Ag Policy Blog

Political Reaction Largely Negative to EPA's RFS Rule

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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You have to give EPA credit for consistency. Nobody gets everybody on all sides of an issue upset with them quite as well as EPA does.

The long-awaited EPA rule on the Renewable Fuels Standard left market analysts shrugging their shoulders over a relatively incremental change in biofuel use and demand for corn. Still, politically the fight reflects a tooth-and-nail battle over every fraction of the energy market the petroleum industry is yielding to biofuels.

The 2007 energy law setting the Renewable Fueld Standard sets an open-ended renewable biofuel blend level at 15 billion gallons for 2015 on into the rest of the statute until 2022. EPA lowered that number to 13.93 billion gallons for 2015 and 14.27 billion gallons for 2016.

With its decision, EPA effectively cut required blend volumes for corn-based ethanol by about 1.8 billion gallons for 2015 and 2016 from the statute. EPA argues there is no actual mandate for corn-ethanol. Corn-based ethanol is simply one of the ways you achieve a renewable, blended fuel, the agency stated.

The cut -- 1.8 billion gallons off 30 billion gallons of potential -- translates into a 6% reduction in the volume that will come from corn ethanol compared to the law.

Ethanol supporters called for Congress to reverse the decision. Ethanol opponents called on Congress to reverse the decision as well.

Political perspective on the EPA was decision was more regional, though both sides expressed their criticism of the agency's final decision and the rule-making contortions of the last two years.

“This rule is a slight improvement but it still sells biofuels short," said Sen. Charles Grassley, R-Iowa.

Grassley stated farmers and biofuels producers have shown they can produce the volume of biofuels to meet goals set by Congress. "The EPA doesn’t seem to appreciate that the law on the books requires strong biofuels targets and that consumers like the chance to use alternate fuels. Instead, the EPA took a flawed approach that seems to buy into Big Oil’s rhetoric. The new rule is not only more than two years late, but it also sets back the development of next generation biofuels. This rule undermines the efforts to commercialize the next generation of biofuels. It’s unfortunate that this Administration, which claims to be for renewable and clean energy, would stand in the way of the production and use of more renewable fuels.”

Iowa Gov. Terry Branstad, a Republican, said EPA's decision "shows the lack of interest in providing consumers choice at the pump, creating jobs and increasing incomes in Rural America, and reducing our dependence on foreign oil. This rule falls far too short of a robust RFS and short of the standards set by Congress.”

Branstad argued EPA was limiting choice by tamping down the volume of blending ethanol, while the American Petroleum Institute argued EPA was impeding consumers' right to choose fuels without mandated ethanol blends.

Rep. Bob Goodlatte, a Republican from Virginia, took an opposing view, along with Reps Peter Welch, D-Vt., Steve Womacki, R-Ark., and Jim Costa, D-Calif. The bi-partisan group of biofuel critics saw the decision as EPA putting more ethanol on the market.

“The EPA’s decision to funnel more ethanol into the fuel supply is terribly disappointing. The RFS requirements announced today will push ethanol volumes beyond the blend wall in 2016, leaving American consumers and our economy to feel the negative effects. While well-intentioned, it’s now abundantly clear the RFS is a broken policy that is having drastic impacts on families, small businesses and retailers, the agriculture community, and the environment."

The four congressmen also noted they were part of a larger group of 184 House members who wrote EPA expressing concerns about any increase in the blend. http://goodlatte.house.gov/…

Here we should note:

The new rule issued Monday lowers blend volumes from the law by 1.87 billion gallons for 2014, 3.57 billion gallons for 2015 and 4.14 billion gallons for 2016.

Corn-based ethanol is cut 1.8 billion gallons over 2015 and 2016.

Still, the House RFS critics seized on the fact biofuels in their various forms are breaking the petroleum industry's self-imposed 10% blend wall. The blend wall is a market force created by the petroleum industry.

Agriculture Secretary Tom Vilsack said the EPA rule continued the growth in biofuels and he reiterated the administration's other investments supporting biofuel policies. Vilsack said the rule was a step forward despite the cut in volume from the law.

"The rule released today is a positive step forward providing for continued growth in all parts of the Renewable Fuel Standard—advanced, biodiesel, cellulosic, and conventional—building on the Obama Administration's and USDA's commitment to biofuels and American-grown renewable energy," Vilsack said. "While the Renewable Fuel Standard is one piece of the equation of this commitment, it is not the only piece. Significant strategic investments by this Administration across the board in feedstock production, research, refining capacity, distribution and new market development have resulted in a sophisticated and growing American biofuels industry."

Sen. Al Franken, D-Minn., said EPA's plans to scale back the RFS was the wrong decision, though the was glad the agency did not cut as steep as originally proposed in 2013.

“The Renewable Fuel Standard doesn’t just support homegrown jobs and homegrown energy: it enhances national security, reduces dependence on foreign oil, cuts our carbon footprint, and increases demand for local farm products,” Franken said.

Franken added that the country needs to expand renewable energy, not pull back.

Rep. Collin Peterson, D-Minn., ranking member of the House Agriculture Committee, acknowledged the volume blending levels aren't as bad as some of the denouncements suggested. The rule is better overall than the earlier proposals.

“A strong biofuels industry is an essential component of the rural economy and necessary to achieving our full potential of producing the next generation of domestic biofuels," Peterson said. "Today’s announcement isn’t everything we wanted, but is an improvement on the disastrous proposed rule. The Administration deserves credit for listening to our concerns and now needs to immediately start work on the numbers and get the program back on track.”

Others saw a need to look at EPA's management of the program. “The fact that EPA is coming out with its 2014 volumes long after the year is over and its 2015 numbers with only one month left to go is a sure sign of a program that needs fixing,” said Energy and Power Subcommittee Chairman Ed Whitfield, R-Ky., in a statement. “We need to take a look at the RFS program, because EPA has not done a good job implementing it.”

House Energy and Commerce Chairman Fred Upton, R-Mich., said, "The economic, technological, and environmental assumptions that gave rise to the RFS are dramatically different than the realities we face today, and it is time to finally consider updating this program. Before we make any changes, we need to be mindful of the impact on the agricultural sector, renewable fuel producers, refiners, automakers, fuel retailers, and other affected parties, and most importantly of all we need to do what is best for American consumers.”

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melvin meister
12/2/2015 | 8:21 PM CST
Any farmer who thinks he has a friend in the oil industry better check how many oil wells in their state and then pull up at the ethanol pump and go inside to thank the man or lady for having the nerve to sell the best fuel in the USA It is much better than dirty old gasoline. All your gas motors can handle 30% ethanol.
Bonnie Dukowitz
12/1/2015 | 5:36 AM CST
Question; Just how will the decrease be implemented? In Minnesota the gas pump indicates 10% ethanol, all year long. Some blender pumps are being installed at some stations. Is the number not a minimum, rather than a maximum. With the Corn and Soybean Growers promoting, will use not actually increase? I do not know, however, it seems the law might only be slowing expansion rather than reducing use.