EPA raises ethanol mandate higher, riling oil companies

Corn is unloaded from trucks into the grain elevator at the Mid Missouri Energy ethanol plant in Malta Bend, Missouri. (Patrick Fallon/Bloomberg)
Corn is unloaded from trucks into the grain elevator at the Mid Missouri Energy ethanol plant in Malta Bend, Missouri. (Patrick Fallon/Bloomberg)

The amount of ethanol and other biofuels that must be blended into the nation’s fuel supply must increase by 6 percent next year, the U.S. Environmental Protection Agency announced Wednesday.

That represented a significant gain over the four percent the EPA put forward in a draft proposal in May, which had drawn protests from biofuel producers arguing the EPA was failing to keep pace with the schedule outlined by Congress when they passed a renewable fuel mandate more than a decade ago.

“The move will send a positive signal to investors,” Bob Dinneen, president of the Renewable Fuels Association, said in a statement.

Dinneen predicted the new biofuel levels will “stimulate new interest in cellulosic ethanol and other advanced biofuels” and  “drive investment in infrastructure to accommodate E15 and higher ethanol blends.”

Under the mandate for 2017, 15 billion gallons of conventional corn-based ethanol would be blended into the fuel supply – compared to 14.5 billion gallons this year. In addition, 4.3 billon gallons of advanced biofuels like biodiesel and cellulosic ethanol would be added – compared to 3.6 billion gallons this year.

The hikes follow a recent turnaround in what had been a steady decline in the amount of fuel American motorists were consuming. In August retail gasoline sales reached 384.7 million gallons a day, the highest level for that month since 2007, according to the U.S. Energy Information Administration.

That allowed the EPA to increase ethanol production without increasing ethanol’s share of the total fuel supply to as great a degree.

The ratio of ethanol to gasoline in the fuel supply has been the source of longstanding debate, with oil companies and the federal government arguing over what percentage represents the “blend wall” – the point at which ethanol could damage conventional car engines.

Even with rising gasoline consumption, the EPA is projecting the proportion of ethanol in the fuel supply would likely increase to 10.7 percent in 2017 – well above the 10 percent ratio most oil companies argue represents the blend wall.

“We are disappointed that EPA has taken a step backwards with this final rule,” the American Petroleum Institute’s Downstream Group Director Frank Macchiarola said in a statement. “Today’s announcement only serves to reinforce the need for Congress to repeal or significantly reform the [Renewable Fuel Standard].”

Rep. Bill Flores, R-Waco, has joined with other congressman on a bipartisan bill that would force the EPA to keep the ethanol mandate at less than 10 percent of the total fuel supply.

While that bill has gained some support in Congress – a BP executive put the consponsors at 117 House members last week – a number of gas station chains including RaceTrac and Murphy USA are already going ahead and increasing the amount of ethanol in standard gasoline to 15 percent. 

A 2011 study the U.S. Department of Energy declared it was safe to use gasoline mixed with up to 15 percent ethanol on cars manufactured in 2001 or later.

Cellulosic ethanol, which aims to turn farming and yard waste into fuel, has struggled to achieve the technological breakthroughs envisioned a decade ago. Under the schedule set by Congress, cellulosic production was supposed to hit 5.5 billion gallons next year. The mandate announced by EPA Wednesday only called for 311 million gallons

Right now there are only two cellulosic ethanol plants operational in the United States, both in Iowa, said Paul Winters, spokesman for the trade group Biotechnology Innovation Organization.

“We think this rule will provide a a strong signal to investors that EPA supporting this technology,” he said.