Oil, Ethanol Industries Joust Ahead of RFS Release

Oil, Ethanol Industries Joust Ahead of RFS Release

Renewable fuels groups combat American Petroleum's campaign against ethanol as government finalizes Renewable Fuel Standard volumes

A group of renewable fuel advocates on Thursday said the fight over the Renewable Fuel Standard – a policy that mandates the amount of renewable fuel that must be blended into the U.S. fuel supply – isn't necessarily about volumes. It's about methodology.

Brent Erickson of the Biotechnology Industry Organization, which supports retaining current volume mandates in the yet-to-be released 2014 RFS, says EPA has "invented a new methodology" in determining RFS mandates, based on whether the oil industry wants to offer renewable blends in the marketplace.

Gas pumps with a sign indicating the gas is containing up to 10% ethanol are seen at Victory gas station on November 15, 2013, in Pembroke Pines, Fla. (Photo by Joe Raedle/Getty Images)

According to Erickson, the agency is basing RFS volume decisions on how much gasoline will be consumed, and therefore how much will be available for blending. EPA has previously acknowledged this situation, referred to by some as the "blend wall" – the point at which the amount of ethanol available is more than can be absorbed by the market.

Related: Farmers Continue To Wait for Final Renewable Fuel Standard Volumes

"The new methodology would dampen investment in advanced biofuels in years to come," Erickson said. "The Renewable Fuel Standard is supposed to push us over the blend wall, which really is an artificial creation of the oil industry anyway. It's not meant to codify the blend wall, and that's what this proposal would do."

API, however, says the issue is neither about methodology nor volumes, rather it's a discussion that focuses on politics.

API's Downstream Group Director Bob Greco said EPA Administrator Gina McCarthy's recent comments indicating the 2014 RFS volumes would be mostly retained at 2013 levels is a signal that the White House wants to ensure Democratic support in the Iowa Senate race.

"You don’t have to be a political insider to see how the Iowa Senate race, and the White House’s fear they will lose control of the Senate, plays into this decision," Greco said in a call Thursday, referencing original speculation that RFS volumes would be lower, followed by an EPA reversal in recent weeks.

Related: Lawmakers Question EPA's McCarthy on Renewable Fuel Standard

API maintains also that the RFS itself is unstable, citing many missed deadlines. "The administration hasn’t released the requirements on time since 2011," Greco said. "In 2012, the rule was one month late. In 2013, it was nine months late. And this year it could be 11 or 12 months late."

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What's more, API says the demand just isn’t there for ethanol and advanced biofuels – a comment not well-received by ethanol's proponents.

The counterpoint, proponents say, is that the oil companies hold the reins when it comes to providing blender pumps and distributing the fuel, and they can keep it out of consumers' tanks.

"[The oil industry] knew since 2008 they were obligated parties," said Jon Doggett, Vice President of Public Policy for the National Corn Growers Association. "They don't allow E85 pumps under the canopy; they have pushed back with all their might on E15. They are refusing to put in blender pumps, and all the while knowing that they were going to be at some point obligated to these statutory numbers."

While the 2014 RFS mandate has been sent to the White House Office of Management and Budget, there's still no indication of when it will be publicly released. Ethanol groups say the sooner, the better.

"The more they dither the more it hurts the biofuels industry," Erickson said, briefly addressing concerns that investors will be less likely to support the biofuels industry without affirmation of support from government policy. Farmers, too, feel the pressure of shrinking markets.

Related: Economic Data By State Supports Ethanol's Fight to Keep RFS

"We are now talking about the prices (of corn) available on the market today being below the price of production," Doggett said. "It is a constant struggle to get young people back to the farm. But if we … find ourselves at the mercy of policies that can be changed for all the wrong reasons, and disrupt the market for corn, folks get nervous.

"We're looking for a diversity of places to sell our product. The ethanol industry has provided markets," he said.

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