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DAVID KRUSE

By Staff | Nov 29, 2013

The leaked memo that was made public, reported to be from the EPA reducing the 2014 Renewable Fuels Standard, was a warning that came true.

Sen. Charles Grassley attributed the EPA action to the president. That is a leap of faith considering what little the White House purportedly tells the president these days.

If the president wasn’t informed about the condition of his namesake website, why would they bother to inform him about this?

The EPA decided to limit biofuel use mandated by the RFS to whatever the petroleum industry is willing to blend. which is equivalent to an E-10 blend. Nowhere in the legislation did it make any accommodation for the EPA to do this.

It did not say that we were going to use 30 billion gallons of ethanol … or E-10, whichever comes first. The EPA did have the authority to modify the RFS relative to what fuel can realistically be produced.

They would not mandate 1 billion gallons of cellulosic ethanol use if production was only 100 million gallons. But nowhere did it say that they would limit the biodiesel to 1.28 billion gallons when the industry is ready to produce much more.

The RFS was not intended to limit biofuel production and use, but to expand it to the greatest technological and logistical potential possible. They are now doing the opposite.

By lowering the RFS blending requirement EPA will take all of the air out of the developing cellulosic industry that was just becoming commercialized this next year.

If it is not even allowing the corn-based ethanol use to reach its legislated 15-billion-gallon RFS because of the mythical blend wall, there is no room in the market for one drop of cellulosic ethanol.

That industry’s prospects were just destroyed by the EPA announcement. It is toast. The way beyond the mythical E-10 blender’s wall is for E-15, E-30 and E-85 blender’s pumps.

Given the new limit on the ethanol RFS there would be no commercial reason to invest in them. U.S. Ag Secretary Tom Vilsack was trying to put lipstick on the pig, but I would rather see him resign in protest, but then the administration wouldn’t have anybody who could think their way out of a box left in it.

The proposed 13.1 billion gallon corn-feedstock RFS is a joke on corn farmers that they will not find amusing. It will likely kick the corn carryover up above 2 billion bushels.

There is a provision in the RFS that allows the EPA to waive the legislated requirements if they “would severely harm the economy or environment” or if “there were an inadequate domestic supply.”

They are not contending any harm to the economy or environment. They are using a very broad interpretation of what constitutes an “inadequate supply.” The legislation’s framers meant that to mean that if there was not enough corn the EPA could modify the RFS.

Even last year, given extremely tight corn stocks, the USDA told EPA the corn supply was adequate and they did not invoke the waiver. So this year, we have corn piles again, a 2 billion bushel carryover, burdensome stocks and cheap corn prices and the EPA decides that the domestic supply is inadequate.

EPA is broadening the interpretation of its authority to conclude, first of all, that the blend wall’s theoretical structural limits on the volume of biofuel that blenders can add is near 10 percent. And second that they are good with that.

“To heck with the legislated mandate.”

“Forget the incentives to market E-15, E-30 or E-85.”

“Forget the blender’s pumps.”

“Forget cellulosic ethanol.”

The petroleum industry says that an E-10 blend is all they will willingly market. Gosh, we could have just as well let the petroleum industry write the law in the first place. President Obama has been humiliated by the incompetence his administration, has shown implementing policy and this EPA ruling is another astounding blunder that occurred on his watch.

They are now anti-ethanol just like the GOP leadership, whom we all know is managed by Big Oil.

Under the RFS law, we were supposed to use 14.4 billion gallons of corn-based ethanol next year and the Renewable Fuels Association said that the industry capacity will be 14.7 billion.

Instead the EPA has arbitrarily reduced the amount to 13.1 billion using an audacious expanse of authority beyond its statutory guidelines that will undermine and reverse the entire intent of Congress when it wrote the law.

The EPA interpretation of their broad powers is a gross overreach of what was intended in the law. It will be challenged in court for whatever that is worth.

Such legal challenges often just become part of the autopsy as they come too late. The cellulosic industry will be dead from the fall.

It probably won’t kill the corn-based ethanol industry as it is no longer a baby and can handle being roughed up. That doesn’t make it right.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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