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EPA agrees to 'take another look' at biofuel blending rules

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The U.S. Environmental Protection Agency (EPA) has agreed to "take another look" at a controversial proposal to reduce consumption mandates for corn-based ethanol and other biofuels next year. (Wikimedia.org)
The U.S. Environmental Protection Agency (EPA) has agreed to "take another look" at a controversial proposal to reduce consumption mandates for corn-based ethanol and other biofuels next year. (Wikimedia.org)

Reuters (KELO AM) - The U.S. Environmental Protection Agency (EPA) has agreed to "take another look" at a controversial proposal to reduce consumption mandates for corn-based ethanol and other biofuels next year, Iowa Senator Tom Harkin said on Thursday.

However, EPA Administrator Gina McCarthy stopped short of making any commitments to alter the proposal, now under final review, as she met on Wednesday with Harkin and 15 other U.S. farm-state Senators to discuss the controversial rule.

"I think the most we got from Administrator McCarthy is that they're going to take another look at it. They're going to review it," Harkin said during a weekly call with Iowa journalists.

"They're going to reassess it. It's not a final rule, it's a proposed rule," he said.

In a controversial move that took biofuel supporters by surprise, the EPA recommended in November to reduce the requirement for how much corn-based ethanol and other biofuels should be blended with petroleum-based fuels next year. The recommendations are now undergoing a comment period, with a final decision expected in mid-2014.

Despite Administrator McCarthy's assurances, some experts are skeptical that the agency is likely to change its mind as it finalizes the rules.

"As far as I can tell, they almost never change the proposed rules in going to the final, so I'm not persuaded that what's going on right now means much," said Scott Irwin, an agricultural economist at the University of Illinois Urbana-Champaign.

Still, the meeting marks a clear sign of the political backlash sparked by the Obama administration's proposal to reduce the biofuel mandates. For years, the administration had supported steadily increasing them but backed down this year due to concerns over the country's ability to consume all the ethanol required under a 2007 biofuel blending law.

A spokeswoman for the EPA said the agency "very much appreciates the Senators' time, interest and viewpoints" as it seeks input on how to put the biofuel blending program on a "manageable trajectory."

 

BREACHING THE 'BLEND WALL'

The trouble stems from the steep increases in biofuel consumption that Congress mandated under the 2007 law. Assuming that gasoline consumption would continue to rise, Congress grew the biofuel blending mandates from 9 billion gallons in 2008 to 36 billion by 2022.

In 2014, the law requires 18.15 billion gallons of biofuels to be blended with petroleum-based fuels, including 14.4 billion of corn-based ethanol.

But thanks to rising vehicle fuel efficiency standards and the effects of the economic downturn, gasoline demand has fallen. That has given the rising quotas an increasing share of the gas tank faster than expected.

With 134 billion gallons of gasoline demand forecast for 2014, the 14.4 billion quota for corn ethanol would represent more than 10 percent of gasoline consumption.

Oil refiners have been reluctant to cross that 10 percent threshold - nicknamed the "blend wall" - due to fears over engine damage that higher ethanol blends can cause in many cars on the road today.

Manufacturers of motorcycles, boats and small-engine equipment like chainsaws and lawn mowers are also concerned about damage from the higher ethanol blends, and have sided with refiners in lobbying against the mandates.

Refiners have also raised concerns about the lack of infrastructure - such as pumps at gasoline stations - available to sell gasoline blends higher than 10 percent without risking misfueling.

To address those concerns, the EPA proposed reducing the 2014 corn ethanol blending quota to about 13 billion gallons. That's down 800 million gallons from this year and about 1.4 billion less than the 14.4 billion required by the 2007 law.

Iowa Senator Chuck Grassley, who also attended the EPA meeting, said in a statement that "the blend wall is a result of Big Oil's obstruction to higher ethanol blends, and EPA's proposal rewards its obstruction."

The meeting was attended by 10 Democratic Senators and six Republicans, according to a list released by Harkin. Several big corn-producing states were represented, including Iowa, Indiana, Minnesota, North Dakota, South Dakota and Nebraska, which each had two Senators in attendance.

Michigan Senator Debbie Stabenow, who Chairs the Senate Agriculture Committee, was also in attendance, along with Dick Durbin of Illinois, the Senate's second highest-ranking official.

It is unclear whether the lawmakers will be able to sway the EPA. But Harkin made clear that the political pressure is bound to continue.

"We'll see what happens, but I hope they get the message that we're not going to stand still for this kind of a rule that takes us in the wrong direction," he said. (Reporting By Cezary Podkul and Joshua Schneyer; Editing by Muralikumar Anantharaman)

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