SALEM, Ohio — Corn farmers were dealt a setback May 29, when the U.S. EPA released the much anticipated renewable fuel standard proposal — for last year, and the next three years.
Many had hoped the standard, which sets the amount of ethanol that the U.S. must blend into gasoline, would be higher and more in line with figures originally approved by Congress.
But over the years, market fundamentals, as well as political influence, have caused the government to take a closer look at what it’s mandating.
The advanced biofuel requirement for 2014 is 2.68 billion gallons; for 2015, 2.90 billion gallons; 2016, 3.40 billion gallons; and the 2017 is still undecided. Likewise, the biobased diesel requirement for 2014 is 1.63 billion gallons; 1.70 billion gallons for 2015; 1.80 billion gallons for 2016, and 1.90 billion gallons for 2017.
All of these standards represent year-over-year increases, but fall short of original proposals, especially for corn ethanol.
According to the National Corn Growers Association, the ethanol standard has been cut a total of 3.75 billion gallons from 2014-2016, which NCGA equates to nearly 1.5 bushels of corn demand.
“The only beneficiary of the EPA’s decision is Big Oil,” said Chip Bowling, president of NCGA, in a released statement.
Chad Kemp, president of the Ohio Corn and Wheat Growers Association, said the RFS was “achieving every goal that it was designed to accomplish.” He warned that the decision to reduce RFS will hurt farmers and consumers alike.
Oil perspective
The American Petroleum Institute, on the other hand, also claims to have consumers’ interest in mind, and said “consumers’ interest should come ahead of ethanol interests.”
API President Jack Gerard argued in a released statement, that Congress should repeal the RFS, because it’s forcing more ethanol into the market than the market and today’s vehicles can handle.
“The administration should not try to force the use of fuels like E85 and E15, for which there is no significant consumer demand, while trying to eliminate fuels like E0, for which actual consumers have shown a substantial demand,” Gerard told reporters in a press conference.
Janet McCabe, an assistant administrator at the EPA, said the volumes reflect Congressional intent of a growing market for renewable fuels, but at the same time, they also reflect “that there are real limits to the actual amounts of biofuels that can be supplied to consumers at this time.”
The limits, she said, stem from lower-than-expected demand for gasoline, and constraints in supplying ethanol blends greater than 10 percent.
On the same day as the EPA announcement, the U.S. Department of Agriculture announced that it plans to inject $100 million to get more blender pumps into the market, specifically the higher-blend kind, so consumers have more choice.
Other factors
The RFS, and other alternative energy mandates, have also had to compete with changing market fundamentals. Over the past four years, the U.S. has become a major supplier of its own oil and gas, as a result of domestic shale drilling.
At the same time, prices for fossil fuels have reached a historic low, and more efficient engines are burning fewer gallons.
Following through
During a call with reporters May 26, Mark Borer, president of the Ohio Ethanol Producers Association, said Congress and other supporters of the RFS recognized its importance in getting the ethanol industry started, and must now fulfill their promises.
Borer, who also is general manager of POET Biorefining in Leipsic, Ohio, said about $1 billion has been spent in Ohio related to capital infrastructure. In turn, he said the investment provides thousands of jobs, and an economic output of about $7.6 billion.
“There was recogition that we had to build up the infrastructure,” Borer said. “All that we’re asking is that they (EPA) apply the law as it was written.”
American Soybean Association President Wade Cowan applauded the EPA for at least increasing its biodiesel requirement over earlier proposals. But Cowan, like the corn association, said farmers are capable of supplying much more.
Changing markets.
During the first few years of the RFS, and coupled with severe weather events, corn and soybean prices reached record highs, with corn eventually topping $7 per bushel in many places.
Grain farmers netted strong profits, while livestock producers and other end-users of grain were forced to evaluate their herds, and in some cases cut back.
Today, corn is selling for about half of what it was, and grain farmers are struggling to break even.
Road ahead
The EPA proposal includes a 60-day public comment period and is expected to be finalized by Nov. 30.
NCGA vowed to fight the proposal, and noted it is evaluating its legal options to “fight to protect and build profitable demand for corn,” and to defend the RFS law Congress originally put in place.
And, the API will continue fighting as well, Gerard said, as they take their concerns to the White House and to the EPA.
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The kind of ethanol added to gasoline is anhydrous, which is basically moonshine with the last few percentage points of water removed because gasoline (oil) and water don’t mix. You say ethanol has a third less energy content than gasoline, which translates into a 33% mileage loss over gasoline. When added to gasoline at a ratio of 10% (E10), it’s claimed to cause 3% mileage loss. But that doesn’t explain how 100% ethanol, even hydrous ethanol (moonshine with the water left in it), does not cause a 33% mileage loss in a high compression engine.
What’s really behind the loss of mileage with E10 has already been mentioned, oil and water don’t mix, meaning the hydrocarbon chain connecting gasoline to ethanol is very weak, so weak that too much water causes a “phase separation”. This is where the ethanol and water sink to the bottom of the tank with the gasoline floating on top of it, which causes a great deal of damage to engines. What no one talks about is what happens even with the bare minimum exposure to water, even normal water vapor in the atmosphere that fuel is exposed to in the piston chamber. This causes that weakly connected hydrocarbon chain to break so there are too distinct fuels being fired. So when the spark plug ignites what is supposed to be 87 octane fuel, the ethanol is now at 113 octane and the gasoline 83 octane. This is because in order to achieve an 87 octane balance when adding 113 octane ethanol at 10%, the gasoline it’s added to is 83 octane.
Low compression engines, like those that use regular gasoline, cannot compensate for a fuel mix of 113 and 86 octane at the same time, it’s impossible. This results in the claimed 3% mileage loss along with high emissions of acetaldehyde and formaldehyde. I t also causes hotter running engine because so much of the fuel is not combusting, it’s rather burning. The truth however is it causes a greater loss than 3%. Depending on the type fuel, engine, and ignition system, most suffer a 10% mileage loss or greater, meaning adding ethanol to gasoline at 10% by volume is a total wash even if it didn’t require any energy to produce. This is while hydrous ethanol causes no mileage loss, meaning the whole Midwest could be gasoline free using their own self sustaining 100% ethanol fuel rather than lobbying the federal government to force the rest of us to truck or train it to our regions so it can be used to ruin our fuels.
To sum it up, even if ethanol came out of the ground ready to be added to gasoline, even if it fell like rain or magically appeared in our fuel tanks already mixed with our gasoline, it would still do more harm than good.
On federal mandates driving commodities markets, ethanol forces high demand for corn, which means higher corn prices. So more farmers will grow corn over other crops. This means less of other crops coming to market, which drives their prices up as well. And the fact that ethanol is not just a drain on the economy because it requires more energy to produce than gives back in power, that is if we believe it works as a fuel, which it does not, this means our cheap energy model is broken, which drives down the value of the dollar. “That’s absurd, if this was true, the dollar would have started sinking as quick as mandated ethanol use began in the Spring of 2006,,,,,,, well I’ be, I just checked and that’s where the dollar started to decline, and kept declining the more ethanol was produced and making it’s way into gasoline supplies”
Exactly, and a weaker dollar means higher prices for imports like oil. Not only that, but with all these federal mandated forces pushing markets in directions that can’t be stopped, it invites speculators into commodities so already rising prices went that much higher.
Cheap energy and food are hallmarks of our economic model. Our formally unsubsidized low wage work force was founded on three floating variables, cheap energy, especially gasoline so workers can afford to drive to work; cheap food so they can feed themselves and their families; and affordable rent. Also a strong second hand market in cheap hand me down products like used cars, thrift stores, classifieds, and yard sales, all allow low wage workers a full flavor taste of the American Dream. Change any of them so workers can no longer afford to sustain themselves on unskilled wages and our financial markets start to come unraveled. We either have to import cheap labor or subsidized the work force we have, or both, which is what we’ve been doing.
This is all predicated on one central factor working against all the rest, not just a fuel additive that doesn’t work, and would be a bad idea even if it did what it’s promised to do, it’s a federal mandated fuel product that can’t be competed against. So when it points markets downhill, that’s where they will go, not only meaning nothing can stop it, but everyone knows where’s it’s all heading. So of course markets respond by investing somewhere else, which is correct, why back a dying horse, a horse that’s being poisoned by it’s owner when it’s safer to take chances overseas or betting against US markets.