Iowans Respond To EPA Announcement Of Delay On E15 Decision

Government approval of higher blends of ethanol is still possible as tests on vehicles continue.
Rod Swoboda

The federal Environmental Protection Agency on December 1 delayed until mid-2010 its decision on whether to raise the allowable percentage of ethanol in blended gasoline to 15% from the current 10%.

The ethanol industry had asked for the increase as a way to break through the "blend wall" which will limit growth of the industry to about 12 billion gallons. The industry this year will produce and sell about 10.5 billion gallons of ethanol nationwide. EPA was scheduled to announce its decision on December 1, 2009 but instead said it is delaying the decision pending completion of on-going tests of E-15 use in engines.

The addition of 5% to the legal limit for the blend would add a potential 7 billion gallons of demand to the market for ethanol-blended gasoline. "We need more demand," says Bruce Rastetter, whose Hawkeye Renewable Energy operates four ethanol plants in Iowa. If demand can't grow, then the industry can't be profitable in the long term."

Mixed reaction from Iowa farm and ethanol groups

A spokesman for the Iowa Renewable Fuels Association is critical of EPA's decision to postpone the decision until later--sometime in 2010. The Iowa Corn Growers Association and the National Corn Growers Association don't like the decision either—but are hopeful EPA will eventually decide in favor of a blend higher than E10. The Iowa Farm Bureau issued a press release that is a bit more positive, saying its members are disappointed, but IFBF also points out that government approval of higher blends of ethanol is still possible as the tests on vehicles continue.

The Iowa Farm Bureau release says the members of Iowa's largest farm organization are pleased to see that EPA's preliminary tests on newer-model cars using higher-blended ethanol show promise. Since Iowa leads the nation in both renewable fuel production and corn production, Iowa farmers have a vested interest in EPA's final decision.

EPA is conducting engineering and emissions tests on cars manufactured in 2001 and later to see how they run on 15% ethanol fuel (85% of the blend is regular gasoline).

Goals will be hard to reach without E15 approval

"The government's renewable fuels goals call for the use of 36 billion gallons of ethanol by the year 2022 in the United States. But we know that goal will be difficult to reach without blending gasoline with higher levels of ethanol," says IFBF president Craig Lang. "We're glad to see the early tests of these fuels show promise because we know that increasing the use of ethanol is good news for the environment and for farmers who grow the product—the corn that's used to make the ethanol."

Most unleaded fuels used today in the U.S. are blended with 10% ethanol and 90% gasoline. The majority of corn grown in Iowa is fed to livestock, not for human consumption, notes Lang, himself a dairy farmer who supports the making of ethanol from corn as a way to boost Iowa's rural economy.

The U.S. Department of Energy is conducting tests for EPA on 19 newer-model vehicles manufactured in 2001 and later to examine the long-term effects on engines and emissions when using higher ethanol blends. That study is expected to be completed by August 2010. Meanwhile, word from EPA this week is that the data from E15 use on vehicles in the study look promising—but the study isn't yet completed.

EPA's lack of action on E15 harms consumers

The Iowa Renewable Fuels Association expresses disappointment at EPA's announcement that the agency is delaying a decision on the E15 waiver request. In addition, the EPA announcement is a signal that future approval comes with caveats or certain conditions.

"The EPA has effectively kicked the E15 can down the road," says Monte Shaw, executive director of IRFA. "While not surprising, the EPA's non-decision is highly disappointing. There is a mountain of scientific evidence on the pro-E15 side and nothing on the other. Yet, the EPA technocrats decided more testing was needed."

He adds, "With E10 currently selling for about 13 cents per gallon less than non-ethanol blended gasoline, you could expect E15 to sell for about 19 or 20 cents cheaper. Iowans will purchase roughly 100 million gallons of E10 in December 2009. If those E10 gallons were E15 instead, Iowans could save about $6.5 million in fuel costs in December alone—during an economic recession and a period of high unemployment. That $6.5 million would put quite a few presents under the Christmas tree."

EPA may only approve E15 for 2001 and newer vehicles

"It's a positive part of the announcement that EPA is signaling the potential for partial approval of E15 sometime next year," says Shaw. "However, the testing to date does not show any problems with E15 for vehicles older than 2001. Splitting the vehicle fleet like that would diminish the positive impact of E15, while at the same time complicating a retailer's decision on whether or not to offer consumers the fuel. Such a decision should only be made if compelling science demonstrates it is absolutely necessary. To date, such science does not exist."

Shaw adds, "Further, the EPA should move ahead under existing law and regulations to approve E12 immediately—even as EPA continues the testing on E15 that it has decided is necessary. The E15 waiver request included 'other blends' and the public docket is full of scientific and legal support for E12 as an immediate step forward. For the EPA's non-decision today to entirely ignore E12 is very frustrating."

Request for E15 has drawn opposition from some groups

EPA's announcement to delay its decision foretells a favorable decision next year, says retired General Wesley Clark, the president of Growth Energy, a national ethanol industry trade group that asked EPA to allow the increase in the blending rate of ethanol in gasoline. "We're pleased. It shows that we're on the way to getting approval for E15 next year," he says.

Growth Energy's request to EPA was put in terms of energy security and a boost for agriculture. Federal requirements for ethanol use will rise from 10.5 billion gallons this year to 12 billion gallons in 2010 and 15 billion by 2012. But the E15 request drew opposition from:

* Environmentalists worried about water use and greenhouse gas emissions.

* Livestock producers who have seen their profits disappear in part because of ethanol-stimulated increases in corn prices.

* Automakers and manufacturers of small engines such as used in lawnmowers, power tools and motorboats. The manufacturers asked EPA for legal waivers from their engine warranties for use of a blend more concentrated than E10.

Several petroleum fuel refiners also sent comments to EPA regarding their need to protect themselves from lawsuits, should EPA grant allow unrestricted use of the E15 blend in gasoline. "We would be hesitant to produce a fuel that an engine manufacturer might not warranty," says Bill Day, spokesman for Valero, a refiner headquartered in San Antonio, Texas, which owns ethanol plants in Iowa at Albert City, Charles City, Fort Dodge and Hartley.

IPPA wants study to look at impact on livestock industry

Bill Tentinger of LeMars, a pork producer and vice president of the Iowa Pork Producers Association, says livestock groups are monitoring the situation. "The pork industry would like to see EPA study the impact an increase in the ethanol blend would have on the pork and other livestock industries," he says.

Sen. Charles Grassley, R-IA, and other ethanol supporters in Congress have criticized the delay announced by EPA. "It's unfortunate that given the overwhelming scientific evidence supporting increased ethanol blends, the EPA has chosen to obstruct a move that would immediately lower our nation's dependence on imported fossil fuels, which aren't good for the environment like a renewable fuel such as ethanol is," says Grassley.

The ethanol industry posted robust profits in 2005-06. But in the second half of 2007, profits fell as ethanol producers struggled with record-high corn prices. Since June, though, the industry has become profitable again because of lower corn prices. "We're probably seeing our best margins in the last year and a half," says Rastetter.

But the ethanol industry now faces the same challenge as the oil business: For the first time since the initial oil price shocks of the 1970s, demand for gasoline has failed to show year-to-year growth. The ethanol industry now has to wait for EPA's decision in 2010 regarding E15, a decision many believed would be automatic on Dec. 1, 2009.

SOURCE: wallacesfarmer