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.
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.
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.
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.
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.
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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