RFS Delay Continues

Ethanol Waits Post-Election

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The fuel industry is waiting to see if government mandates for biofuels will be renewed. (DTN file photo)

OMAHA (DTN) -- One year after EPA released the proposed volumes for the 2014 Renewable Fuel Standard the agency is silent about when the final numbers will be released.

The proposed rule, which would cut the overall biofuels volumes by about 3 billion gallons including those volumes for corn-based ethanol and biodiesel, was submitted to the Office of Management and Budget on Aug. 22, 2014 and remains there.

An EPA spokesperson told DTN earlier this week that there was no update on when the agency will release the final numbers. Speculation had been swirling that the RFS was delayed until after the Nov. 4 mid-term elections in order to ease political pressure on Democratic candidates. Still, the Republicans gained control of the U.S. Senate and increased their majority in the U.S. House of Representatives.

For now, ethanol advocacy groups continue to remain in the dark and the biodiesel industry already is experiencing real-world effects from the delay.

"I wish I had some info I could share with you, but no one knows when the EPA will be issuing the final rule, and what has caused the extended delay," said Michael Frohlich, director of communications for Growth Energy. He said the agency seems to be remaining "tight-lipped" about the RFS. Spokespersons from the Renewable Fuels Association and the American Coalition for Ethanol told DTN they have not heard from EPA.

Caitlin Grace Kennedy, communications manager for the Biotechnology Industry Organization, told DTN Thursday that word from the Hill is that EPA might release the final RFS early next week.

"BIO has not heard anything official from the EPA but our consultants have suggested that the numbers will be announced next week," she said.

BIODIESEL HURT

Brian Milne, energy editor and product manager for DTN's parent company Schneider Electric, said EPA's delay is hurting the biodiesel industry that already has met the proposed 1.28 billion-gallon mandate for this year.

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"They were hoping for an increase to 1.7 billion gallons," he said. "Production has slowed and trading is extremely thin."

Energy information company Platts reported this week that traders expect the final RFS to include a biodiesel number below 1.5 billion gallons, though industry officials have said they were on track to produce at least 1.8 billion gallons in 2014.

So far it is unclear what if any effect the RFS delay has had on the corn-based ethanol industry, Milne said. The original proposal calls for corn-based ethanol's mandated volume to be cut from about 14.4 billion gallons in 2013 to about 13 billion gallons in 2014. There has been some indication that EPA has backed off the cuts somewhat although the agency has yet to confirm speculation and media leaks about the final proposal.

Although EPA does not actually set a corn-based ethanol number, it proposed an overall RFS biofuels volume of 15.21 billion gallons, including 17 million gallons for cellulosic biofuels -- down from 1.75 billion gallons currently called for in the RFS -- 1.28 billion gallons for biomass diesel, or biodiesel, and 2.2 billion gallons for advanced biofuels.

AG GROUPS PRESS

Though EPA has indicated in meetings with members of Congress and others that it may dial back on the proposed overall volume cuts, several agriculture interest groups urged President Barack Obama in a Nov. 3 letter to "correct the misguided pathway taken by the EPA" on the RFS.

The letter signed by the National Corn Growers Association, National Sorghum Producers, National Farmers Union, American Farm Bureau Federation, National Association of Wheat Growers, Agricultural Retailers Association and the Association of Equipment Manufacturers, reiterated a common concern in farm country -- that proposed RFS cuts already have undermined the growth of advanced biofuels such as cellulosic ethanol.

In addition, they said changes to the RFS come at a time when net farm income since 2013 has fallen 14% to its lowest level since 2010, at $113.2 billion. Corn receipts, the groups said, are projected to see a $12.8 billion decline this year and soybeans a $6 billion decline. The groups are concerned that the ag sector's efforts to identify, grow, harvest and deliver non-food and non-feed biofuels feedstocks to cellulosic ethanol companies could be going to waste.

"Until the proposed rule was released, the cellulosic sector was poised for expansion," the groups said. "Yet, with the release of the EPA's proposal, investments are now moving overseas as first movers like Abengoa attribute their decision to locate their next cellulosic ethanol facility in Brazil rather than the United States to the EPA's proposed rule.

"The EPA's proposed policy decision is driving one of our key economic engines -- the biofuel sector -- overseas. We have invested in response to the signals in the RFS and are poised to deliver the very-low-carbon fuels you have sought for so long. Instead of reaping the economic benefits of this investment with a build-out of a domestic biofuel industry, the methodology proposed by EPA is offshoring the industry -- and our market."

LATE INFLUENCE

A number of groups held meetings with EPA and OMB in September and October, in attempt to influence the outcome of the final rule, according to the OMB website. Both ethanol and oil industry groups, as well as AAA and oil industry representatives, environmental groups, poultry groups, boating and motorcycle interests and taxpayers groups met with OMB and EPA officials.

According to EPA's "Regulatory Development and Retrospective Review Tracker" online, the final rule remains slated for publishing in the Federal Register yet this month. The public comment period closed Jan. 28, 2014.

The EPA received hundreds of thousands of comments on the proposal and during the past year there has been ongoing speculation about whether the agency would back off its proposed cut. EPA Administrator Gina McCarthy indicated that public outcry led the agency to take a closer look at its proposal.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow Todd on Twitter @toddneeleyDTN

(CC/SK)

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Todd Neeley

Todd Neeley
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