EPA proposes lower renewable fuel requirements

The Environmental Protection Agency (EPA) today released the long awaited proposed 2014 Renewable Fuel Standard (RFS) volumetric requirements. For 2014, EPA is proposing to lower the conventional renewable fuel requirement from the statutory level of 14.4 billion gallons (BG) to 13 billion gallons, and reduce the total RFS volumetric requirement from 18.15 BG to 15.21 BG. The proposed 2014 blending requirements will be open to public review and comment before a final ruling is made.

“The Renewable Fuel Standard has been incredibly successful, achieving every goal that it was designed to accomplish,” said Brent Hostetler, president of the Ohio Corn and Wheat Growers Association. “By reducing the amount of renewable fuel required in the RFS, the price of gasoline will increase and favor oil over home grown renewable fuels, taking money out of the American economy and hindering additional investments in bioenergy.

“For the first time since 1995, the U.S. imported less oil than we produced. A major factor in this increasing trend towards energy independence is the increased use of ethanol and biofuels. We should be moving forward with our goals of energy independence, not reversing this success and relying on hostile countries to supply our energy needs. Everyday, ethanol is saving drivers money at the pump.”

Though many were disappointed, the announcement was received as a great victory or a devastating loss, depending on the side of the biofuel debate.

“We appreciate this action as it acknowledges a problem exists with the current policy. The inflexible RFS mandate continues to have a detrimental impact on the economy and makes feeding animals risky because our industries are not competing on a level playing field,” said a long list of livestock, poultry and meat organizations, including the Milk Producers Council, the National Cattlemen Beef Association, National Chicken Council and the National Pork Producers Council, in a statement. “Today is a step in the right direction, however, it is the responsibility of the Congress to find a lasting solution to this rigid, inflexible program and put livestock and poultry producers back on equal standing in the marketplace.”

Biofuel and crop supporters, however, were very concerned about the proposed rules.

“Clearly we are disappointed in the initial proposal that was released today. This proposed rule goes directly against the best interests of our nation and American consumers. The RFS is working to reduce our dependence on foreign oil, create jobs, clean our air and save consumers at the pump. It makes no sense to roll back a successful policy just because Big Oil stands to lose profits — profits that come directly from the wallets of American drivers. Any attempts to do so undermine the intent of the Energy Independence and Security Act of 2007, in which the RFS was strengthened,” said Tom Buis, CEO of Growth Energy. “We welcome the opportunity to ensure that biofuel stakeholders are able to express their concern with this proposed rule, while also laying out a reasonable pathway to achieve the goals of the RFS during the forthcoming comment period.

“We are only five years into a 15 year policy that is working and has saved Americans billions of dollars at the pump. Now is not the time to turn back on the progress we have made and ask Americans to pad big oil’s already record profits. In its current form, this rule would freeze innovation or investment in next generation biofuels; reduce production of conventional biofuels; harm our environment and jeopardize savings to consumers.”

The Renewable Fuels Association points out that the impacts of the proposed changes could include: reduced corn prices and farm income, increased demand for gasoline and higher pump prices, increased greenhouse gas emissions from transportation sector, and discouraging investment in biofuels for the future.

“By re-writing the statute and re-defining the conditions upon which a waiver from the RFS can be granted, EPA is proposing to place the nation’s renewable energy policy in the hands of the oil companies. That would be the death of innovation and evolution in our motor fuel markets, thus increasing consumer costs at the pump and the environmental cost of energy production. This proposal cannot stand,” said Bob Dinneen, President and CEO of the Renewable Fuels Association. “During the comment period, I expect reason and fact to replace the fear and misinformation peddled by Big Oil and seemingly adopted for this proposal.”

The term “outrage” was used by the National Corn Growers Association in describing the EPA’s proposal.

“Ethanol and the RFS have been a great success story. Now, the EPA is sending a terrible message that we no longer have a long-term energy policy for biofuels, which was the original intent of this forward-thinking legislation. The Administration has clearly backed away from their commitment to renewable energy and this proposal blatantly contradicts the President’s Climate Action Plan,” said Martin Barbre, NCGA president. “The goal of the RFS is to reduce our dependence on imported oil to make our country more energy independent and more secure. It has done that while also revitalizing rural America.”

According to the U.S. Energy Information Administration, U.S. oil imports have decreased from 60% of U.S. total usage to 45%. This was due to increased efficiency in the automobile fleet, the recession and the increased use of biofuels. Corn prices were falling prior to the EPA announcement and currently stand close to where they were when the RFS was enacted in its current form in 2007.

While corn prices have returned to previous levels, the cost of producing the crop has continued to increase. In 2012, it cost $655 per acre to plant corn. Based on this year’s projected yields, a farm price of $4.25 per bushel would be required to cover production costs.

In addition, many expect the psychological impact of EPA’s proposal to push corn prices well below the cost of production. If corn prices dropped to $3.50 a bushel, farmers and the rural economy would lose more than $10 billion.

“A shock of this magnitude to agriculture markets would send ripples throughout the entire economy. Congress must carefully weigh the ramifications any changes to the RFS would have on agriculture and related industries. The U.S. economy and consumers can ill afford a downturn in this sector,” Barbre said. “EPA is making a conscious decision to limit ethanol’s access to the market even with the significant price advantage of ethanol compared to gasoline.”

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