Battle Over RFS Continues

OMAHA (DTN) -- The American Petroleum Institute accused the Obama administration of playing politics with the Renewable Fuels Standard while a group representing 33 governors called on the administration to boost its RFS proposal before releasing it.

The back and forth over ethanol and biodiesel blend levels continues over proposed biofuel levels for 2014 with less than three months left in the calendar year. EPA offered no indication when the final rule would come. It was supposed to be released last spring.

EPA first announced proposed RFS volumes for 2014 in mid-November last year. The proposal would cut the corn ethanol mandate from 14.4 billion gallons to 13 billion gallons. The EPA also would set mandates of 17-million gallons for cellulosic biofuels, 1.28 billion gallons for biomass diesel and 2.2 billion gallons for advanced biofuels.

The ethanol market is facing a supply glut that has sent prices tumbling. DTN's Refined Fuels division reported Thursday that the October contract settled Wednesday at a four-year low of $1.53 a gallon. The November contract also hit its lowest level since December 2008. Meanwhile, demand has dropped 2.7% over the past week.

American Petroleum Institute staff held a press conference Thursday after hearing rumblings that EPA may raise the volume levels from the agency's original proposal. Bob Greco, downstream group director for API, said White House officials are trying to use the RFS to aid Iowa Democratic Senate candidate Bruce Braley.

"It seems the White House is focused on one goal, keeping control of the Senate after next month's election," Greco said. "Namely, they want to give cover to the Democrat running neck-and-neck with his opponent in the Iowa Senate race."

Braley, a Democrat, and his opponent, state Sen. Joni Ernst, a Republican, have battled over support of the Renewable Fuels Standard. Braley and his supporters have criticized Ernst because the Republican came out early in the campaign opposing federal mandates. Ernst then clarified that she would support the Renewable Fuels Standard. The two candidates have since been locked in arguments over who supports ethanol more.

"We think politics may drive them to a decision before the election if it is one that can benefit Congressman Braley in his election," Greco said.

Greco called on the administration to keep the RFS below 10% or risk hurting consumers. He argued retailers and refiners would have a difficult time adding more ethanol blends this late in the year. Grego said renewable fuel blends should be no higher than 9.5% of the retail fuel market.

"Never mind that the year is nearly over and refiners can't retroactively put more ethanol into gasoline," Greco said. "Never mind that higher ethanol mandates could require more ethanol than is safe on most cars on the road today."

The American Petroleum Institute, which represents the oil and natural gas industries, is launching a TV, radio and ad campaign pushing the administration to stick with EPA's original 2014 proposal.

Meanwhile, the Governors' Biofuels Coalition, led by Illinois Gov. Pat Quinn and Iowa Gov. Terry Branstad, wrote the White House Office of Management and Budget on Wednesday asking the administration to increase the biofuel mandates for biodiesel and cellulosic ethanol. The proposed reductions in the 2014 volume would hurt the rural economy, "creating turmoil, resulting in production cutbacks and layoffs," the governors wrote.

"Amending the proposed rule to one that would build and restore America's robust leadership in the development and production of domestically produced renewable fuels is crucial to ensuring a successful future in rural America," the governors wrote.

The governors also noted in their letter that the country is expecting a record corn harvest, indicating the corn crop would be able to produce the original 14.4 billion gallons of corn-based called for in the RFS. "Farmers are more than able to meet the demand that Congress envisioned when it passed the Energy Independence and Security Act of 2007," the governors wrote.

Chris Clayton can be reached at chris.clayton@dtn.com

(BM/AG)

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