The U.S. Environmental Protection Agency (EPA) has proposed reducing in the amount of biofuel that refiners are required to blend into petroleum-based fuels.
The proposal is intended to ease pressure on refiners hit hard by reductions in fuel consumption caused by the Covid-19 pandemic and last year’s associated shutdowns.
The EPA has proposed retroactively setting total renewable fuel volumes at 17.13 billion gallons for 2020, down from a previously finalized rule for the year of 20.09 billion gallons, set before the coronavirus hit. Volumes for 2021 would be revised downward to 18.52 billion gallons, while 2022 ethanol mandate is set at 20.77 billion gallons.
The EPA has also proposed rejecting 65 small refinery exemption applications. These exemption applications are waivers requested by small fuel refiners seeking to be excused from blending mandates for financial reasons. The Trump administration had angered biofuel producers by expanding the number of exemptions granted.
Campaign Promises Abandoned
President Joe Biden is breaking promises he made on the campaign trail when he was running for President to support ethanol producers, Sen. Joni Ernst (R-IA) said in a press release.
“Iowa is the number one producer of ethanol in the country, and 85 percent of Iowans believe biofuel plays an integral part in our economy,” said Ernst. “This decision is an about-face by President Joe Biden who campaigned on his supposed support for renewable fuels.
“These RVOs will slash demand for biofuel and have devastating, long-lasting consequences for Iowa farmers and producers,” Ernst said. “While President Biden may have forgotten his promise to Iowans, Iowa farmers and producers and I sure haven’t, and we will work together to fight back against this harmful policy.”
The EPA’s flip-flop was based on political calculations by the Biden administration, but the result is a good thing for consumers, says Craig Rucker, president of the Committee for a Constructive Tomorrow (CFACT), which co-publishes Environment & Climate News.
“Candidate Biden bashed Trump for selling out farmers by easing up on the biofuels mandate,” said Rucker. “Now faced with inflationary pressures and gasoline prices hovering around a seven-year high, he’s doing pretty much the same thing as his predecessor.
“Having fumbled terribly on virtually every other aspect of his energy policy, it’s good to see Biden is finally doing something right, proving even a blind squirrel can find a few acorns,” Rucker said.
‘More Expensive than Gasoline’
Higher prices will be the likely result from the EPA’s waiver rejections, says Myron Ebell, director of the Center for Energy and Environment at the Competitive Enterprise Institute.
“Ethanol continues to be more expensive than gasoline produced solely from petroleum, even though crude oil prices have gone way up, thus the biofuel mandate raises gas prices at the pump,” Ebell said. “The EPA’s decision to lower biofuel blending requirements retroactively for 2020 and 2021 is based on the reality that gas consumption dropped significantly during the pandemic shutdown.
“That’s the good news, but the bad news is the EPA rejected many exemptions for a number of smaller refineries and set higher blending requirements for 2022 and 2023,” said Ebell. “Requiring significantly more ethanol to be used in the next two years will help keep gas prices high, and without exemptions, many smaller refineries could become unprofitable and be forced to shut down.”
Consumers can expect to pay more at the pump if refining capacity becomes further limited due to the EPA’s denial of small refineries waiver applications, says Ebell.
“Total U. S. refining capacity is already inadequate,” said Ebell. “If small refineries do close because their exemptions have been ended and they can’t afford the additional cost of buying credits, then that will be another factor raising gasoline prices in the near future.”
‘Consumers Foot the Bill’
Ethanol mandates represented an unjustified political interference in energy markets from their inception, says Rucker.
“Like all forms of government intervention, ethanol mandates artificially create winners and losers and disrupt an otherwise efficient market structure,” Rucker said. “While producers rake in money, consumers foot the bill in terms of higher prices and sporadic food shortages.
“In general, the ethanol mandate has not served the American people well, so taking steps to toward its ultimate elimination would be, in my opinion, a wise public policy move,” Rucker said.
Kevin Stone (email@example.com) writes from Arlington, Texas