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Oil companies win RFS round one

The EPA announced its proposal for the 2014 Renewable Fuel Standard Friday and, as expected, it would leave less room for corn-based ethanol in gas tanks next year.

The proposed rule, which will be followed by 60 days of public comments, mandates 15.21 billion gallons of renewable fuel blending next year, but when you subtract the mandate for advanced biofuels (which includes cellulosic and biodiesel), the mandate for conventional ethanol made mostly from corn is about 13 billion gallons.

That's a dramatic reduction from this year's 13.8 billion-gallon corn ethanol RFS.

"This would take 500 million bushels of demand away from America's farmers," said Bob Dinneen, president of the Renwable Fuels Association.

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In its press release announcing the proposal, the agency said it "seeks to put the Renewable Fuel Standard (RFS) program on a steady path forward -- ensuring the continued long-term growth of the renewable fuel industry -- while seeking input on different approaches to address the 'E10 blend wall.' "

But the industry isn't buying it.

Brent Erickson, executive vice president of BIO, which represents the advance biofuels industry, said the rule, if it stands, "would undercut investment for the advanced biofuels industry," just as companies like Abengoa, DuPont, and POET are building plants that will begin commercializing cellulosic ethanol.

The EPA is proposing a waiver to the RFS, based in part on the blend wall.

But Dinneen said Friday that is has no legal authority to do so. In fact, when the 2007 Energy Independence and Security Act was passed, a House-Senate conference committee rejected lack of oil company infrastructure as justification for any waivers. EPA has to show economic harm, which Dinneen said it can't when ethanol is 50 to 60 cents a gallon cheaper than gasoline. Or, it has to show inadequate supplies.

"We produced more this year than they are requiring next year," he said.

National Farmers Union president Roger Johnson said that the energy law's intent was to increase the share of biofuels in the nation's liquid fuels by more than 10%, up to about 25% to 30% by 2022.

The EPA proposal, Johnson said, "lets the oil companies know that if they simply quit investing in infrastructure to allow this into the marketplace, they win."

Reaction in the agricultural community was swift and negative.

American Farm Bureau president Bob Stallman said:

“The intent of the Renewable Fuels Standard revised in 2007 (RFS2) was to get more renewable fuels into our nation’s pipeline and move beyond the E10 fuel blend. Today’s announcement from EPA moves us in the opposite direction. This decision has the potential to pull the plug on new technologies and investments that are currently in place and needed to produce advanced biofuels," he said.

“The ethanol industry, from farmers to investors and everyone in between, needs stability and certainty.”

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