Ethanol Industry Set To Fight EPA On Blend Rule

Iowa Farm Scene

What's behind EPA's move to cut the amount of biofuel blended into our nation's gasoline supply?

Published on: February 7, 2014

The Iowa Renewable Fuels Association's annual meeting last week at Altoona was sharply focused on the U.S. Environmental Protection Agency's proposal to reduce the volume requirements in the Renewable Fuel Standard. EPA wants to reduce the amount of ethanol and biodiesel required to be blended into the nation's gasoline and diesel fuel supply. 

The RFS, a federal law passed by Congress in 2007, sets annual volume requirements for biofuels. Congress enacted the RFS to increase production and use of renewable fuels. The amount set by the RFS is a target, a minimum number of gallons of ethanol and biodiesel the petroleum industry must use. If they use more than this amount, that's ok, but they have to use at least the annual amount set by the RFS.

CONSUMERS WANT CHOICE: "Consumers want choice at the pump, the oil industry doesnt want them to have it," says Bob Dinneen. "Consumers like ethanol and biodiesel. But Big Oils near-monopoly on transportation and distribution of fuel in the U.S. is holding back the availability of biofuels, especially the higher blends."
CONSUMERS WANT CHOICE: "Consumers want choice at the pump, the oil industry doesn't want them to have it," says Bob Dinneen. "Consumers like ethanol and biodiesel. But Big Oil's near-monopoly on transportation and distribution of fuel in the U.S. is holding back the availability of biofuels, especially the higher blends."

Backers of RFS are urged to keep the heat on EPA; Iowa attorney general questions the legality of EPA's proposal
Speaking at the IRFA meeting, Iowa Governor Terry Branstad and Iowa Attorney General Tom Miller urged farmers and biofuel supporters to keep contacting EPA's top officials, to get the federal agency to reverse its proposal calling for a reduction in the RFS. The 60-day public comment period on EPA's proposed changes to the RFS ended January 28, the same day as IRFA's annual summit.

Branstad pledged to keep up his effort urging EPA to support a strong and growing RFS. "We have just begun the fight to reverse this proposed reduction," he said. "Big Oil may have the money, but we have the passion and good reasons to stand up for biofuels and I believe our message is getting through to Washington."

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Branstad has led the Midwest-based criticism against EPA's proposal to trim the required use of corn-based ethanol to 13 billion gallons in 2014, down from 14.4 billion gallons set by the RFS. After EPA refused to hold a Midwest hearing on the proposed changes in the RFS, he organized a day-long hearing in Des Moines attracting ag leaders from several states to testify. Over 80 people testified and Branstad sent their comments to EPA.

Iowa Attorney General Tom Miller says EPA can't legally reduce RFS mandate
EPA's proposal, first announced in November, would reduce the overall requirement for all renewable fuels, including corn ethanol, cellulosic ethanol and biodiesel, to 15.2 billion gallons, from the 18.1 billion gallons set by law in the RFS. Supporters of biofuels say if the proposal is enacted it would eliminate thousands of jobs in Iowa and other Midwest states, drive down farm income, harm air quality and force consumers to pay more for fuel at the pump. EPA's proposal, biofuel advocates say, is an example of politicians and regulators making a wrong decision while reacting to pressure from the powerful petroleum industry.

At a news conference at the IRFA summit, Iowa Attorney General Tom Miller said the federal government doesn't have the authority to reduce how much ethanol and biodiesel should be blended into the U.S. fuel supply. Miller said based on his interpretation of the law, EPA doesn't have the authority to reduce the ethanol volume requirements for the reasons EPA has stated. EPA says it is cutting the requirements because there isn't enough ethanol. But that's not the case, said Miller.

"EPA says that phrase in the RFS statute is ambiguous, and they go on to interpret it to include challenges in distribution of the biofuel," Miller noted. "We're saying, no, it says 'inadequate domestic supply' and that's what the RFS is referring to—supply. But we have the supply. There is a huge amount of corn and there are ethanol plants in operation and more being built. There is no suggestion that farmers and the plants can't produce the ethanol required in the standard. Simply put, EPA doesn't have the authority to make these reductions."

Will Iowa officials take legal action against the Environmental Protection Agency if EPA scales back the renewable fuel mandate as proposed?
Miller said his office is taking a wait-and-see approach before deciding whether to take action against EPA. "We hope they revise their rule. We think there is good reason to," he said.

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Bob Dinneen, president of the national Renewable Fuels Association, also spoke at the IRFA summit. He said the White House drove EPA to make the proposed changes in the RFS after being misled by the petroleum industry's misinformation that the RFS law was driving up gasoline prices. The petroleum industry is one of the most influential lobbying groups in Washington, D.C.

"Big Oil just can't stand the thought of losing more market share to a bunch of Iowa farmers. Prompted by the oil industry, EPA has pushed for this proposed reduction in the RFS," said Dinneen. "But I think farmers and biofuels are going to win this challenge."

Bob Dinneen: "This fight is about access to the consumer, about market share."
"We're up against the richest and biggest companies in the history of the world," Dinneen emphasized. "And they are irritated. They don't like the fact farmers have taken 10% of their barrel, 10% of the oil industry's market. Big Oil is fighting the expansion of biofuels. The oil industry is afraid of losing more market share to higher blends such as E15, E30 and E85 ethanol, and to higher blends of biodiesel. It's also clear the oil companies aren't going to build the infrastructure, the distribution system needed to allow higher blends of biofuels to reach consumers. I believe we're going to have to do that as an industry."

EPA is expected to make a decision on its RFS proposal sometime this spring. Meanwhile, the petroleum industry is pushing hard for the RFS change, lobbying in Washington D.C. and sending "robo calls" to consumers at random trying to scare them with misinformation about the RFS, said Dinneen. In fact, the president of the American Petroleum Institute has said the oil industry would like to see the 2007 Renewable Fuel Standard completely repealed.

If EPA goes forward with its proposed rule and decides to reduce the RFS volume requirements, a lawsuit is likely, said Dinneen. "We will not shy away from defending the RFS program to the bitter end. It is too important."

U.S. has paid a deep price for reliance on imported oil—in both dollars spent and in lives lost
Citing the huge cost of federal dollars to support military operations to protect America's access to foreign oil, Dinneen added, "We must stand together to promote our homegrown fuel. We must continue to fight against our country's addiction to foreign oil. We've paid a deep price for that oil in dollars and lives."

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Dinneen was talking to a sympathetic audience. Iowa has 42 ethanol refineries and leads the nation in ethanol production, making about 30% of the U.S. supply. Ethanol is made mostly from corn, and Iowa is the leading corn producer. The state is also the top biodiesel manufacturer with 12 plants producing the diesel fuel additive from multiple sources—soybean oil, animal fats, industrial corn oil and recycled restaurant cooking oil.

Consumers have as much at stake as farmers do, in this pending EPA decision
Over 15,000 comments were sent to EPA during the public comment period which closed January 28, regarding EPA's RFS proposal.

At the IRFA summit, Wallaces Farmer asked Dinneen what consumers and farmers should do now that the comment period has closed. "Consumers should recognize while farmers have a lot at stake in this decision EPA will make, consumers have a lot at stake as well. Because, without the RFS the price of gasoline goes up. Consumers need to realize they have as much at stake in all of this as the ethanol industry itself."

Dinneen says he doesn't know for certain what will happen when EPA decides on the final rule for RFS, but he says a decision probably won't come from the agency until April or May. He says it is possible EPA will backtrack and return to the previous RFS levels or choose a compromise number between the previous RFS levels for 2014 and the lower ones it is now proposing.

What biofuel supporters will need to decide is whether to challenge any new RFS decision in court, essentially arguing the law doesn't give EPA the ability to change the RFS volume figures based on the so-called "blend wall" or other distribution issues. Instead, the law only gives EPA power to change the figures based on whether the renewable fuels industry can supply the needed amounts of biofuel to meet the RFS volume requirements.