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Producers Panic as Ethanol Mandate Loses Support

By James Stafford | Thu, 02 January 2014 19:16 | 6

Ethanol producers are panicking amid speculation that the ethanol mandate could be drastically reduced or scrapped entirely this year as the biofuel loses its allure and bipartisan allies and former friends team up against it.

December saw California Democrat Dianne Feinstein—a renewable fuel champion--coordinate efforts with Oklahoma Republican Tom Coburn to come up with a Senate bill to get rid of ethanol from the Renewable Fuel Standard (RFS), citing fears that corn-based fuel production mandates will harm livestock producers.

In November, Washington proposed cutting the biofuels mandate for 2014 by 16% to 15.21 billion gallons. This would be the first cut in biofuels requirements, which were ideally set to grow each year with incremental increases in renewable fuel targets laid out in a 2007 law.

For renewable fuel targets, this represents a major setback because not only is 15.21 billion gallons for 2014 much less than the originally intended 18.15 billion gallons, it is also less than this year’s mandate of 16.55 billion gallons.

Two years ago the Environmental Protection Agency (EPA) approved the E15 blend, which contains 15% ethanol and 85% gasoline, for vehicles manufactured in 2001 or later. There has been little progress towards widespread use of E15 though, and today’s blend is commonly E10.

The problem is that the RFS set its parameters too far ahead and predictions are a tricky thing. Flexibility is necessary and this is being learnt the hard way and will certainly have repercussions and this initial lack of flexibility—of RFS ranges—was a policy misstep on the part of the Environmental Protection Agency (EPA).

The problem is that the current and future ethanol mandates were created back in 2005 with the Renewable Fuel Standard (RFS), at a time when gas demand predictions were expected to be different. Now we have better fuel economy and demand for gas that is increasing slower than forecast.  In 2007, it looked like gas demand would continue to rise every year; instead, it peaked in 2008.

Beyond that, poultry companies are going bankrupt due to rising prices of feedstock as crops are diverted to ethanol. The rising costs of farming and egg production are taking their toll on states like Minnesota.

On the other side of this divide we have the biofuels producers for whom uncertainty is rising fast as a resolution on the ethanol mandate looms. States like Iowa are leading the lobbying here because they have been reaping the benefits of all that demand for corn. This has come along with new jobs. Iowa will certainly baulk at the proposed cuts because the bulk of US biofuels are made from corn, with soybeans, grasses, crop waste and Brazilian sugarcane playing lesser roles.

The Iowa Renewable Fuels Association is balking at the new bill before the Senate. The recent launch of a new wet mill and three cellulosic ethanol plants slated to begin production in 2014 had raised high hopes of further growth.

“Iowa ethanol production was up in 2013, but not enough to round the decimal point. With the record U.S. corn harvest in the bin and new production facilities coming on line, there is hope that Iowa can once again expand ethanol production,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association. “But hanging over that potential like a gray cloud is the EPA proposal to cut the RFS (Renewal Fuel Standard).”

By. James Stafford of Oilprice.com

About the author

Contributor
James Stafford
Company: Oilprice.com
Position: Editor

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  • David Hrivnak on January 04 2014 said:
    I think this is a good thing overall. While I like bio-fuels in general I hate using food (corn) to make it. Then while overall fuel usage is down in the USA, the ethanol mandate is increasing. This would make motorists use more than a 10% mixture which has been shown to be harmful to many cars. Why not cap it at a max of 10% of fuel usage?
  • Jeff on January 04 2014 said:
    I say we scrap the inefficient use of ethonal altogether. The reduced fuel efficiency and the destructive nature of corn ethnol on fuel systems out way it's practicality. Besides, the total amount of fuel sold at the pumps by retailers is tracked by the government and that amount has been reduced by almost a third since 2006. It's time to stop subsidizing ADM and halt the pick pocketing of the citizens of the united states of America.
  • Lane on January 06 2014 said:
    Ethanol was forced on us by corn lobbyists. It's bad for older engines. Including the costs to grow and raise the corn, transport it, refine it, etc., it costs more to produce per BTU it provides than gas. It's a solution to a problem that no longer exists.

    Give up on ethanol, and spend the money on bio-fuel research on something that shows more potential, like switch grass.
  • bob miller on January 06 2014 said:
    Using corn has been a horrific idea from the word go. High quality stock producers are going out of business due to the price of the feed and we are putting out as waste 10,000 gallons of water for every distilled gallon of ethanol with a water shortage and drying land. Bad idea and only bad idea.
  • Mickey McVay on January 07 2014 said:
    The damn government has no business telling the citizens what to use for fuel.

    They are a bunch of idiots who could not pass a Jr. High science course, or show they have an IQ over 80, and yet they think they know all about climate, scientific matters, economics, Etc..

    It is a case of the lunatics running the asylum!

    All they really want is control over our lives!
  • Troy on February 22 2014 said:
    Ethanol as fuel, a complete disaster that was forced on the world by greedy corn lobbyists.

    #1 - ethanol results in far more greenhouse gas emissions, the nitrites from the extra chemical fertilizer alone destroy any environmental benefits never mind all the additional greenhouse gases from farming, transportation, manufacturing etc.

    #2 - the science proving that burning ethanol is actually worse than burning gasoline has been suppressed even when AGW is touted as the worlds greatest crisis. Hmmmm....

    #3 - Engine damage, voided engine warranties compliments of mandated ethanol. Another hmmmmm.....

    #4 - Decreased fuel economy, curiously lighter more streamlined vehicles don't burn that much less fuel than ones decades older. Hmmmm... Why are North American vehicles fuel efficiency lagging behind Europe and Asia anyways?!?!? Could it be "gasp" because it would result in less fuel used and less taxes and profit? Of course not, Europeans and Asians just must have secret engines we can't figure out eh?

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