The Environmental Protection Agency on Friday proposed lowering the amount of corn-based ethanol that must be added to gasoline next year, loosening demand from energy producers as the grain’s prices fall from drought-era highs.
The EPA proposed specific levels of fuels made from plant-based sources that would have U.S. oil refiners use between 12.7 billion gallons and 13.2billion gallons of corn-ethanol next year, down from the 13.8 billion gallons this year.
It marks the first proposed cut in the federally mandated renewable fuels era that started in 2007.
Ethanol policies reverberate in the Midlands. Iowa is the largest producer of both corn and ethanol. Nebraska is the second-largest producer of the fuel and the third-largest corn grower.
The Cornhusker State’s 24 ethanol plants have a capacity of 2 billion gallons a year, requiring up to 700 million bushels of corn, or a little less than half of the state’s 1.3 billion-bushel output last year. There are 42 ethanol plants in Iowa.
“We are disappointed, obviously,” said Scott Merritt, director of the Nebraska Corn Growers. “The EPA and the administration has been talking a lot about renewable fuels, but this is a real mixed signal.”
A wide variety of other agriculture and business groups, led by the American Petroleum Institute, applauded the proposal. Supporters included poultry farmers, who use corn as a feed and see ethanol plants as competition for the crop; motorcycle and boat users, who say ethanolized gasoline doesn’t work well in small engines; and national chain restaurants, who say they pay more for meat and corn products because ethanol production drives up the price of corn.
“All users of corn must have equal access to the marketplace,” said Mike Brown, president of the Chicken Council, a poultry growers association. “Rising prices affect chicken farmers and consumers.”
Corn futures contracts surpassed $8 a bushel last year, as a two-year drought pushed up prices. Corn for December delivery, the most actively traded contract on the Chicago Board of Trade, fell 4.5 cents to $4.22 a bushel, the lowest closing price for the front-month contract since Nov. 7.
Overall, the EPA proposed Friday that refiners blend 15.2billion gallons of renewable fuel, most of it ethanol, into gasoline supplies. That is about 16 percent less than what Congress specified in the 2007 renewable fuels law. The law gives EPA the discretion to lower the requirement.
Of concern to the EPA is the so-called “blend wall,” or the point where the annual requirement mandated by law exceeds the amount of ethanol that can be mixed into conventional blends of gasoline, such as the ubiquitous E10, or gasoline mixed with 10 percent ethanol.
“Production of renewable fuels has been growing rapidly in recent years,” read the agency’s statement Friday. “At the same time, advances in vehicle fuel economy and other economic factors have pushed gasoline consumption far lower than what was expected.”
Growth in the ethanol mixing requirement, EPA said, would require adoption of increasingly higher ethanol blends, such as E15 and E85.
The EPA proposal specifies between 2 billion gallons and 2.5 billion gallons of advanced biofuels, leaving a range of 12.7billion gallons to 13.2 billion gallons of corn-based ethanol. Ethanol for December delivery was unchanged Friday at $1.778 a gallon on the Chicago Board of Trade. Prices have gained 18 percent this year.
Iowa Republican Gov. Terry Branstad and U.S. Rep. Adrian Smith, R-Nebraska, criticized the EPA’s proposal. In a statement, Branstad called Washington “out of touch” and a threat to Iowa jobs.
Sen. Chuck Grassley, R-Iowa, issued a statement taking issue with many of the criticisms of the Renewable Fuel Standard. “So what’s at stake when a coalition of special interests tag teams to pull the rug out from underneath the nation’s ethanol policy?” he said in the statement. “Unfortunately, these flawed attacks on ethanol and next-generation biofuels undermine America’s effort to move forward with an aggressive, diversified energy policy that takes into account global demand, geopolitics and U.S. economic growth.”
A Democrat from Iowa, Rep. Bruce Braley, said the administration should be working to create jobs but that the EPA’s proposed rule would do just the opposite. “Under the proposed reduction in the Renewable Fuel Standard, growth in Iowa’s renewable energy industry stands to suffer, putting job growth at risk and threatening damage to Iowa’s economy,” Braley said.
Smith, of Nebraska, said the country needs to increase production of all sources of fuel and that ethanol provides consumers with a domestically produced alternative. “As the Environmental Protection Agency reviews comments submitted on the proposed changes, I hope sound science and the rule of law will prevail after a full consideration of the facts and the need for greater consumer choice,” Smith said in a statement.
Correction: A previous version of this story incorrectly stated the amount of corn-ethanol in the nation's motor fuels this year.