RFS Proposal Worries Some

Ag Groups Consider Next Steps

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Biodiesel is the only renewable fuel standard that meets statutory requirements.

OMAHA (DTN) -- Though EPA officials Friday touted the proposed Renewable Fuel Standard volumes as pro-growth for biofuels, most biofuels and agriculture industry groups were not impressed with EPA's numbers.

Ethanol and agriculture groups see the proposal as doing little or nothing to address blend wall concerns. Corn-ethanol producers would see virtually no RFS support to the levels mandated by statute. The corn-based ethanol portion of the RFS falls short of the 15-billion-gallon cap already in statute through 2016.

Under the law, corn-based ethanol volume requirements should be 15 billion gallons for 2015, the cap under the law. EPA proposed volumes of 13.25 billion gallons for 2014; 13.4 billion gallons for 2015 and 14 billion gallons for 2016. Therein lies the problem for farmers and others who anticipated a higher RFS level would help the corn market.

Janet McCabe, EPA acting assistant administrator for the Office of Air and Radiation, told reporters the overall RFS volumes as a percentage of gasoline consumption proposed for 2015 and 2016 would represent 10.05% and 10.28%, respectively. Yet, EPA's own fact sheet is lower than McCabe's comments and put the blend levels at 9.63% of all fuel for 2016. Oil industry officials have pushed EPA to keep the percent of ethanol blended at 9.7%.

Although EPA is proposing increases in the cellulosic ethanol portion of the RFS for 2014 to 2016, McCabe said the blend wall would play no role in the development of that industry. Under the law, cellulosic blends should be 3 billion gallons for 2015, but EPA capped cellulosic blend requirement levels at projected production of about 106 million gallons.

Cellulosic ethanol industry officials have said the expansion of the ethanol market beyond E10, to E15 and E85 blends is critical to the growth of that industry.

"The blend wall won't prevent cellulosic fuels from growing," McCabe said, calling the proposed RFS an "ambitious and responsible" approach.

However, the biodiesel industry came out a winner in the proposal that calls for increased volumes through 2017.

IOWA CONCERNS

The EPA announcement was not received well in Iowa, the nation's top-producing ethanol state.

Iowa Gov. Terry Branstad said in a statement the proposed RFS comes at a time when Iowa farmers are in need of good news.

"We are disappointed that the EPA failed to follow the renewable volume levels set by Congress," he said. "But, we're encouraged that the agency has provided some stability for producers by releasing a new RFS proposal, and made slight increases from their previous proposal. Already, Iowa farmland has dropped by 15%, corn and soybean prices have dropped by 40% to 50% since 2012 and farm income is expected to decline 32% this year. Maintaining a robust Renewable Fuel Standard is extremely important for Iowans and families across the country."

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The head of the Iowa Renewable Fuels Association said he's concerned EPA is giving into oil industry interests with the proposal.

"The Obama administration has no legal authority to reduce the ethanol numbers," said Monte Shaw, executive director of the IRFA. "For conventional biofuels, this is a path to nowhere. The proposed ethanol level for 2016 is less than what we already produced in 2014."

Eldridge, Iowa, farmer Jerry Mohr, president of the Iowa Corn Growers Association, said in a news release that the proposal isn't enough to help farmers.

"The Iowa Corn Growers Association is extremely concerned about the impacts the proposal will have on the corn industry and rural economies," he said. "We have the largest corn carryover stocks since 2005, prices are below the cost of production, and so far, it appears we will grow stocks even larger with the current ideal growing conditions."

Maryland corn farmer Chip Bowling, president of the National Corn Growers Association, said in a news release Friday the NCGA is considering the next steps, which could lead to litigation. NCGA argued that by not following the corn-ethanol numbers in the law, EPA was cutting corn-ethanol obligations by 2.75 billion gallons over the three-year period.

"This represents nearly a billion and a half bushels in lost corn demand. The only beneficiary of the EPA's decision is big oil, which has continuously sought to undermine the development of clean, renewable fuels. Unfortunately, the EPA's gift to big oil comes at the expense of family farmers, American consumers and the air we breathe..." Bowling said.

INDUSTRY FRUSTRATION

Bob Dinneen, president and chief executive officer of the Renewable Fuels Association, said in a statement EPA was not following the statute.

"EPA has to be given some credit for attempting to get the RFS back on track by increasing the renewable volume obligations over time," Dinneen said. "But the frustrating fact is the agency continues to misunderstand the clear intent of the statute -- to drive innovation in both ethanol production and ethanol marketing. The agency has eviscerated the program's ability to incentivize investments in infrastructure that would break through the blend wall and encourage the commercialization of new technologies."

Growth Energy Chief Executive Officer Tom Buis also reiterated that EPA has not followed Congressional intent.

"It is unfortunate that EPA chose to side with the obligated parties who have deliberately refused to live up to their obligation to provide consumers with a choice of fossil fuels or lower-cost, higher-performing, homegrown renewable energy at the pump," Buis said.

National Biodiesel Board Chief Executive Officer Joe Jobe, said in a statement the proposal will help a biodiesel industry that has been in shutdown mode since the expiration of a $1 blenders credit at the end of 2014.

"This proposal is a significant step in the right direction," he said. "It is not perfect, but it will get the U.S. biodiesel industry growing again and put people back to work."

American Soybean Association President Wade Cowan said in a statement the biodiesel portion of the RFS is a good sign EPA may be returning to a regular schedule.

"Again, we are glad to see the volumes for biomass-based diesel increased above the previous proposal. Biodiesel provides significant economic and environmental benefits and we have the capacity to do more," he said.

CELLULOSIC DAMAGE

While the proposed RFS sets increasing volumes for cellulosic ethanol for 2014 through 2016, Brent Erickson, executive vice president of Biotechnology Industry Organization's Industrial and Environmental Section, said damage already has been done.

"The agency's previous proposal to constrict market access for renewable fuels and its delays in approving pathways for advanced biofuels, have chilled investment in the sector," he said. "We estimate EPA is responsible for a $13.7 billion shortfall in necessary investments for advanced biofuel capacity. EPA shouldn't scratch its head and wonder why the cellulosic biofuel industry is having increasing difficulty attracting capital to build additional new capacity."

POET Chief Executive Offer Jeff Lautt, whose company is one of the first to launch commercial cellulosic ethanol production in Emmetsburg, Iowa, said in a statement the proposal falls short.

"Today's proposal by the EPA puts the oil industry's agenda ahead of farmers and rural America," he said. "While the EPA is correct in recognizing the intent of Congress to continue growth in biofuels, the targets announced today fall well short of rural America's potential to produce low-cost, clean-burning ethanol. America's farmers have answered the call laid out in the Renewable Fuel Standard to help wean our nation off of foreign oil.

"Agriculture has taken incredible strides in recent years, growing yields through efficient farming practices and technology improvements, and we have all reaped the benefits of that labor through greater availability of high-performance, domestically produced ethanol. Rural America has upheld its end of the deal, and I ask that the EPA uphold Washington's end."

EPA's announcement and rationale can be found at http://www.epa.gov/…

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

Follow him on Twitter @toddneeleyDTN

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Todd Neeley

Todd Neeley
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