Reduced Yields
An Environmental Protection Agency proposal to reduce the renewable fuel volume in 2014 could have negative impacts on more than just the ethanol industry.
Late last year, the EPA proposed requiring transportation fuel companies to blend 15.21 billion gallons of ethanol into the nation’s fuel supply in 2014, down from 16.55 billion gallons in 2013 as outlined in the Renewable Fuel Standard.
Rationale behind the proposal was partly because of an alleged low demand for the corn-based fuel. However, POET Biorefining General Manager Greg Olsen said fuel demand is low nationwide because of people driving less and more efficient cars. Rather, he said, the proposal is an attack on the renewable fuel industry.
“The RFS was designed to reduce our dependency on foreign oil, to make a cleaner fuel and reduce the price at the pump, and it’s done just that,” Olsen said. “The oil industry, though, has not kept up their end of the bargain.”
Large oil companies, which are responsible for the delivery of the ethanol, have not produced the infrastructure needed to distribute the higher-level ethanol blends, like E85 and E15. Despite more than 14 million vehicles on the road capable of running off E85, only 3,000 gas stations nationwide offer the product out of the total 140,000, according to the Renewable Fuels Association.
“If supporters of the oil industry get legislators to change the RFS, there will be no demand, no more investments into new technology for biofuels,” Olsen said. “We won’t be stepping forward anymore.” Southwest Iowa Coalition Coordinator Lynn Adams said there has been some discussion within the Iowa legislator about mandating gas stations to provide higher-level ethanol blends and the infrastructure needed to support them, something other states have started requiring in support of the RFS.
While the closing of biorefineries, like POET, which is located in Corning, is a worry of Olsen’s should the EPA’s proposal take effect, the reduced numbers would have a much larger impact.
“Ethanol brings jobs to rural America, good paying jobs,” he said. “There are 400,000 U.S. jobs in ethanol, but if there is no market for it or that market changes because of the EPA proposal, I don’t know how that number would change. Chances are some plants would close.”
Through a trickle down effect, the farmers who plant the corn for ethanol, including those in Montgomery County, would then see an added burden.
Iowa’s ethanol industry produces 3.8 billion gallons annually, using more than 1.3 billion bushels of corn, according to the RFA.
Statewide, corn farmers grew 2.2 billion bushels in 2013, according to the USDA, a number projected to reach 2.4 billion in 2014.
Locally, Iowa State Extension data from the last 10 years indicated an average of 158 bushels of corn per acre is yielded in Montgomery County. That amount peaked in 2009 at 193 bushels and saw a low of 130 in 2003.
“The ethanol industry has given farmers additional places to sell their product, meaning there’s a reduction in government subsidies because the farmers are profitable,” Olsen said. “If the government changes the RFS, the farmer will suffer and so will rural America.”
Projected data indicates, with the proposed numbers, 500 million bushels of corn nationwide will not be needed.
For the general population that isn’t financially invested in biofuels or the production of corn, a reduction in ethanol in the market could mean higher prices at the pump.
According to Olsen, ethanol is responsible for lowering gas prices anywhere from $.50-1.09.
Environmentally speaking, the proposal is also a setback, according to the RFA, which indicates it is equivalent to putting five million more cars on the road increasing the associated greenhouse gas emissions.
“It may not be all about Montgomery County,” Adams said. “But, if you look at the broader picture, what’s good for the state is good for us. We are going to see the impact in a variety of ways. Whether it’s farmers with less revenue or higher prices at the pump.”
Following the announcement of the proposed reduction, a public comment period on the matter began, which ended in late January. With the strong responses against the EPA’s proposal, Iowa Secretary of Agriculture Bill Northey said a change of some sort is likely.
“The impression we got from administrators is that, ‘we heard loud and clear that we did not get the number right the first time and we’re working hard to understand what the situation is and what we need to do,’” Northey said at an Iowa Corn meeting in Red Oak last week. “So that gives me the impression that there could very well be a different number than what the first number was in the proposal. Now, that doesn’t say we are all going to be happy with it or it will be at a place that really works for the industry, but it certainly indicated that you all did a good job at getting the word out and letting them know this is wrong.”
Northey added, historically, the EPA is pro-renewable fuel so he was surprised when they released a proposal that is against the advancement of the industry.
A final decision and a possible new number of gallons of ethanol to be blended into the nation’s fuel supply will likely be available this summer. With the possibility of complications though, Northey said chances are a number of what needs to be blended this year may not be finalized until closer to the end of 2014.
Regardless of a decision made, Olsen said this is a turning point for the industry.
“My hope is that the EPA will go back to the original quantities and allow the ethanol industry to do what they wanted it to do, which is provide a cleaner, more green fuel, reduce our dependency on foreign oil and keep prices low at the pump,” Olsen said. “It’s a big concern for one of two reasons. If the EPA goes back to the original proposed volume numbers, the oil industry will lobby to change the RFS, and if they hold onto the current proposal, it’s just a chink in the armor for the ethanol industry. Lobbyists will use it to say, ‘See, even the EPA says things need to change.’”