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Organization claims ethanol's damage to economy will soar to three-quarter trillion dollars a year by 2015

For ethanol advocates, 2013 has been a disappointing year.  Complaining that "breaking the blending wall" and pumping E15 out to stations would damage older vehicles, automakers and motorists united to petition the Environmental Protection Agency (EPA) for a waiver.  

Despite the apparent win of shooting down that waiver, ethanol producers saw the economics start to catch up to them.  With refinery growth grinding to a halt due in large part to the elimination of government grants for ethanol producers, 2013 production levels are expected to miss their target of 16.55 billion gallons.  As a result the EPA has given refiners an additional 6 months to meet that target, effectively a cut to the 2013 target.

I. Big Oil -- Ethanol Target Will Cost U.S. Economy a Quarter Trillion Dollars

Now the top two industry organizations of "big oil" -- The American Fuel & Petrochemical Manufacturers (AFPM) and the American Petroleum Institute (API) -- have looked to push the EPA to make further cuts.

The EPA announced that refiners must blend in 18.15 billion gallons during 2014 or face fines, under The Energy Independence and Security Act of 2007's (EISA) [PDF] Renewable Fuel Standard (RFS) terms.  The oil indstry advocacies want that target to be slashed 3.35 billion gallons, to 14.8 billion gallons.  While that's technically a higher 12 month production level than the 2013 EPA-approved level (with the 6-month extension factored in), the oil producers are willing to live with that small increase as long as production stays at E10 levels or below.

Refinery
Oil industry organizations claims that the 2014 ethanol target will cost the economy $250B USD next year. [Image Source: Independent Refiners]

In a press release they write:

This action is necessary to avoid the severe economic harm that will result from exceeding the 10 percent ethanol blendwall. Beyond 10 percent, the corrosive nature of ethanol renders the blended fuel incompatible with today’s engines, vehicles and the multi-billion dollar infrastructure in place throughout the nation. Waiving the 2014 volumes is the only available solution to avert the potentially disastrous implications of the blendwall.

The organizations claims that if no waiver is granted the RFS will cause a $270B USD dent to the U.S. gross domestic product (GDP) in 2014 a $770B USD hit in 2015 (which calls for 20.5 billion gallons, tentatively).  They cite data [PDF] from a study they commissioned by the National Economic Research Associates, Inc. (NERA) as supporting that number.

II. EPA Admitted a Waiver May be Necessary

AFPM President Charles T. Drevna, a former Sunoco, Inc. (SUN) executive, remarks:

The negative impacts of the RFS will be extreme and will undoubtedly hurt consumers. If EPA does not act, the inability to blend the statutory-mandated amount of ethanol could lead to domestic fuel supply shortages and ultimately cause severe economic harm to consumers and the economy.

EPA has the opportunity to curtail the harmful effects of the policy next year by waiving the 2014 volumes before more economic damage is done.  I expect it will take American families into consideration when it makes its decision.

EPA missed a golden opportunity to address the ethanol blendwall in 2013; however, we’re encouraged the Agency recognized there is a problem in its rule setting this year’s biofuel requirement. This petition will provide a roadmap for the Agency to follow as it promulgates its 2014 waiver.

The EPA seeming left the door open to a potential RFS waiver, writing in its finalization of targets:

This notice also acknowledges that there are constraints in the market’s ability to consume renewable fuels at the volumes specified in the Clean Air Act in future years, and states that the EPA anticipates proposing adjustments to the 2014 volume requirements in the 2014 rule to address these constraints.

The Renewable Fuel Association (RFA) -- the big ethanol/big corn industry's largest advocacy firm -- has not responded to the waiver request.  

E15
A waiver would be another hit to big corn's E15 plans. [Image Source: Digital Trends]

They did issue a press release last week, that suggests that ethanol production may be a bit higher than expected in 2013 due to a strong harvest and another press release that cites research suggesting that E85 (a higher ethanol blend for special certified vehicles) may be a route for refiners/station owners to circumvent the E15 issue and avoid vehicle damage while using more fuel.  (The latter press release aside, the RFA takes issue with automakers claims that E15 will damage older vehicles, claiming they're colluding with the oil industy to damage alternative fuels.)

Source: AFPM/API [press release]



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Kill it with fire
By Scannall on 8/19/2013 8:09:58 AM , Rating: 5
Using food for fuel, plus prime arable land to grow it on is one of the dumbest ideas to come down the pike. It isn't an alternate fuel, it's a giant money funnel to pay off political supporters.




RE: Kill it with fire
By retrospooty on 8/19/2013 8:14:41 AM , Rating: 5
"Using food for fuel, plus prime arable land to grow it on is one of the dumbest ideas to come down the pike. It isn't an alternate fuel, it's a giant money funnel to pay off political supporters."

Considering its real purpose is to be "a giant money funnel to pay off political supporters" it's actually kind of brilliant, in an evil genius kind of way.


RE: Kill it with fire
By half_duplex on 8/19/2013 9:11:09 AM , Rating: 2
Astute observation.


RE: Kill it with fire
By JZavala on 8/19/13, Rating: -1
RE: Kill it with fire
By kattanna on 8/19/2013 11:45:25 AM , Rating: 2
quote:
except they don't use human edible food for fuel


that is incorrect. Now while the type of corn used is not what you would pick up in the store for corn on the cob.. it is very much used in all sorts of food products we consume, as well as feed for our livestock.


RE: Kill it with fire
By ebakke on 8/19/2013 11:51:51 AM , Rating: 2
quote:
except they don't use human edible food for fuel.
100% false. I have personally helped grow corn which was then sold directly to the local ethanol plant.

quote:
big oil has been receiving oil subsides for 100 years. that's 100 years of us paying oil companies to find more oil and sell it.
Please list said subsidies, and if possible an explanation as to how the rules differ from other industries and how the oil companies are getting special treatment.


RE: Kill it with fire
By Samus on 8/19/2013 8:13:01 PM , Rating: 2
Even if it wasn't used for human consumption, "ethanol corn" is a great feed for cattle and other animals. Even dog food has corn in it.

The E15 arguenment is growing old and false. There is no damage to be seen in engines. The 5% differential in blends has no scientific impact on fuel delivery systems or engine wear, and the fuel economy reduction is somewhere in the 1-2% range.

E85 on the other hand can have a massive fuel economy hit, especially in city driving when energy density is most important. But it is also $1.00 less/gallon.


RE: Kill it with fire
By Concillian on 8/20/2013 12:00:04 AM , Rating: 1
quote:
E85 on the other hand can have a massive fuel economy hit, especially in city driving when energy density is most important. But it is also $1.00 less/gallon.


It's also way higher octane. For turbo car owners who convert to E85, it's like race gas for about the price of premium gas (once you account for the MPG difference.) Been running E85 for years in my 2002 WRX even on the stock turbo it was +40 HP.

I also don't buy the E15 damage argument. I used a new fuel pump (I needed a bigger one anyway to handle the higher fuel flow) and bigger injectors, but otherwise my 2002 fuel system has handled E85 on and off for 5 years and for about the last 2-2.5 years it hasn't seen a drop of E10. Modern fuel systems are built to handle E10 and will work fine with E15.

I also don't want E15, as that will help keep E85 prices reasonable =). I'll be using E85 as long as it's available. Renewable, schrenewable, it gives ~15% more power than premium gas... I'll be using it.


RE: Kill it with fire
By FITCamaro on 8/20/2013 7:30:21 AM , Rating: 2
And how about non-modern fuel systems of cars from the 80s and 90s? Even the study conducted only rated vehicles from 2001+ as being ready for E15. Plenty of people still drive vehicles that are from the 80s and 90s. Then you have the classic car owners.


RE: Kill it with fire
By Concillian on 8/21/2013 8:00:32 PM , Rating: 2

Cars of the 80s and 90s aren't going to have any more problem with E15 than they are with E10 that they see now. The MFRs are blowing smoke up people's asses when they say that E15 is more damaging than E10.

The auto manufacturers also aren't talking about voiding the warantee for cars from the 90s. They're talking about E15 voiding warantees of cars still under warantee.

This is where I'm saying they're lying. They are lying about the relative difference in corrosiveness between E15 and E10. Period.


RE: Kill it with fire
By Myrandex on 8/21/2013 7:52:29 AM , Rating: 2
Yea many dog foods have corn in it...but it shouldn't. Dogs are straight up carnivores. Sure they will eat practically anything people give them and I feel that is conditioning, but look at wild dogs in Africa, they hunt in packs for meat as that is what they are designed to eat, not corn and rice and other fruits and veggies.

Jason


RE: Kill it with fire
By superflex on 8/19/2013 2:10:41 PM , Rating: 2
quote:
and people getting all ornery about ethanol subsidies. big oil has been receiving oil subsides for 100 years. that's 100 years of us paying oil companies to find more oil and sell it.

I'd love to see a source on that. I wont hold my breath, though as it's pure liberal FUD.


RE: Kill it with fire
By retrospooty on 8/19/2013 4:03:13 PM , Rating: 2
HE is right about big oil, but adding additional "coffers" to pay isnt a good thing. Nothing about ethanol is good. I have never even seen anyone defend it, liberal or not. It's pretty universally agreed upon as a bad idea. The way it was managed was .... 100% big govt. Take a bad idea, do a bad implementation and pay someone somewhere rediculous amounts of money for it.

As mentioned above though. That was its purpose. aaaaaugh!


RE: Kill it with fire
By Chadder007 on 8/19/2013 11:20:53 AM , Rating: 2
For once, I agree with Big Oil...


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