Iowa deepens commitment to ethanol as EPA proposes easing biofuels mandate

In mid-November the U.S. Environmental Protection Agency proposed reducing the amount of biofuels in the nation’s fuel supply for the first time, potentially dealing a major setback to the ethanol industry.
The change would require almost 3 billion fewer gallons of biofuels — mainly ethanol — to be blended into gasoline in 2014 than under the current federal mandate. The proposal comes at a time when domestic oil production has exceeded oil imports for the first time in years, and when falling motor fuel demand has made ethanol an unexpectedly large part of the total fuel supply.

During a visit to Indiana, EPA Administrator Gina McCarthy said the mandate, if left unchanged, would have resulted in more ethanol being generated than could be used next year.
Nowhere is federal biofuels policy watched more closely than in the Midwest, home to the vast majority of ethanol production in the nation as well as many of the most far-reaching tax incentives and state programs.
“The timing [of the EPA proposal] is bad because it comes when a record corn crop is being produced, and the price of a bushel has fallen almost to the cost of production,” Iowa Sen. Tim Kapucian says. “We are going to continue to support biofuels.”
In fact, state officials in Iowa — which produces about 25 percent of U.S. ethanol — recently announced they would use a $250,000 federal grant to bolster a program that pays gas stations to install “blender” pumps.
These pumps allow a higher percentage of ethanol in motor fuels than the standard 10 percent. The state’s goal is to promote greater availability of E30 — 30 percent ethanol and 70 percent gasoline. Ethanol blends of up to 85 percent can be used in newer “flex fuel” vehicles.
Retailers in Iowa are able to receive state grants for blender, E85 or biodiesel pumps. In exchange for the grants, gas stations agree to sell the fuels for three to five years.
In 2012, the legislature allocated $3.5 million over the next five years to improve Iowa’s ethanol infrastructure. The new set of grants furthers the state’s biofuels commitment.
This year, too, Iowa lawmakers approved HF 640, a law that guarantees local gas stations the right to offer ethanol and biodiesel blends of their choice. Sometimes called a gas retailer’s “bill of rights” by proponents, the measure prevents oil refiners from limiting the ability of stations to sell the blend of their choice. South Dakota passed a similar law in 2011.
As much as Midwestern communities have benefited from the rise in use of corn-based ethanol, Sen. Kapucian says, the future lies in cellulosic.
The Iowa-based Poet Biorefining plant, for example, is scheduled to begin commercial production of ethanol from corncobs, leaves and husks by early 2014.
The company’s chairman of the board, James Moe, says the EPA’s proposed changes are a setback to cellulosic ethanol as well, in large part because federal targets for the advanced biofuel are not set high enough. Moe adds that “the grain ethanol industry must remain strong in order to build cellulosic capacity.”
In light of the EPA decision, “Iowa’s efforts are even more important now,” says Iowa Sen. David Johnson, whose district includes the Poet plant.
Stateline Midwest ~ December 20131.76 MB