U.S. Rep. Cindy Axne said $1 billion for biofuels will be included in the initial draft of the House reconciliation bill. (Photo by Perry Beeman/Iowa Capital Dispatch)
The head of Iowa’s biofuels association on Thursday called five oil states’ attempt to get the federal government to suspend ethanol supports “galactically stupid” and “pathetic.”
The fight is the latest between two of the nation’s most powerful lobbies: agriculture and oil. And it comes after a string of court challenges over a federal law intended to support the manufacture of fuel additives from corn and soybeans to support farmers. The oil industry, which opposes the biofuels mandates, is heavily subsidized, too.
The governors of Texas, Wyoming, Utah, Oklahoma and Louisiana have asked the U.S. Environmental Protection Agency for a COVID-related national waiver exempting the oil industry from having to blend biofuels into gasoline as normally required by the Renewable Fuel Standard, Reuters reported.
In a letter dated Wednesday, four of the governors argued that the 50% drop in U.S. gasoline demand is an economic hardship to the oil industry. The waiver would help the companies survive what the governors called a “meltdown” in the industry. (Louisiana had sent a letter earlier.)
“Currently, significant harm to the energy economy is expected to result from depressed demand for transportation fuel,” the four governors wrote. They noted that the cost of renewable identification numbers, used to prove they are meeting the blending requirement, is up 178% this year. They suggested permanent financial harm could be done to some refineries.
Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the request is off-base. If EPA pursues the idea, public comments would be filed “and we will contact our elected officials to let them know how galactically stupid this idea is,” Shaw said. “It’s as pathetic as it is sad.”
Shaw said each refinery is required to blend enough ethanol to equal 10.6% of the refinery’s individual production. So as refineries drop production during low demand, the amount of ethanol they blend does, too.
Shaw said it’s clear the oil companies are taking a hit, but ethanol isn’t the reason.
“This request is 100% meritless,” Shaw said.
The national goal is to include 15 billion gallons of ethanol in fuel mixes. But if the downturn means it’s less than that, you won’t hear complaints from biofuels plants, Shaw said. The federal system was set up to address situations like this, he added.
The governors’ letters are power plays from oil companies that came into the COVID-19 outbreak with plenty of cash in the bank, Shaw said. “Conversely, ethanol plants have had two rough years in a row, first losing China as a market amid the trade war and then battling EPA exemptions for small refineries who don’t want to blend ethanol. The exemptions reduce the market for ethanol.
Shaw said that nationally, ethanol production is half of normal. In Iowa, at least 10 of the 43 plants, and probably more, are idled completely. Others have limited production.
Nationally, ethanol plants have cut production by 7 billion gallons, equal to the entire capacity of the globe’s No. 2 ethanol producer, Brazil, Shaw said.
“These are numbers we’ve never seen before,” Shaw said. “I’m in my 21st year in the industry. It’s horrific.”
Iowa is the nation’s top producer of corn and corn-based ethanol, producing 4 billion gallons of the additive in a typical year. That’s nearly one-third of the U.S. supply.
Shaw could not say how much aid Iowa ethanol plants, or the oil refineries for that matter, will get from the federal government’s COVID aid packages.
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