Ethanol groups blast EPA for lowering renewable fuel mandate

WASHINGTON – The Obama administration Friday proposed lowering the amount of ethanol that must be blended into America's gasoline supply through next year, angering the renewable fuel industry that has fought to keep the volumes in line with much more aggressive targets set by Congress.

The Environmental Protection Agency unveiled what it called an "ambitious, but responsible" proposal that balanced the Obama administration's commitment to grow renewable fuel use, while acknowledging that congressional forecasts were no longer realistic, given production and consumption changes that have occurred since they were put in place.

The measure is unlikely to have a noticeable effect on drivers who use gasoline blended with the largely corn-based product.

Still, any meaningful change in the Renewable Fuel Standard — a 2007 law requiring increasing amounts of alternative fuels to be blended into cars, trucks and other vehicles — could have a sweeping impact in Iowa, where farmers, ethanol producers and rural economies are tied to the mandate.

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The EPA proposed requiring refiners to blend 17.4 billion gallons of renewable fuels in 2016, much of it from corn, but 3.4 billion gallons would come from advanced biofuels such as cellulosic ethanol made from grasses and wood chips.

The figure was well below the 22.3 billion target set by Congress. EPA officials also proposed 16.3 billion gallons for the current year, less than the 20.5 billion set by Congress.

Agency officials defended the move, noting the 2016 proposal is 9 percent — or 1.5 billion gallons — more than actual 2014 production.

The proposal was released ahead of a court-ordered June 1 deadline. It drew opposition from the oil industry for pushing higher-ethanol blends that it says consumers don't want, as well as from ethanol groups who argued the agency was caving to the oil industry and stifling growth of renewable fuel producers.

"Today's announcement represents a step backward for the RFS," said Bob Dinneen, president of the Renewable Fuels Association. "EPA has to be given some credit for attempting to get the RFS back on track by increasing the renewable volume obligations over time. But the frustrating fact is the agency continues to misunderstand the clear intent of the statute — to drive innovation in both ethanol production and ethanol marketing."

Justifying the lower mandate

The EPA said it had the legal authority to adjust the numbers to below what Congress intended.

Among the reasons: Growth in cellulosic ethanol has been slower than expected, gasoline consumption has not kept pace with forecasts, and higher ethanol blends such as E15 and E85 have not been widely accepted.

Most gasoline currently is E10 — 10 percent ethanol and 90 percent gasoline.

"Even as we recognize the success of the program so far, we also must recognize real-world limitations to the future growth in the near future," Janet McCabe, the acting assistant administrator for EPA's Office of Air and Radiation, told reporters. "These volumes actually represent more than gradual growth. They represent ambitious growth and are appropriate in light of Congress' intent."

Ethanol supporters from Iowa warned the EPA plan would hurt the state. Iowa produced a record 3.9 billion gallons of ethanol in 2014 — about 27 percent of country's production.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the proposal "gives in to Big Oil lies and turns its back on consumers, fuel choice and the environment. The Obama administration has no legal authority to reduce the ethanol numbers. For conventional biofuels, this is a path to nowhere."

App users: Click for graphic of annual renewable fuel standards

Jerry Mohr, an Eldridge farmer and president of the Iowa Corn Growers Association, agreed. He expressed concern the EPA proposal was based on "flawed methodology" and would be damaging to the corn industry and rural economies already reeling from a supply glut of the grain and low commodity prices.

"Now is a critical time for farmers to step up and engage on this issue that will significantly impact our farmers," Mohr said.

Petroleum push-back

The American Petroleum Institute, a trade group representing more than 550 oil and natural gas companies, said the plan underscores the need for Congress to repeal or significantly reform the antiquated Renewable Fuel Standard.

A bipartisan group of lawmakers in Washington has proposed bills that would cap the amount of ethanol that can be blended into conventional gasoline at 10 percent or eliminate the annual corn targets in the mandate. Both proposals have languished in Congress.

API President and CEO Jack Gerard said the Obama administration is pushing ethanol blends such as E85 that most consumers simply don't want and that are not compatible with most cars on the road today.

"Some of (the EPA's) rosy assumptions raise questions of how much ethanol can ultimately be consumed," Gerard said. "We're at the point of the government trying to mandate a consumer choice that the consumer is rejecting."

What is the RFS?

The Renewable Fuels Standard was established by Congress in 2007 and aims to increase the amount of renewable fuels used to power cars, trucks and other vehicles, and at the same time reduce America's dependence on fossil fuels.

Congress set annual targets for renewable fuel use that increase through 2022. But it also gave the U.S. Environmental Protection Agency the authority to adjust those targets if they would severely harm the economy or the environment.

Pushing more ethanol pumps

On the same day the EPA released its new Renewable Fuel Standards, the Agriculture Department announced it would invest up to $100 million in matching funds to help double the number of fuel pumps at gas stations and encourage the use of higher blends of ethanol.

The grant program would help Iowa and other states pay for the roll out of blender pumps and test approaches to market higher blends to consumers.

"I think we have been too fixated, frankly, on just simply the RFS," Agriculture Secretary Tom Vilsack told reporters Friday. "There are other components involved in supporting this industry, and if all of the components are focused on with the same intensity that we focus on the RFS, I have no doubt we'll see a significant expansion of this industry."

"People are interested in consuming and interested in purchasing this fuel and want to use it, so we have to make it available. That's the key," he said.

What's next?

The EPA will hold a public hearing on its proposed renewable fuel levels June 25 in Kansas City, Kan., with public comments open until July 27. The federal agency expects to finalize the standards by Nov. 30.

Donnelle Eller contributed to this story. Contact Christopher Doering at cdoering@gannett.com or reach him at Twitter: @cdoering