Monte Shaw, Iowa Renewables Fuels Association, “We came right up to the blender wall, we
were about to crack through with the help of the RFS which is what the law envisioned,
and they hit neutral.”
Politicians and biofuel industry leaders gathered in Iowa this week to discuss the outlook for
renewable fuels.
Those in attendance wasted little time before jumping on the high octane topic of the Renewable
Fuels Standard, more commonly known as the RFS.
Secretary Bill Northey, Iowa Secretary of Agriculture,” It’s an odd thing that it
takes a mandate, an RFS, a law, to let the market work.
The RFS was originally implemented in 2005, It mandated that all gasoline must contain
a minimum amount of renewable fuels.
In the beginning that amount was 7.5 billion gallons annually.
Two years later, bio-diesel was included and the level was increased to 9 billion gallons.
Other congressional changes established the ambitious goal of 36 billion gallons of biofuels
being blended into gasoline by 2022.
But in 2013, the Environmental Protection Agency, which oversees the RFS, called for
cutting the mandate by six percent to 13 billion gallons due to a decline in gasoline demand.
The reduction wasn’t implemented in 2014, leaving the industry without a clear indication
of how much ethanol would be included in America’s fuel supply.
Dr. Chad Hart, economist, ISU: “Until they make an announcement, it leaves that uncertainty
and we likely won’t see a lot of investment in the ethanol industry.
Once they make that ruling, especially looking at 2015, that will determine what is the impetus
for some investment?”
Renewable fuels proponents cried foul over the delay, saying the RFS is a Congressional
mandate that boosted the biofuels ability in the open market.
Secretary Bill Northey, Iowa Secretary of Agriculture, “When it’s lower priced,
it adds qualities a gasoline absolutely needs and we should have been growing.
What wasn’t allowing that?
It was market access and you all know it.”
Those lamenting bureaucratic delays also blamed big oil for denying ethanol what they believe
is its rightful place at the pump.
Senator Rick Santorum R-Pennsylvania (1995-2007),”
Is there concern in the past that the oil industry is not so friendly with competition
to their product…I think there is a pretty long track record of the oil industry not
being particularly friendly to products that are competitive to them, that may even be
superior to them.”
Senator Byron Dorgan D-North Dakota (1992-2011), “I sat in those meetings when we were trying
to go to E15.
And guess what.
The oil industry pushed back because they didn’t want it to happen and now they claim
to have a blend wall.
Hell yes there is a blend wall, they helped create it.”
The blend wall refers to the infrastructure problem for blending ethanol.
Right now all gasoline is blended with ten percent ethanol.
The biofuels industry has been trying for years to move that number to fifteen percent
ethanol.
And in 2012, the EPA approved E15 for all vehicles manufactured after 2001.
But the oil industry claims most cars on the road are not properly equipped for E15.
And it says the consumer could be left paying a hefty price if they end up at the corner
gas station, spending more money on repairs than on filling the tank.
A spokesman for the American Petroleum Institute, in response to this week’s rally, told Market
to Market:
“This issue is more about consumers than it is about the petroleum industry.
If consumers are forced to use E15, we can expect broken down cars and high repair bills.
This will occur because E15 can damage engines and cause break-downs.
According to the Coordinating Research Council, this could even occur in vehicles approved
by the EPA for E15.
Auto manufacturers have said they will not honor warranties when E15 causes damage.
Furthermore, since ethanol contains 33 percent less energy than gasoline, E15 lowers mileage.”
Consumer groups also have have warned that EPA should suspend sales of E15, believing
that many cars are incompatible and consumers don’t know the potential dangers of using
the fuel.
According to American Automobile Association: “AAA’s automotive engineering experts
believe that sustained use of E15 could result in costly problems such as accelerated engine
wear and failure, fuel-system damage and false “check engine” lights in some cars.
An overwhelming 95 percent of consumers surveyed by AAA were not familiar with E15, indicating
a strong likelihood of consumer confusion leading to misfueling.”
Dr. Chard Hart, Economist, ISU “When you look at ethanol... that is its one buggagbo.
It has some different characteristics than gasoline so it can create some problems especially
in older vehicles.
But it takes time when you are talking about a vehicle fleet of over 240 million vehicles
and a vehicle flip is 7 or 8 years it takes a lot of time to move it forward.”
Ethanol proponents are quick to note their product’s ability to lower prices at the
pump.
But some supporters claim the renewable fuel plays a vital role in achieving energy independence
and maintaining national security.
For Market to Market, I'm Paul Yeager.