The People of America's Oil and Natural Gas Indusry

Proposed 2014 RFS Levels a Small Win for Reality

Mark Green

Mark Green
Posted November 15, 2013

Before taking a look at EPA’s proposals for 2014 ethanol use announced Friday, first consider a number that must guide the discussion of how much ethanol America’s refiners should be required to blend into the U.S. fuel supply: 132.65 billion gallons. That’s what the U.S. Energy Information Administration (EIA), projects for 2014 gasoline demand.

Do the simple math. Using the government projection, the U.S. supply of conventional E10 fuel (up to 10 percent ethanol), for which the vast majority of cars and trucks on the road today were designed, would require 13.265 billion gallons of ethanol. If the ethanol mandate in the Renewable Fuel Standard (RFS) required more, then you’re running into the ethanol “blend wall” – that is, to satisfy the RFS, refiners would have to blend fuel with higher ethanol content than millions of vehicles are designed to use.

Now look at EPA’s 2014 proposal.

rfs_mandate_footnote

The agency would set the total biofuels mandate at about 15.21 billion gallons. Sure, that’s lower than the 16.55 billion gallons mandated for this year, but the blend wall would still loom. EPA:

The proposal seeks to put the Renewable Fuel Standard (RFS) program on a steady path forward – ensuring the continued long-term growth of the renewable fuel industry – while seeking input on different approaches to address the “E10 blend wall.”

Below is reaction to EPA’s proposal – from the oil and natural gas industry to food producers to various interests associated with engines not designed for higher ethanol blend fuel – collected during a conference call with reporters.

Joel Brandenberger, National Turkey Federation:

“We appreciate EPA and the administration lowering the RFS volume levels for the coming year. But for a permanent fix to the problem, you need to appreciate how corn prices hit hard and recede slowly. Our members are not yet feeding this crop year’s corn at the reduced prices. They’re still feeding corn from the 2012 harvest – corn they bought at high prices. Those high costs forced cutbacks (2 to 5% for the turkey industry) across all poultry and livestock. That reduces the total supply of protein available, and ripples through the poultry and livestock business for years or more. The price of corn doesn’t drop one day and food prices drop the next. Ethanol supporters know the solution is not that simple. The only way to avoid these cycles is for Congress to enact long-term RFS reform. … Corn ethanol, even at this reduced level, is still going to be the No. 1 consumer of corn in the country.”

Rob Green, National Council of Chain Restaurants:

“The Environmental Protection Agency’s adjustment to the Renewable Fuel Standard volume mandate is an implicit recognition that the ethanol mandate is out of sync and out of touch with current market realities. The Renewable Fuel Standard has wrought havoc on food retailers, chain restaurants, franchisees and operators, as well as food producers, and suppliers. However, the ultimate losers are consumers. Study after study has shown that the corn ethanol mandate has artificially driven up commodity costs by billions of dollars annually, and with it, consumer prices. The EPA announcement does nothing to alleviate the economic distortions the corn ethanol mandate has inflicted on commodity and food costs paid by America’s small businesses and consumers. The EPA, in effect, is hamstrung by current law.”

John McKnight, National Marine Manufacturers Association:

“We have serious, well-documented and data-driven concerns with the safety of high ethanol fuel blends which have been proven to cause damage to marine engines. This damage puts consumers at risk and hurts manufacturers during a time of important economic recovery. The RFS is a broken law which sets unrealistic fuel mandates and requires a long term fix from Congress.”

Former U.S. Sen. Wayne Allard, American Motorcyclist Association:

“The American Motorcyclist Association remains committed to its members—and all motorcyclists—as we continue to support legislation that prohibits E15 fuel. The bottom line is that this decision certainly slows the unnecessary rush on bringing E15 fuels to market for at least the next year, but it doesn’t address the central issue that real-world motorcyclists face, and that is that no motorcycle currently on the road is approved for E15 use, and the risk of inadvertent mis-fueling is tremendous once it is available at the pump.”

Mike Brown, Chicken Council:

“As corn comprises nearly 70 percent of the feed given to chickens, our single largest input cost, rising prices directly affect farmers’ and consumers’ bottom lines. Since the RFS was aggressively escalated in 2007, average annual feed costs have skyrocketed by $8.8 billion for poultry producers. Last year, the average U.S. family of four faced a $2,000 increase in food costs due to higher corn prices brought on largely by the RFS. … This number still represents a mandate by the federal government that four out of every 10 rows of corn go into our gas tanks instead of to consumers and the products we provide them.”

Mark Dopp, American Meat Institute:

“While this is a positive action, the fact remains the RFS is a flawed policy that requires Congressional action. Even with a record corn crop expected this year, the damaging ripple effect of this defective policy has been moving through the meat and poultry complex for the past several years. The time for Congressional action is now.”

Look for more discussion of the EPA’s ethanol mandate proposals in the days to come. The agency, while acknowledging the RFS’ problems, has not gone far enough to avoid serious impacts for consumers and the broader economy – problems a NERA study says could drive up the cost of diesel by 300 percent and the cost of gasoline by 30 percent by 2015 and lead to a $770 billion decrease in U.S. GDP and a $580 billion decrease in worker take-home pay. API President and CEO Jack Gerard:

“For the first time, EPA has acknowledged that the blend wall is a dangerous reality and must be addressed to avoid serious impacts on America’s fuel supply and harm to American consumers. While the agency took a step in the right direction, more must be done to ensure Americans have the choice of fuels they want and we are continuing our call for Congress to act now. Ultimately, Congress must protect consumers from this outdated and unworkable program once and for all.”

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.