Ethanol Producers Nervously Await EPA Ruling on 2014 Target

FREEPORT, IL - OCTOBER 4: Signs mark the location of various corn hybrids grown for use in ethanol production on a plot of land farmed by Kevin Otte October 4, 2004 near Freeport, Illinois. Certain varieties of corn grown specifically for ethanol production have been determined to produce about 4 percent more ethanol than other varieties. A bushel of corn produces 2.7 gallons of ethanol. Currently the United States produces 3.3 billion gallons a year, by 2012 it is estimated it will exceed 5 billion gallons a year.  (National Journal)

As the Environmental Protection Agency readies next year's renewable-fuel standard, both biofuels producers and gasoline refiners are poised to pounce. No matter where EPA sets the volume requirements for ethanol and other biofuel blends in 2014, the standard is going to face push-back.

"Groups within the biofuel industry are fully committed to challenging the rule in court if the EPA changes how it implements the standard," said Paul Winters, communications director for the Biotechnology Industry Organization. "We want to see the targets continue to be set at the highest-achievable level."

The biofuels industry is concerned about the 2014 standard because a leaked draft of the proposal showed the agency might reduce the target for renewable fuels from the statutory requirement of 18.15 billion gallons to 15.21 billion gallons next year.

EPA Administrator Gina McCarthy emphasized in a statement last month that no decisions would be made until all stakeholders had an opportunity to provide input, but the leaked draft made many ethanol producers nervous.

"Having seen the leaked draft, we've begun to focus on how it would send a chilling signal about future investment in the industry," Michael McAdams, president of the Advanced Biofuels Association, told National Journal Daily. Association members took their concerns to the White House Office of Management and Budget, which must sign off on EPA's proposal before it is released, possibly as early as Tuesday.

If the final proposal mimics the draft, biofuels producers are threatening swift retaliation. "We will consider every possible avenue available to change the rule," McAdams said. "We plan to take our message wherever we need to so that we can try and compel a different set of numbers than the ones we've already seen."

The oil industry also is ready to respond if it considers the target too high.

"If the draft is accurate and the proposal mirrors that, we think that EPA would be on the right track, but we think that they should go further to lower the ethanol requirements," said Bob Greco, the American Petroleum Institute's downstream group director.

The numbers in the leaked draft would set ethanol requirements at somewhere between 9.8 percent and 10 percent of the total fuel supply for 2014, Greco said. This could mean that the blend wall — the point at which the amount of ethanol mixed with gasoline exceeds 10 percent — is reached. API contends that this could cause a host of problems, including damage to car engines, although biofuels producers say the claim is exaggerated.

"Once we see the proposal we'll submit comments, testify at hearings, and continue to talk to EPA about why the requirements should be lowered," Greco said.

Oil- and gas-industry stakeholders also note that while a lower renewable-fuel standard would be a minor victory, the real prize for them would be repeal of the mandate. For that, they have their sights set on Congress.

"This is still just a Band-Aid cure for a longer-term problem," said Charles Drevna, president of the American Fuel and Petrochemical Manufacturers. "What EPA is doing is triage, and this patient needs to be delivered to Congress."

A bill to eliminate the standard's corn-based ethanol requirements — sponsored by Reps. Bob Goodlatte, R-Va., Jim Costa, D-Calif., Peter Welch, D-Vt., and Steve Womack, R-Ark. — is pending in the House Energy and Commerce Committee.