Renewable fuel producers and corn growers, along with a number of Iowa officials, are criticizing the Obama administration's new requirements for the amount of ethanol that must be blended into the nation's gasoline supply each year. The critics point out that the new Renewable Volume Obligations (RVOs) issued earlier this week fall far short of the aggressive production targets Congress set nearly a decade ago when it established the Renewable Fuel Standard or RFS.
The required level for 2016, announced Nov. 30 by the U.S. Environmental Protection Agency, is above the amount the ethanol industry is on target to produce this year and is higher than the proposed level the EPA had recommended last May. However, a number of Iowa farm leaders, renewable fuel industry leaders and government officials are lambasting any RFS reduction from the levels set by Congress in 2007.
Level is up from EPA's earlier plan, but still falls short of aggressive targets
Gov. Terry Branstad and Lt. Gov. Kim Reynolds were disappointed and issued statements on Monday as soon as EPA released the final RFS volume obligation levels for 2014, 2015 and 2016. "I'm extremely disappointed EPA's final decision failed to follow the renewable volume levels set by Congress," said Branstad. "Unfortunately, this decision by EPA shows the lack of interest in providing consumers choice at the fuel pump, lack of interest in creating jobs and lack of interest in increasing incomes in rural America, and lack of interest in reducing our nation's dependence on foreign oil."
"This entire process and EPA's delays in issuing the target numbers has negatively impacted Iowa families through reduced commodity prices, farm incomes and farmland values," said Reynolds. "We were hopeful EPA would fully recognize the importance of renewable fuels after years of regulatory uncertainty. However, EPA's decision only marginally improves volume levels in a step that will hurt Iowa families, businesses and farmers." Branstad and Reynold have been calling for a strong and robust RFS over the past two years.
Doesn't mean more ethanol will be added to each gallon of gasoline
Announcing the final RFS volume obligations, EPA said refiners will be required to blend 18.11 billion gallons of renewable fuels in 2016, an increase from the 17.4 billion gallons EPA proposed in May, but well below the 22.25 billion gallon target set by Congress in 2007. The increase largely reflects rising gasoline consumption tied to low pump prices and doesn't mean more ethanol would be added to each gallon of gas.
EPA also announced similar changes for advanced biofuels. This category includes cellulosic ethanol made from grass and forages, cornstalks, woodchips and other materials. EPA has mandated 3.61 million gallons of advanced biofuels be used in 2016, an increase from the 3.4 billion previously proposed by EPA and about half of what Congress approved in 2007.
"This EPA announcement is extremely disappointing," says Iowa Secretary of Agriculture Bill Northey. "There is no reason for EPA to ignore the law and lower the amount of renewable energy included in the nation's fuel supply. We need a strong RFS to encourage retailers to invest in the infrastructure necessary to make renewable fuels available to customers. With the low price of corn and beans, now is the time to grow the renewable fuels industry, not undermine it. Unfortunately, this continues the pattern by EPA in recent years to give in to the demands of Big Oil rather than stand up for cleaner-burning, homegrown renewable fuels."
EPA officials defend new RVO numbers as a realistic expansion
EPA on Monday defended its new requirement as a realistic expansion of renewable fuels that it said would put the biofuel industry on "stable ground" to support further investment and innovation.
Janet McCabe, assistant administrator in EPA's Office of Air and Radiation, says EPA's new ethanol targets follow Congressional intent to promote increased use of renewable fuels. But she also points out that slower-than-expected growth in the emerging cellulosic ethanol industry which is just getting started, means that the RFS mandate would not be able to realistically meet the levels Congress approved in 2007.
McCabe told Wallaces Farmer: "The new numbers set by EPA will drive the volumes significantly above where they've been in the last couple of years, which is what Congress intended. And that is substantial, achievable growth. The biofuels industry is going to have to push hard to achieve these production targets, but these volumes EPA has announced do provide the signal the industry has been asking for."
She also observes that the increase in ethanol production probably won't have a noticeable impact on food prices or motorists who use the corn-based ethanol and gasoline blend. With the third largest corn crop on record in the U.S. this fall, the glut of corn has suppressed corn prices.
With huge corn supply, EPA's decision will indeed affect Iowa
Iowa is the largest producer of ethanol and biodiesel among all states. So any meaningful change in the RFS, the 2007 law requiring increasing amounts of alternative fuels to be blended in gasoline and diesel fuel used by cars and trucks, could have a significant impact on Iowa. Farmers, ethanol producers and the rural economy are tied to the annual RFS mandate.
EPA's revised ethanol target amount for use in 2016 is drawing mostly negative reviews from ethanol and corn groups. The Iowa Renewable Fuels Association released a statement saying EPA's decision to set the final RFS standard below what Congress intended in 2007 will result in less fuel choice and higher fuel prices for consumers. It will also hurt farmers who are already struggling with low farm income and low crop prices that are at or below the cost of production for many farmers.
EPA decision is a punch in the gut for consumers and farmers
"Today's announcement by EPA was a gut-punch for consumers and farmers," said Monte Shaw, executive director of IFRA. "The adverse impacts of this rule on rural economies across Iowa and the Midwest can't be overstated. We just finished a bin-busting corn and soybean harvest. Farm machinery manufacturers in Iowa and surrounding states are laying off workers, folks are losing their jobs. I fear that more agribusiness job losses are on the horizon in Iowa."
Bob Hemesath, a farmer from Decorah and president of the Iowa Corn Growers Association, says ICGA will fight to protect the mandate and hold EPA accountable. "The U.S. should be strengthening our nation's commitment to renewable fuels, not taking a step backward."
RVOs are set annually by EPA to dictate the amount of renewable fuel that is blended into the motor fuel supply. The RFS is a federal law that requires domestic, renewable, cleaner burning ethanol to be blended into the nation's fuel supply. It has been one of America's most successful energy policies ever. "Contrary to the erroneous criticism spread by the oil industry, biofuels can meet growing consumer demand for these homegrown fuels," says Hemesath.
Iowa groups say EPA's final RVO rule sets a poor precedent
When the EPA first proposed to lower the RVO numbers under the RFS, "ICGA activated and engaged members from across the state to defend this important priority for our organization, farmer members and the industry," says Hemesath. "ICGA as well as many other organizations across the nation submitted thousands of comments to EPA telling the agency officials to stick with the law that was passed by Congress. The RFS is the No. 1 priority for ICGA as it builds demand for corn and corn-products. In light of EPA's decision, we will continue to fight to protect the RFS. Iowa Corn will continue to grow the renewable fuel market by working to upgrade infrastructure for higher blends and promote use of higher blends among automakers, fuel retailers and consumers to gain more demand for corn-based ethanol."
Noting that ethanol is the world's cheapest source of fuel octane, IRFA's Monte Shaw adds: "Given EPA's stated rationale for these new numbers, one of the most successful energy policies in our nation's history has been put squarely in the stranglehold of the petroleum industry. As a result, consumers will see higher prices at the pump and Iowa farmers will likely continue to see commodity prices below the cost of production."
What about the new biodiesel use targets EPA has set?
Shaw also cried foul on EPA's use of the mythical "blend wall" to justify its lowering of the RFS levels for ethanol. "The so-called blend wall is a fabrication of the oil industry to explain its anticompetitive behavior. There is simply not a blend wall issue; there is a consumer access issue. At virtually every station offering consumers the choice of fuel blends containing more than 10% ethanol, ethanol accounts for well more than 10% of total fuel sales. Iowa retailers with blender pumps, offering blends from zero to 85% ethanol, consistently average 20% to 25% ethanol content across their total fuel sales."
What about the new biodiesel production targets EPA has set? Shaw says, "While the targets for biodiesel are slightly less bad than for ethanol, the nominal growth for biodiesel set forth by EPA will likely be more than offset by surging imports of foreign biodiesel that EPA fast-tracked earlier this year. As a result, we could likely see a reduction of U.S. biodiesel production and use under these RFS levels."
With all the worry about climate change, EPA's decision doesn't make sense
Shaw concludes, "With the Obama administration so intently focused on cutting greenhouse gas emissions, cleaner-burning renewable fuels should be allowed to grow, and not be held back. This final EPA rule is a severe step backward for consumers, farmers, the environment and energy security."
The original corn-based ethanol targets under the RFS call for 15.0 billion gallons in 2015 and 2016. Now, EPA has finalized these targets at 14.05 billion gallons for 2015 and 14.5 billion gallons for 2016. Additionally, despite the demonstrated ability to produce 1.8 billion gallons of biodiesel in 2013, surging biodiesel imports, and the National Biodiesel Board's request of 2.4 billion gallons in 2016 and 2.7 billion gallons in 2017, now EPA has finalized the biodiesel targets at just 1.9 billion gallons for 2016, and 2.0 billion gallons for 2017.
Iowa is the nation's leader in renewable fuel production. Iowa has 43 ethanol refineries capable of producing 3.9 billion gallons annually, including nearly 55 million gallons of annual cellulosic ethanol production capacity. In addition, Iowa has 12 biodiesel facilities with the capacity to produce nearly 315 million gallons annually. For more information, visit IowaRFA.org.