Disappointment, outrage, confusion, “betrayal,” “punch to the gut,” “pulls the rug out,” “huge step backwards” – all are characterizations of the reactions from the renewable energy sector over the administration’s proposal announced last week to slash biofuel blending requirements under the federal Renewable Fuel Standard (RFS) for next year.
And each characterization would be accurate. The EPA proposal to reduce the total 2014 RFS requirement from the 18.15 billion gallons called for in the 2007 Energy Independence and Security Act (EISA) down to 15.21 billion gallons is a complete reversal of a policy that has driven the biofuel industry to create jobs and strengthen the nation’s energy security.
The proposed cutbacks – soon to be subject to a 60-day comment period – would reduce the requirement for corn ethanol from the 14.4 billion gallons called for in EISA to a fraction more than 13 billion gallons. It would be a move that would undercut strong efforts by U.S. corn producers to meet the demand for ethanol required by the RFS while still producing the food, feed and fiber needs of this country and the world. The proposed reductions in corn ethanol would come at a time when corn prices are down to their lowest levels in six years and, in some areas, below the cost of corn production.
In a review of the proposal, EPA says the reductions are needed to ease the market away from a “blend wall,” a situation where there is an insufficient petroleum fuel supply to accommodate the amount of biofuels called for by EISA to meet the RFS.
While gasoline consumption is currently down, Congress updated and strengthened the RFS in 2007 knowing that that consumption levels could fluctuate. However, the law places the responsibility for meeting the demands of the RFS on the oil industry to develop the distribution solutions – including infrastructure and blending pumps – to meet those demands.
EPA, however, appears to be taking the view that because the oil industry made no effort to expand the distribution of biofuels to meet the RFS requirements, corn, ethanol and advanced biofuel producers must pay the penalty, despite the fact that the latter have met every obligation called for in the law. By waiving the oil industry’s responsibility in meeting the RFS, EPA is rewarding those who have done nothing but protect their transportation fuel market share.
The renewable fuels industry would be harshly damaged by the proposals after being assured in 2007 that it could rely on Congress and the mandate to deliver a market for their product. In addition to corn producers and first-generation ethanol producers, others put at great risk from the proposals are those who make up a growing advanced biofuel industry and an estimated $14 billion that developers have invested in the next generation of biofuels. Simply put, reducing the contribution of first-generation ethanol in our national energy strategy equation also diminishes the development and needed role of cleaner second- and third-generation biofuels.
The Obama administration must understand that the hardships that could be generated by this shortsighted proposal fall far beyond feedstock and biofuel producers. It will likely lead to increased prices at the pump, given that ethanol has kept the price of gasoline significantly lower.
And it will harm those who make up the renewable fuels industry’s supply chain. Equipment manufacturers and sales, grain storage and transportation, agricultural finance and research and development interests, among others, are all facing a rippling negative impact from any government effort to kill the momentum towards the clean fuel technology that the RFS has built.
The 25x’25 Alliance calls on all of those who contribute to a renewable fuels industry that boosts the economy, particular in rural areas; lessens our dependence on oil and its volatile prices; and reduces the greenhouse gas emissions from our cars and trucks, to comment on the EPA proposal and make it clear that now is NOT the time to stray from the course set by a bipartisan Congress six short years ago. Maintaining the certainty of the RFS is a critical necessity to our energy security and independence.