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EPA gets an earful on RFS

An EPA hearing in Arlington, Virginia, Thursday on its proposal to roll back its mandate for blending ethanol and biodiesel into the nation's fuel supply next year drew bewildered opposition from corn farmers and the biofuels industry and faint praise from oil interests who said it didn't go far enough.

And the Obama Administration found itself in a strange political limbo that drew praise from a Tea Party organization funded by the Koch brothers while the legal counsel to former South Dakota Democratic Senator Tom Daschle who helped write the energy law's renewable fuel standard was dumbfounded that a Democratic president appears to have caved in to the oil industry.

EPA is citing the "blend wall," the oil industry's inability to sell more than 10% ethanol in its motor fuels, as a reason to roll back the mandate for all biofuels to 15.2 billion gallons, less than for this year and far below some 18 billion gallons Congress mandated in its 2006 energy law. The rollback includes about 13 billion gallons of mostly corn-based ethanol, down from the 2013 level of 13.8 billion gallons and less than the original target of 14.4 billion gallons.

The agency is using a waiver that relies on limits in the pipeline to consumers to justify lowering the mandate, but Jonathan Lehman, who was Daschle's counsel when the RFS was written, told EPA regulators Thursday that Congress rejected an amendment that would have allowed the oil industry to use lack of infrastructure as an excuse to not sell a fuel it doesn't like.

"That a Democratic administration appears to grant it that authority is nothing short of mind-blowing," said Lehman, who spoke on behalf of the American Coalition for Ethanol.

Yet the move drew praise from Christine Hanson of Americans for Prosperity, a group with more than 2 million activist members that draws support from the Koch brothers. The RFS "leads to higher food prices, restricts Americans' access to affordable energy, and burdens small businesses," she said. The EPA rule is "a step in the right direction," she said, and the group supports complete repeal of the RFS.

Iowa Governor Terry Branstad predicted economic disaster for his state, the leading ethanol producer, if the rule stands. It would contribute to a drop in corn prices of 25 cents a bushel, enough to put them under the cost of production for many, he said, leading to falling land prices and "an unbelievable negative ripple effect all through rural America."

"The last thing we want to do is again trigger this nation going into another farm crisis," said Branstad, who was governor of Iowa during the 1980s farm debt crisis.

"The EPA is now caving in to the demands of big oil, who has always resisted renewable fuels from the very beginning. It’s something they don’t control," he said.

Members of the fuel industry, even those representing independent retailers, said the blend wall is a real problem.

U.S. fuel consumption has fallen, instead of rising as Congress expected in 2007.

"Left untouched, the statutory mandate could cause fuel rationing," said Bob Greco, director of downstream activities at the American Petroleum Institute. "These rigid requirements are obsolete and have no place in today's energy market."

His group will continue to call on Congress to repeal the RFS, he said.

Members of Congress sympathetic to that view also testified Thursday.

Representative Bob Goodlatte (R-VA) said that he and Vermont Democrat Peter Welch, led a group of 165 House members who wrote EPA asking for a lower RFS.

"Since the renewable fuel standard was dramatically expanded in 2007, we saw almost immediately the market-distorting effects on our economy," said Goodlatte, a former House Ag Committee chairman who has introduced several bills to weaken or repeal the RFS.

Welch said that high corn prices have been hard on dairy farmers in his state.

"It’s great for corn producers. There are some winners here, but it’s really bad for livestock producers," he said.

"The corn rush has driven up the price of food. It’s inflicted real environmental damage," he said, referring to claims that corn production has led to greater soil erosion and pollution.

Bob Dinneen, president and CEO of the Renewable Fuels Association said the proposal weakens the Obama Administration's efforts to reduce greenhouse gas emissions.

"It is the only program we have that addresses climate change," said Dinneen. "There will be environmental backsliding as a result of this rule."

"It will tell the investment community, 'don’t invest in cellulosic, don’t invest in advanced biofuels,' " he said, and that, instead, the U.S. can frack its way to energy independence.

Roger Zylstra, president of the Iowa Corn Growers Association, said the EPA's ruling will have a big effect on the rural economy.

"It is a delicate balance today and just a slight change in the system can produce a domino effect," he said. "This is serious, as serious as anything I've dealt with in my 33 years of farming."

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