014 target of 18.15 billion gallons is mandated by EISA.
Senator Debbie Stabenow, chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, said, “The so-called ‘blend wall’ is a crisis manufactured by the oil industry, which is interested in eliminating the competition so they can continue reaping even greater windfall profits.”
Martin Barbre, president of the National Corn Growers Association, said, “This recommendation is ill-advised and should be condemned by all consumers because it is damaging to our tenuous economy and short-sighted regarding the nation’s energy future. Agriculture has been a bright spot in a failing U.S. economy, but current corn prices are below the cost of production. E.P.A.’s ruling would be devastating for family farmers and the entire rural economy.”
Mr. Barbre maintained the E.P.A. proposal would make investments in new biofuels plants risky, discourage investment in infrastructure and send the wrong signals to automakers who want more direction on where they should be spending millions of targeted investments on research and development.
Bob Dineen, president and chief executive officer of the Renewable Fuels Association, decried the E.P.A. proposal and asserted the agency had no statutory authority to veer from the goals established for the R.F.S. by Congress.
The food industry long has held a different view of the R.F.S. and corn-based ethanol. Robb MacKie, president and c.e.o. of the American Bakers Association, said, “The baking industry recognizes the E.P.A.’s modest proposal to lower the corn-based ethanol mandate. However, A.B.A. strongly encourages E.P.A. to move to further alleviate the pressure corn-based ethanol puts on grain availability and costs. Corn-based ethanol is a factor that has led to decreased wheat acreage in the United States over the past 30 years and tighter food supplies around the world. According to most experts, corn-based ethanol accounts for more than 40% of acreage planted in the United States. With a finite number of acres available for food production, that becomes problematic.”
Rasma Zvaners, A.B.A.’s policy director, added, “Recently there has been scrutiny of the R.F.S. program by Congress, and this needs to continue. The House Energy & Commerce Committee began a productive dialogue earlier this year. Further, Congress has begun seeking solutions. In particular, the baking industry hopes the work of Representatives Peter Welch of Vermont, Bob Goodlatte of Virginia, Jim Costa of California and Steve Womack of Arkansas will continue to gain momentum in the House.”
Representatives Goodlatte, Welch, Costa and Womack in April introduced the Renewable Fuel Standard Reform Act (H.R. 1462), which would repeal the corn ethanol mandate, cap ethanol use at 10% (E10) and preserve the mandate for the fledgling cellulosic biofuels industry. These same representatives also drafted a letter in October that was signed by 169 members of the House urging the E.P.A. to lower required ethanol levels.
Representative Goodlatte, who also is a former chairman of the House Committee on Agriculture, responded to the E.P.A. proposal saying, “While the E.P.A.’s slight reduction of the R.F.S. for 2014 acknowledges that the mandate is unworkable, it is not enough to provide the much-needed relief businesses, farmers, and consumers need. Today’s announcement makes it even clearer that it will now be up to Congress to fix this broken mandate.”