UPDATE 2-US seeks middle ground on biofuel targets, pleasing few

30 May 2015 | Author: | No comments yet »

EPA Raises Fuel Requirements, Lowers Standards, Upsets Everybody.

WASHINGTON (AP) — The Obama administration’s latest plan on ethanol, the corn-based renewable fuel, probably will not have a major effect on pump prices, but could have political reverberations in Iowa and other farm states in the 2016 presidential campaign.The Environmental Protection Agency on Friday announced long-overdue changes to how much corn-based ethanol and other biofuels are blended into American gasoline and diesel, proposing increases that fell short of targets set by Congress and prompted criticism from both supporters and opponents of the Renewable Fuel Standard.

Under the proposed rule announced Friday, the amount of ethanol in the gasoline supply would increase in coming years, just not as much as set out under federal law. The proposed requirements cover the years 2014, 2015 and 2016. (The requirements for 2014 are retroactive, reflecting the amounts actually used that year, since the proposed amounts had been repeatedly delayed.) Going forward, the proposal would increase the required amount of cellulosic biofuels — fuels produced from wood, grasses or waste portions of plants — from 33 million gallons used in 2014 to 106 million by 2015 and 206 million gallons by 2016. Bush, sets annual volume requirements for how much biofuel must be combined with the traditional fossil fuels that power roughly 270 million U.S. cars, trucks, boats and motorcycles.

Democratic presidential candidate Hillary Rodham Clinton has called for a robust renewable fuels standard while campaigning in Iowa, host of the leadoff presidential caucuses next year. It’s heavily opposed by fossil fuels groups, ranchers, motor-vehicle organizations, conservative lawmakers and a handful of environmental advocates,who argue the standard amounts to little more than a corn subsidy that’s made no progress on its stated goals: weaning the U.S. off foreign oil and reducing the country’s greenhouse gas emissions. But declining gasoline use has crimped plans greatly, since ethanol volumes beyond 10 percent of gasoline — the so-called “blend wall” — would exceed what many car warranties say vehicles should use. All sides have castigated the EPA for blowing through congressionally mandated deadlines to revise the standard – delays both opponents and supporters say have introduced market uncertainty that’s harmed ethanol producers, vehicle manufacturers and fuel refineries. The proposed policy simultaneously increases conventional biofuel volumes (mostly comprised of corn-based ethanol) for 2016 to up to 14 billion gallons — enough to breach the “blend wall,” industry charges — but also raises them less than the law had initially stipulated (to 15 billion).

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. The new policy would also steadily increase mandated volumes for so-called “advanced” biofuels, like cellulosic ethanol. “We recognize at EPA that the delay in issuing the standards … has led to uncertainty in the marketplace,” said Janet McCabe, acting assistant administrator at the agency’s Office of Air and Radiation, on a call with reporters Friday. EPA officials said the new requirements would drive growth at an “ambitious but responsible” rate. “We believe these proposed volume requirements will provide a strong incentive for continued investment and growth in biofuels,” said EPA’s Janet McCabe. Minnesota’s 21 ethanol plants in 2014 purchased 393 million bushels of corn, or 36 percent of the state’s crop, and produced 1.1 billion gallons of ethanol, 3.3 million tons of animal feed and 184 million pounds of corn oil with a total value of $2.9 billion, according to an ABF Economics analysis for the Minnesota Biofuels Association. The National Corn Growers Association said that the new rules would mean “nearly a billion and a half bushels in lost corn demand.” Meanwhile, traditional fuel refiners appeared no happier. “In acknowledging that the proposal seeks to force more ethanol use than the marketplace can handle, EPA is playing Russian Roulette with fuel supply and consumers,” said the American Fuel and Petrochemical Manufacturers’ president Chet Thompson. “I guess the one liner is that there’s something in here for everybody not to like,” said James Stock, a a Harvard economist and fellow at the Center on Global Energy Policy at Columbia University. “What they’ve decided to do is to make a commitment to moving through the blend wall – get out higher volumes of ethanol through higher blends – but to do so in a measured way.” Stock, who calculates that the blend wall could be breached by 0.2 percent in 2016 under EPA’s proposal, thinks nonetheless that the compromise is a smart move.

Ethanol companies expressed frustration that the EPA proposed standards were less than what is in the law, something the agency has the power to do if it thinks the goals cannot be met. While making no change to this standard, the updated volume requirements effectively encourage the expanded use of fuels like E15 and E85 that require much higher levels of ethanol as well as wider export of these fuels to countries like Brazil, which enjoys robust trade of biofuels with the U.S. “This is pushing not only blending at low levels – E10 for instance – but also export for use in E85 and also higher-level mid-blends like E15 in those few places that are able to accommodate that market,” says Jason Hill, an associate professor at the University of Minnesota who studies biofuels. POET-DSM, which opened a cellulosic ethanol plant in Iowa in September, says the updated requirements do not go far enough to support advanced biofuels.

President Barack Obama had championed biofuels as a candidate and since his days representing Illinois in the Senate, and his administration resisted calls to lower biofuel volumes before that 2013 proposal. Corn ethanol’s gain would come at the expense of consumers and the environment.” “I had hoped that the long period of time EPA took to make these announcements meant that they would get it right and follow the path set by Congress,” U.S.

In a Kafkaesque turn, in addition to standards for 2015, 2016 and for biomass-based diesel in 2017, the updates announced Friday also include a required “proposal” for 2014 that was never issued. David Vitter (R-La.) called them “unrealistic.” Nor did the EPA’s announcement please the corn industry. “Once again, the EPA has chosen to ignore the law by cutting the corn ethanol obligation 3.75 billion gallons from 2014 to 2016.

Collin Peterson, who represents a rural district with strong farming interests. “Unfortunately, it was a mistake to think the EPA could administer this program without screwing it up … “Without a strong biofuels industry, we will never be able to reach our full potential when it comes to producing the next generation of homegrown biofuels. Opponents argue the measure has distorted markets and driven up feed costs for corn-fed livestock like chickens and cattle – and, by extension – retail food prices – while doing little to address climate change or reduce the country’s dependence on oil and gas. “The mandate is in need of significant reform and oversight,” said Sen. In a bid to ethanol producers, the administration also announced Friday that the Agriculture Department will invest up to $100 million to help improve infrastructure for delivering ethanol to cars, such as fuel pumps capable of supplying higher blends of renewable fuel.

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