Producers Panic as Ethanol Mandate Loses Support

This article was written by Oilprice.com -- the leading provider of energy news in the world

Ethanol producers are panicking amid speculation that the ethanol mandate could be drastically reduced or scrapped entirely this year as the biofuel loses its allure and bipartisan allies and former friends team up against it.

December saw California Democrat Dianne Feinstein—a renewable fuel champion--coordinate efforts with Oklahoma Republican Tom Coburn to come up with a Senate bill to get rid of ethanol from the Renewable Fuel Standard (RFS), citing fears that corn-based fuel production mandates will harm livestock producers.

In November, Washington proposed cutting the biofuels mandate for 2014 by 16% to 15.21 billion gallons. This would be the first cut in biofuels requirements, which were ideally set to grow each year with incremental increases in renewable fuel targets laid out in a 2007 law.

For renewable fuel targets, this represents a major setback because not only is 15.21 billion gallons for 2014 much less than the originally intended 18.15 billion gallons, it is also less than this year's mandate of 16.55 billion gallons.

Two years ago the Environmental Protection Agency (EPA) approved the E15 blend, which contains 15% ethanol and 85% gasoline, for vehicles manufactured in 2001 or later. There has been little progress toward widespread use of E15 though, and today's blend is commonly E10.

The problem is that the RFS set its parameters too far ahead and predictions are a tricky thing. Flexibility is necessary and this is being learnt the hard way and will certainly have repercussions and this initial lack of flexibility—of RFS ranges—was a policy misstep on the part of the Environmental Protection Agency (EPA).

The problem is that the current and future ethanol mandates were created back in 2005 with the Renewable Fuel Standard (RFS), at a time when gas demand predictions were expected to be different. Now we have better fuel economy and demand for gas that is increasing slower than forecast.  In 2007, it looked like gas demand would continue to rise every year; instead, it peaked in 2008.

Beyond that, poultry companies are going bankrupt due to rising prices of feedstock as crops are diverted to ethanol. The rising costs of farming and egg production are taking their toll on states like Minnesota.

On the other side of this divide we have the biofuels producers for whom uncertainty is rising fast as a resolution on the ethanol mandate looms. States like Iowa are leading the lobbying here because they have been reaping the benefits of all that demand for corn. This has come along with new jobs. Iowa will certainly baulk at the proposed cuts because the bulk of US biofuels are made from corn, with soybeans, grasses, crop waste and Brazilian sugarcane playing lesser roles.

The Iowa Renewable Fuels Association is balking at the new bill before the Senate. The recent launch of a new wet mill and three cellulosic ethanol plants slated to begin production in 2014 had raised high hopes of further growth.

"Iowa ethanol production was up in 2013, but not enough to round the decimal point. With the record U.S. corn harvest in the bin and new production facilities coming on line, there is hope that Iowa can once again expand ethanol production," said Monte Shaw, executive director of the Iowa Renewable Fuels Association. "But hanging over that potential like a gray cloud is the EPA proposal to cut the RFS (Renewal Fuel Standard)."

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  • Report this Comment On January 04, 2014, at 1:49 PM, jesterisdead wrote:

    Feinstein and I agree on something for once. End ethanol requirements.

  • Report this Comment On January 05, 2014, at 4:04 AM, Shawn wrote:

    If ethanol were cheaper, then it could be sold as E-85 and people would buy it all to save money, even without a mandate. But ethanol isn't cheaper, and that's why it needs the mandate. Such mandates are always either a mistake, if ethanol is more expensive, or not needed, if ethanol is cheaper. There are no other possibilities.

    Fossil fuels could become more expensive someday, and we will need something cheaper with which to replace them. Whatever comes next after fossil fuels has to be cheaper.

  • Report this Comment On January 05, 2014, at 4:11 AM, mojo1972 wrote:

    all we need to do is find a way to combine ethanol to coal dust and use that for fuel!

  • Report this Comment On January 05, 2014, at 6:13 AM, griz104 wrote:

    It's well past time they did away with Ethanol..One of the worst things they ever did was to allow it to begin with..It ruined many motors and still continues to do so..Drives the price of food up 10 fold..Of course Big Oil wants to keep it as they get a Government kickback from every gallon produced..Should have been done away with 2 years ago!!

  • Report this Comment On January 05, 2014, at 7:20 AM, NOTvuffett wrote:

    There was a time when ethanol made sense, back when we were driving cars with carburetors,and no catalytic converters lol. I don't even feel like telling everyone here why this is so fantastically stupid.

    When the govt. mandated oxygenated fuel content and the industry was forced into making MTBE (methyl t-butyl ether), it was already known that it would be a significant hazard to ground-water.

    @mojo1972 this research has already been done, although the stuff I saw was with a methanol/coal blend. Guess what? you can make methanol from coal.

  • Report this Comment On January 05, 2014, at 7:52 AM, wildwillywong wrote:

    Why is the corruption behind this whole ethanol scandal always ignored?

    We're suffering the damage and indignity of ethanol because corrupt politicians put their own bank accounts above the interests of lawn mowers and rototillers.

  • Report this Comment On January 05, 2014, at 11:15 AM, foolintexas wrote:

    Ethanol, in the US is a product of the corn lobby. In other countries, ethanol is produced from agricultural waste and thus more economically feasible. High feed prices are a result of this failed policy and if all this is factored in; ethanol is a bust.

  • Report this Comment On January 05, 2014, at 11:26 AM, NOTvuffett wrote:

    40% of corn produced in the US goes toward the stupid mandates on fuel. It does effect prices of foodstuffs, even though the govt. leaves it out of their calculations on inflation, lol.

  • Report this Comment On January 05, 2014, at 11:53 AM, barryo62 wrote:

    I don't know why people are so against ethanol.

    It is a renewable product made in the USA.

    Dried distiller grains make very good livestock feed after corn is turned in ethanol.

    I don't know why people want to patronize big greedy oil companies and foreign countries that sponsor terrorism.

    The USA produces more corn than we can ever use.

    I wonder how many politicans are with big oil?

    One example Tom Harkin`s wife,Ruth is on the board of directors for Cononco Phillips

  • Report this Comment On January 05, 2014, at 12:25 PM, BART1452 wrote:

    Ethanol is a bad deal for everyone but the producers. It uses up the limited ground water supply and causes water shortages to communities and agriculture, drives up the price of corn and all corn dependent foodstuffs, uses more fossil fuel energy to produce it than it produces, increases government tax subsidies, and generates costly engine repairs from the harm it does to engines and fuel systems.

    What is to love about all of that? Those who ignored those foreseeable problems and went ahead with ethanol production should not be coddled at the expense of the rest of the nation.

  • Report this Comment On January 05, 2014, at 1:29 PM, odysseus762 wrote:

    Good, I hope those government collaborators lose everything they own. I can only hope Wellpoint and the rest of the health insurance cartel are next.

  • Report this Comment On January 05, 2014, at 1:50 PM, Shawn wrote:

    High octane gasoline can also be made from coal, using the Bergius process. There's no need to monkey around with making alcohols. Petroleum is the most expensive of the fossil fuels, and coal is the cheapest. Why not make fuel from the cheapest source of energy? After all, our whole concern is that energy could become more expensive someday...

  • Report this Comment On January 05, 2014, at 4:25 PM, frellmedead wrote:

    Ethanol from corn is a scam, a farce forced down the throats of American consumers. Start making it from sugar cane and other more efficient (cheaper) processes.

  • Report this Comment On January 05, 2014, at 5:44 PM, collegestfarm wrote:

    Distiller grain is lot smaller percent after the ethanol process.This has greatly hurt the poultry industry.I have grown broilers for the last 26 years, have not gotten a raise over the last 10 years.Several poultry companies have gone bankrupt. Has government policy ever done so much harm-with so little understanding from the public.

  • Report this Comment On January 05, 2014, at 11:02 PM, bugmenot wrote:

    I don't understand this article. Ethanol never made sense! Ethanol is inferior because it is less energy efficient. You need more ethanol gas to go 100 miles than you need non-ethanol gas. Ethanol just deluded your gas without destroying the engine until Obama said 15%- that would destroy your engine,

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