EPA Ups Ethanol Use in RFS
The EPA set a target for the gasoline industry to use 14.05 billion gallons of corn ethanol this year and 14.5 billion gallons of the renewable fuel in 2016 - 4% more than it proposed in May but 5% less than expected when Congress created the Renewable Fuels Standard. EPA official Janet McCabe said the regulation, delayed for months by a lawsuit, meant “ambitious, achievable growth” for biofuels, but no one was happy with it.
Farm groups and biofuels makers said EPA should have stuck to the schedule set in a 2007 law that called for 15 billion gallons annually of corn ethanol beginning with this year. The National Corn Growers Association said it was “evaluating our options … to protect the rights of farmers and consumers.” The oil industry said EPA would force E15 and E85 blends onto the market. “Congress must step in to repeal or significantly reform the RFS,” said the trade group American Petroleum Institute.
EPA reduced the mandate for ethanol use by a total of 1.45 billion gallons for this year and 2016 from the levels suggested by statute. At 2.8 gallons of ethanol per bushel of corn, that could reduce corn demand by roughly 520 million bushels. USDA estimates that 5.175 billion bushels of corn from this year’s crop will be used to produce ethanol through next August 31.
The ethanol target selected by EPA was somewhat higher than expected by analysts, who foresaw marginal support for prices for corn, DDGs, and ethanol from the EPA announcement. The government was projected to raise the ethanol mandate in response to the first sustained increase in gasoline consumption since the 2008-09 recession.
Corn demand for ethanol could be 400 million bushels larger for 2015 and 2016 under EPA's decision to raise the mandate by 1.15 billion gallons from the level that it proposed in May.
EPA used its authority under the 2007 law to adjust the biofuels mandate to reflect the slower-than-expected growth in gasoline demand, the slow development of second-generation biofuels made from corn stover and grasses, and the small number of service stations with pumps that can sell fuel containing more than the traditional 10% blend of ethanol.
EPA Raises RFS Volume Requirements