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EPA E15 decision gets mixed reviews
The Environmental Protection Agency announced Wednesday a waiver for U.S. gasoline to be blended with 15% ethanol vs. the current 10% in motor vehicles 2007 and newer.
Meanwhile, a decision to increase the ethanol blend rate for vehicles 2001-2006 has been deferred, Gina McCarthy, EPA Assistant Administrator told reporters during a press conference.
“More testing is needed. A research of those years will be completed this month. The waiver for smaller vehicles such as motorcycles has been denied,” McCarthy says.
EPA officials say this is not a mandate, it's a permission for blending companies to use ethanol at the 15% level.
During the press conference, McCarthy noted that in 2011 65 million cars will be eligible to burn E15 gasoline. “That equates to one-third of gasoline consumption in the U.S,” McCarthy says.
EPA also announced a proposal for new pump labels, in an effort to eliminate misfueling confusion. A variety of labels will be presented for public comment. In fact, public comment will be eligible for all news released today by the EPA.
Wednesday’s EPA announcement is being met with mostly caution and some disappointment from the agricultural industry.
Leaders of Growth Energy, the ethanol trade group that asked EPA for the waiver, describes the decision as “a good first step” toward wider use of ethanol.
Tom Buis, Growth Energy CEO, says that the fuel still needs to be certified and tested for health effects but that it will be available in the marketplace fairly soon.
“We think it will be available in the first quarter of the next year,” he says.
When asked where it’s likely to be sold, Growth Energy Chairman, Jeff Broin, says, “We expect the first marketing of E15 to begin in the Midwest and expand from there.”
Individual state changes
State legislatures also may have to change existing ethanol mandates that eight states have to allow for the sale of E15, Growth Energy leaders say.
Iowa is the nation’s largest ethanol producer, with about 4 billion gallons of the 12 billion gallons produced annually. The state has 40 active ethanol plants.
Iowa Secretary of Agriculture Bill Northey says that while this decision is good news and a step in the right direction, it actually does very little to increase ethanol demand or usage. “Until E15 is approved for more vehicles it is unlikely that it will be available as widespread as it should. I believe the science is there to approve E15 for more vehicles and I hope EPA moves forward with that decision quickly,” Northey says.
“We’re disappointed in the very limited scope of this approval, but pleased the EPA has finally taken action to partially approve the waiver request to allow higher blends of ethanol in some motor vehicles,” says NCGA President Bart Schott, a grower in Kulm, N.D. “We believe this bifurcation of the approval process, and the labels that are expected to be placed on higher-blend fuel pumps, can lead to general consumer confusion and therefore act counter to the original intent.”
By proceeding along this path, EPA’s decision casts an unnecessary shadow on all ethanol blend levels, Schott added. Blends up to E-15 and beyond have been tested and found suitable for a wide range of newer and older vehicles.
Bob Dinneen, CEO of the Renewable Fuels Association, is clearly disappointed with today’s EPA ethanol waiver.
“EPA’s scientifically unjustified bifurcation of the U.S. car market will do little to move the needle and expand ethanol use today,” Dinneen says. “Limiting E15 use to 2007 and newer vehicles only creates confusion for retailers and consumers alike. America’s ethanol producers are hitting an artificial blend wall today. The goals of Congress to reduce our addiction to oil captured in the Renewable Fuels Standard cannot be met with this decision.”
Meanwhile, one CME Group floor trader, choosing to remain anonymous, says the increased blending rate will have little impact on corn prices. "Without a subsidy to fuel retailers, I expect this increased ethanol rate to be a slow input into the market, as the cost of delineating fuel types at the pump is prohibitive. So, this is a moot point with ethanol trading above RBOB as it is now.”
The trader adds, “So, this announcement will have little if any immediate corn market impact. But, today's announcement keeps an energy bid under the market.”
He adds, "The price of grain will now more than ever be priced at the margins of the fuel market…leaving more volatility for the meat and grocery producer.”
On Wednesday, the CME Group corn market had little response to the E15 announcement. The Dec corn futures settled 9 3/4 cents lower at $5.69 1/4. In fact, the corn market traded higher before the EPA made its announcement.