Oil industry and biofuel boosters scrap over mandates (video)

WASHINGTON — The fight over the nation’s renewable fuels policy is heating up again, as federal regulators mull where to set final biofuel quotas for 2014, and groups on both sides of the issue pressure Congress to take up the topic.

The Environmental Protection Agency is on track to establish this year’s quotas for traditional corn-based ethanol as well as advanced biofuels made from non-edible plant materials and waste before summer, probably in June. Its first draft of those targets, released last November, proposed requiring refiners to use 15.2 billion gallons of renewable fuels in 2014, some 3 billion below the amount mandated in federal statutes.

Biofuel backers say the EPA was “caving to Big Oil” and have implored the agency to boost the mandates, warning that clean energy jobs and the vitality of rural America are both at stake.

Now, they are hitting the airwaves, with a new advertisement aimed squarely at EPA. The TV spot, by Americans United For Change, will air in Washington, D.C. during “Meet the Press,” “Fox News Sunday” and other Sunday news shows this weekend.

The group did not say precisely how much they were spending on the campaign, only that the ad buy is “approaching six figures.” The commercial insists that the agency must protect renewable energy jobs tied to the biofuel mandate.

“Big Oil wants to gut America’s renewable fuel standard, because it works, because the more renewable fuels we use, the less they make,” says the ad. “And if you get in the way of Big Oil’s record profits, you better watch your backs. Big Oil interests will do whatever it takes to protect their bottom line.”

Not to be outdone, the American Petroleum Institute next week is beginning its own new round of ads on the renewable fuel standard, with a campaign that focuses on Capitol Hill and aims to pressure lawmakers to repeal the eight-year-old mandate.

The first API commercial features a family of boaters wearing life jackets and white sunblock who storm into the House of Representatives to complain about higher ethanol fuel blends damaging their boat’s engine.

“The mechanic said it’s that renewable fuel mandate which forces the blending of too much ethanol into our fuels and can damage small engines,” says the father portrayed in the spot. “Huh. Didn’t know that. But I hear you all did.”

The ad ends with the dad delivering a demand — and a punchline: “Repeal this renewable fuel mandate,” he asks the lawmakers, “or, you’ll be up a creek without a paddle.”

API declined to say how much the group was spending on the ads, which initially will air in Washington, D.C., before expanding to other states. Future commercials in the campaign will have a similar theme, with a grocery shopper and a landscaper similarly upset with Congress’ handling of the issue.

The oil industry trade group has been asking lawmakers to make deep changes to the renewable fuel standard, going beyond the annual adjustments made by EPA.

Federal law requires the agency to set the required biofuel volumes in November of the preceding year, but in recent practice, the agency’s final quotas have been issued months behind schedule.

API has threatened to challenge the flouted deadlines in federal court. Bob Greco, API’s downstream director, said Thursday that remains an option. “At some point, it just needs to be addressed,” he said.

Oil interests have already asked the agency to lower its proposed 2014 quota for cellulosic fuels beyond the draft target of 17 million gallons, describing that as based on overly rosy production forecasts from the industry.

But now, they are citing the looming bankruptcy of the nation’s first cellulosic fuel manufacturer, KiOR, as fresh evidence the EPA’s targets are unrealistic and unattainable.

The Pasadena, Texas-based company said in financial filings that it needs $25 million by April 1 to stay afloat and keep producing cellulosic biofuels made from wood chips, grass and other materials. The company had already halted production earlier this year.

KiOR’s production stats factored heavily into the EPA’s number-crunching. If the company’s Lowndes County, Miss. facility doesn’t start churning out biofuel soon, it it is likely to further undermine the agency’s proposed cellulosic target for 2014.

In general, API says the agency’s renewable fuel quotas should be based on real production data, rather than forecasts. But biofuel backers say that would lock in previous production levels, providing little incentive for refiners to use more of the next-generation fuel and no guaranteed demand to spur its development.

Biofuel industry advocates say KiOR’s problems aren’t industry-wide.

Greco acknowledged that KiOR is just one company. “But,” he added, “it is symptomatic of the problem with the way the EPA sets these mandates.”

The company’s financial problems “make a pretty strong argument” for EPA to lower its cellulosic biofuel quota. “KiOR was considered a significant provider of the advanced biofuels that EPA is basing the mandate on.”

Congress is unlikely to make broad changes to the renewable fuel standard this year, with the November election looming. The EPA’s decision to propose lowering the quotas also took some heat out of the issue, lessening the pressure on lawmakers to act.

Greco argued that EPA’s year-by-year changes aren’t enough to fix fundamental problems with the mandate, which Congress wrote with volumetric targets instead of percentage-based quotas.

“We obviously want EPA to do the right thing,” he said. But, “we don’t want Congress to be distracted by that and take their eye off the fact that even if EPA does do the right thing in the final rule, it will be at least six months late, and it’ll be non-sustainable.”