Corn Ethanol Holds Ground

OMAHA (DTN) -- Corn ethanol blending requirements would be set at 15 billion gallons for 2018, but overall biofuel blending obligations would be slightly lower overall, based on a Renewable Fuel Standard proposal released by the U.S. Environmental Protection Agency (EPA) on Wednesday.

EPA proposed the overall total Renewable Volume Obligation (RVO) for 2018 would drop from 19.28 billion gallons to 19.24 billion gallons.

The proposal calls for reducing advanced biofuels blend volumes, including biomass-based biodiesel, of the RFS from 4.28 billion gallons to 4.24 billion gallons.

EPA would set biodiesel's RVO at 2.1 billion gallons for 2019. The blend requirement for cellulosic ethanol is proposed at 238 million gallons, a 73-million gallon decline from last year's level.

The latest proposal is the first RVOs set by President Donald Trump's administration. There had been concern when the president appointed EPA Administrator Scott Pruitt to head the EPA that he wouldn't be friendly to ethanol because of his opposition to the industry when he was Oklahoma's attorney general.

In a statement on Wednesday, Pruitt said the proposal would continue to grow the biofuels industry.

"Increased fuel security is an important component of the path toward American energy dominance," Pruitt said. He added, "We are proposing new volumes consistent with market realities focused on actual production and consumer demand while being cognizant of the challenges that exist in bringing advanced biofuels into the marketplace. Timely implementation provides certainty to American refiners, the agriculture community and broader fuels industry, all of which play an important role in the RFS program."

DTN Market Analyst Todd Hultman said the numbers do little or nothing to move the corn and soybean markets.

"I would say no, especially with corn-based ethanol and biodiesel looking virtually unchanged," Hultman said. "Given the current focus on weather, I think it would take a substantial change to make traders look up from their weather maps."

MIXED BAG

The EPA announcement was a mixed bag for the biofuels industry as a whole.

Although the agency proposal is to set blend requirements for advanced biofuels, including biodiesel at a level the industry said underestimates production potential, the EPA also announced it would conduct a number of biofuels market-related inquiries.

"EPA is also taking comment on addressing concerns that some RFS obligations are increasingly met with imported fuel from Brazil, Argentina and Indonesia," the agency said in a statement.

"Additionally, the agency is assessing higher levels of ethanol-free gasoline and bolstering an existing memorandum of understanding with the U.S. Commodity Futures Trading Commission to analyze and address a host of market concerns, including the need for increased transparency."

The U.S. government currently is conducting an anti-dumping investigation into biodiesel imports from Argentina and Indonesia. In addition, the Brazilian government had been considering a 17% tariff on ethanol imports from the United States, but announced on Wednesday that it had delayed that decision.

In addition, there has been calls by biofuels groups for the Commodity Futures Trade Commission, or CFTC, to investigate potential market manipulation of the market for renewable identification numbers, or RINs.

ETHANOL CERTAINTY

Renewable Fuels Association President and Chief Executive Officer Bob Dinneen said in a statement to DTN that in leaving the corn-ethanol number as-is, the EPA has provided certainty to the ethanol market. Dinneen said the proposal would continue to drive more investment in infrastructure that would lead to higher ethanol blend levels.

"By staying the course and maintaining a strong RFS, consumers will continue to benefit from the policy, including a greater choice at the pump, while breathing cleaner air and seeing a boost to local economies," Dinneen said.

Dinneen encouraged EPA to finalize the rule as quickly as possible to meet the statutory deadline of Nov. 30.

Growth Energy Chief Executive Officer Emily Skor said in a statement she would like to see the Trump administration do more to promote cellulosic ethanol and other advanced technologies.

"The release of the proposed RVOs is the first real test of the current administration's pledged support for renewable fuels, and we are encouraged to see the EPA demonstrate President Trump's continued commitment to the Renewable Fuel Standard," she said.

"While we are pleased with the EPA and the administration's commitment to a 15-billion-gallon target for conventional biofuels, we would like to see final levels for cellulosic and advanced biofuels continue to give producers and stakeholders certainty in their investment in second generation technology."

BIODIESEL CONCERNS

As was the case last year, the National Biodiesel Board said the agency continues to overlook the industry's ability to produce.

The NBB said it believes the EPA should set the advanced biofuel requirements for 2018 based on a volume of "at least" 5.25 billion gallons and the biomass-based diesel volume for 2019 at 2.75 billion gallons. The latest proposal sets those numbers at 4.24 billion gallons and 2.1 billion gallons, respectively.

"This proposal continues to underestimate the ability of the biomass-based diesel industry to meet the volumes of the RFS program," NBB said.

"This is a missed opportunity for biodiesel, which reduces costs, provides economic benefits and results in lower prices at the pump. Higher advanced-biofuel and biomass-based diesel volumes will support additional jobs and investment in both rural economies and clean-energy-conscious communities."

Anne Steckel, vice president of federal affairs for the NBB, said, "The EPA should be committed to diversifying the diesel fuel market and prioritizing advanced biofuels. Targets like this ignore reality and the law, inhibiting growth in the industry."

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

Follow him on Twitter @toddneeleyDTN

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