My 2 Cents On The Renewable Fuel Standard

Inside Dakota Ag

I'm against mandates, but I'm against lies more. What I'm for: Gasoline or E85 for $1.69, not $3.79.

Published on: January 16, 2014

There’s still time to let EPA know what you think of its proposal to cut the Renewable Fuel Standard. EPA wants to cut the RFS requirement from 14 billion gallons of biofuel this year to 13 billion gallons.

The corn and ethanol industries make it sound like the world is ending.

The deadline for comments is Jan. 28.

I haven’t written to the EPA yet, but I’ll give you my two cents worth here.

I don’t like mandates. I don’t like the government picking winners and losers. So, I’m against the RFS in general.

But I don’t like lies, either.

People who want the RFS reduced say that:

  • The current RFS level will force oil refiners to export more fuel or reduce the amount of gasoline, which could lead to shortages and higher prices. Just a few years ago, when the world economy was booming, they couldn’t make enough fuel for everybody. We will get there again.
  • E15 is not safe for older cars, boat engines, chainsaws and mowers. But there are additives you can use with higher ethanol, and you can buy non-blended gasoline.
  • The RFS has driven up meat prices. Sure it did. But farmers produced more corn that biorefineries and livestock producers could use in 2013 and now the price has dropped 40-50%. Have meat prices come down? No. Will they come down? I doubt it. Everybody up the food chain from the farm seems to be looking for any excuse to justify raising prices.
  • Renewable fuels are no longer necessary due to increased oil production in the U.S. (read the Bakken in North Dakota) and the reduction in gas prices. Gas at $3.19 per gallon is better than gas at $3.79, but it isn’t cheap yet. I’m looking for $1.69.
  • The RFS has led to the biggest loss of grassland in the Midwest since the Great Depression. Some say it rivals the destruction of the rainforest. Boy did that get headlines. The truth is less dramatic. Most of the land that went into Conservation Reserve Program was once cropland and now it is cropland again. It will probably be turned back to grassland in the future. Some of the grassland lost to cropland was actually fields of wheat, barley and other small grains that were being farmed anyway. Now, they are used to grow corn.

Groups that are against cutting the RFS seem have more believable arguments.

They say it will reduce the price of corn.

They say it will force some ethanol plants to close.

They say it will eliminate jobs.

All true.

But I’m not completely sold on the RFS standard. It seems like renewable fuels ought to be able to compete in an open market with fossil fuels. The industry ought to get the same government support – financial and otherwise – as the oil industry.

Ultimately, corn growers and ethanol producers should wean themselves off the RFS or they will be forever fighting political battles in Washington, D.C. The money would be better spent building a network of gas stations – maybe ones that sells E85 exclusively.

I may be wrong, but it seems to me that there’s a simple solution to the RFS. Sell E85 for $1.69 when gasoline is $3.79. We wouldn’t need the RFS. We would buy all the E85 we could get.