Ag Policy Blog
Todd Neeley DTN Staff Reporter

Wednesday 10/16/13

Ethanol Fears Potential cut in RFS

There is growing concern in the ethanol industry that a recent media leak that the U.S. Environmental Protection Agency will push for a reduction in the 2014 volumes in the Renewable Fuel Standard may have some validity to it.

In the past couple of days the nation's largest ethanol interest groups have linked ethanol's perceived importance to the Oct. 16, 1973 OPEC oil embargo and are talking about what might happen to the U.S. corn and ethanol markets if EPA decides to cut back the RFS.

In particular one rumor circulating is that EPA will propose cutting the RFS mandate for so-called "conventional" biofuels such as corn-based ethanol from 14.4 billion gallons to 13 billion gallons.

Geoff Cooper, vice president of research and analysis for the Renewable Fuels Association, outlined in a blog a number of potential effects from scaling back the RFS.

"While it is important to remember that EPA has not formally proposed the 2014 RVOs and last week's drama was driven by unverified rumors, it is clear that the impacts of reversing course on the RFS would have real and severe consequences," Cooper wrote.

"Sharply lower farm income, the largest corn surplus in 25 years, higher gas prices, fewer jobs in rural America, increased GHG emissions, and stifled investment in biofuels may sound like a dream come true to big oil. But for the agriculture sector, investment community and U.S. consumers it would be nothing short of a nightmare."

On Tuesday RFA Chief Executive Officer and President Bob Dinneen wrote in a blog that, "Sadly, we live in a world where petty political theatrics, big oil corporate money, and small-minded misinformation undermine the single most effective energy policy this country has known, the Renewable Fuel Standard, a successor of the 1980 Energy Security Act.

"Economic times are hard enough as is. Hopefully it won't take another energy crisis to wake Congress up to the economic and national security importance of a domestically produced, renewable fuel alternative. Now is not the time to roll back policies and undercut the progress this country has made."

Tom Buis, chief executive officer of Growth Energy, said in a statement that the anniversary of the OPEC embargo should be a reason to continue expanding biofuels production.

"In reflecting on this anniversary, we should recognize that it is futile to put all of our eggs in one basket –- what we need is a diverse policy that helps shield us from the price hikes, supply shortages, shocks and the whims of foreign governments," he said.

"This anniversary should not only be a reminder, but a wake-up call to our nation for increasing the use of renewable energy. Over the last 40 years we have experienced price shock after price shock due to unrest and instability in the Middle East.

"The Renewable Fuel Standard is our nation's most successful energy policy, helping securing America's energy and national security while ensuring long-term, widespread economic growth and it's working. Since its implementation, renewable fuels have helped lower oil imports from 60% to 40%.

"Ethanol already makes up 10% of the nation's liquid gas supply and the potential to reduce our nation's import reliance is even greater if we continue to embrace and increase our production and usage of renewable fuels.

"Forty years ago we didn't have a choice. We couldn't break free, and we suffered. Today, we do; let's not let that choice go to waste."

Read Cooper's blog here, http://tinyurl.com/….

Read Dinneen's blog here, http://tinyurl.com/….

Follow me on Twitter @toddneeleyDTN

Posted at 12:17PM CDT 10/16/13 by Todd Neeley
Comments (5)
I think the Ethanol industry is over blowing the fall out from lowering the RFS mandate. A cap should create more market stability for both ethanol and corn. Supply and demand will find each other. Some of the lowered oil imports to this country can't all be contributed to ethanol. Last I heard there's an oil boom going on in this country. No matter what someone seems to want to cry foul over everything.
Posted by GWL 61 at 2:50PM CDT 10/16/13
Sorry GWL61.If you think theEthanol industry is over blowing it just read the claims from big oil They are scared to death of $1.62 Jan.Futures for ethanol in competeing blender pumps.They need $100 for their costly frack oil. GO E-85 -50 -30 -10 %
Posted by melvin meister at 7:44AM CDT 10/17/13
And Ethanol will need to be well over the 2.00 mark to make it work for them. Either way there won't be people lined up to get E85 - 50- 30 %
Posted by GWL 61 at 8:02AM CDT 10/17/13
GWL points out that there are other factors that have aided in lowering oil imports. He is certainly correct. There is an oil boom ocurring. And we need to keep other energy sources on line---there is no logic to lowering the mandate. The oil companies need to adapt. They should take advantage of some of the additional supply----and the govenment and the oil industry should collaberate to modernize refinery capacity. We need to differentiate between energy policy and production and some "perceived" environmental and/or social policy. Addtionally, ethanol production is becoming more efficient in the creating of co-products. Why stifle ethanol?
Posted by James TRaub at 10:48AM CDT 10/17/13
The obvious reason James is that more acres in corn ethanol production leaves less acres for human food production. Why are you so determined to drive up food costs for the poor here and around the world James?
Posted by Wesley Kuster at 2:51PM CDT 10/20/13
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