EPA boosts amount of ethanol in gasoline supply

1 Dec 2015 | Author: | No comments yet »

EPA boosts amount of ethanol in gas supply.

WASHINGTON (AP) — The Obama administration is boosting the amount of corn-based ethanol and other renewable fuels in the U.S. gasoline supply despite sustained opposition by an unusual alliance of oil companies, environmentalists and some GOP presidential candidates.The decision doesn’t necessarily mean a higher percentage of ethanol in an individual driver’s tank, and isn’t likely to have much effect on gas prices. Environmental Protection Agency (EPA) on Monday issued final blending requirements under a 2007 renewable fuels law, ordering distributors to mix 8 billion gallons of ethanol, biodiesel and other advanced biofuels into the nation’s fuel supply next year. For the first time, the overall U.S. mandate for corn-based ethanol — about 14.5 billion gallons — will exceed 10 percent of the nation’s expected gasoline use.

Janet McCabe, the acting assistant administrator for the EPA’s Office of Air and Radiation, said the renewable fuels industry is “an incredible American success story” and the 2016 targets are a signal it is growing. That’s intended to spur expansion of higher ethanol blends, such as 15 percent ethanol, or E15, which is now sold at just 36 Minnesota stations. “We have seen a break in the blend wall,” said Jeff Broin, chief executive of Poet Inc., the nation’s second-largest ethanol producer with four plants in Minnesota. The levels are part of a program authorized by Congress 10 years ago that requires steadily escalating volumes of biofuels to be blended into the country’s gasoline and diesel fuels. Oil companies have spent many years fighting the 2007 law, saying the market, not the government, should determine how much ethanol is blended into their gas. The agency moved to ease the annual biofuels-blending requirements because of market constraints and other challenges that it said have kept it from meeting the goals of a federal law first passed a decade ago.

Broin, who also is chairman of Growth Energy, an ethanol trade group, said the EPA’s decision “should move renewable fuels forward.” On a conference call, Broin said about 5,000 U.S. fuel stations are on track to install equipment to dispense E15, and he expects the higher-ethanol blend to sell at a discount to regular gasoline. The law, designed to shrink the nation’s dependence on foreign crude and curb greenhouse-gas emissions, has pitted oil companies including Chevron Corp. and Exxon Mobil Corp. that oppose using more biofuels against farmers in the corn-rich Midwest who’ve argued for higher amounts. The EPA’s final rule — delivered on the same day President Barack Obama made an appeal to international climate negotiators in France — could revive a congressional debate over the Renewable Fuel Standard and spill over into the presidential campaign, as candidates stump in Iowa and other corn-belt states.

Energy-industry groups have been harshly critical of the law and the government’s implementation of it, saying the standard burdens companies and raises fuel prices for consumers. The law includes a “waiver” provision, which the EPA used to issue lower amounts than what the law requires, based on multiple factors, including what the agency described as a lack of infrastructure to blend biofuels into gasoline.

Next-generation biofuels, made from agricultural waste such as wood chips and corncobs, have not taken off as quickly as Congress required and the administration expected. Al Franken, D-Minn., said the EPA biofuel targets are too low, even though they are higher than the agency proposed earlier this year. “[W]hile I’m glad they raised levels from what was proposed, these final numbers just don’t cut it — especially for ethanol,” Franken said in a statement. Oil industry groups, which have fought expanding market share of ethanol, also were critical. “This decision is hard to view as anything other than an attempt by EPA to placate the biofuels lobby,” said Chet Thompson, president of the American Fuel & Petrochemical Manufacturers.

In May, it proposed targets that fell short of levels mandated in the law — raising the ire of renewable fuel advocates and setting off a flurry of lobbying in Washington. Tim Rudnicki, executive director of the Minnesota Biofuels Association, said it’s too early to say what effect the EPA decision will have on the state’s ethanol industry, but “It certainly seems like a negative to me,” he said. The EPA’s total renewable target released Monday for 2014 – – 18.15 billion gallons — essentially tracked actual gasoline demand because they were set retroactively. Some leaders in the ethanol and corn industries applauded the upward revisions to the EPA’s earlier proposal, but expressed disappointment that the requirements are below those laid out in 2007. Farm-state lawmakers — and some presidential candidates wanting to win over voters in farm states like Iowa — have successfully pushed back on calls from opponents to lower ethanol levels or repeal the standards.

The agency’s action comes at a time when net farm income in the state already is expected to decline 68% from its high in 2013, because of depressed crop prices. But McCabe stressed that regulators were seeking to balance Congress’ desire to boost next-generation renewable fuels, particularly those made from non-edible plant material, while acknowledging marketplace realities. Three cellulosic ethanol plants have opened in the past 14 months, including two in Iowa that process non-kernel parts of corn usually left on fields. The intent of Congress to increase renewable fuels has to be balanced with “the real-world circumstances that have affected progress toward those goals,” McCabe said. In the presidential race, Democrat Hillary Clinton has called for robust renewable fuels standards, and her fellow Democrats have also been supportive.

A third plant in Kansas is owned by Spain-based Abengoa, which has begun insolvency proceedings, said Scott Chabina, a director at New York-based Carl Marks Advisory Group who tracks the industry. But as national security and the economy have eclipsed farming issues in many rural areas, some candidates, like Cruz, have felt comfortable criticizing it and have still fared well in the polls.

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