Proposed EPA rule draws complaints from ethanol industry

Members of Minnesota's Congressional delegation are displeased that Obama administration has proposed new rules that would maintain a limit on the use of corn ethanol in gasoline.

That could slow the growth of ethanol producers in Minnesota, the nation's fifth-largest producer.

The widespread use of ethanol in gasoline springs from a federal law passed in 2007, when oil prices continued to tick upward, but before large scale domestic oil development in North Dakota or Pennsylvania had taken off. In passing a law creating the Renewable Fuel Standard, Congress aimed to slow the pace of oil imports by mixing more domestically grown biofuels into the nation's gasoline supply.

But the law didn't anticipate the recession, which cut back on how much Americans drive. Nor did it anticipate that people would start driving less and that cars would become more fuel efficient.

The Environmental Protection Agency's proposed new rules, announced Nov. 15, would essentially keep the amount of ethanol blended into gas where it is at 10 percent. As a result of the rules, E-85 fuel -- a blend of 85 percent ethanol and 15 percent gasoline pushed by the ethanol industry and Corn Belt lawmakers -- is unlikely to gain mainstream acceptance.

"I don't think there's any justification for them to do this," said U.S. Rep. Collin Peterson, who represents Minnesota's 7th District.

Peterson, the top Democrat on the House Agriculture Committee, and the ethanol lobby, have an easy culprit to point to for the new rule: Big Oil.

"They are putting it in the hands of the oil companies," said Bob Dineen, president and CEO of the Renewable Fuels Association. "They are putting it in the hands of Exxon Mobil and saying, 'hey, you tell us how much renewable fuel you want to use.'"

If oil companies aren't forced to add more ethanol to gasoline, Dineen asks, where's the oil going to come from?

"It's going to be from Canadian tar sands. It's going to come from tight oil supply and 'fracking' in the Bakken," he said of the oil fields in North Dakota. "It's going to come from drilling deeper in the Gulf of Mexico."

All are sources that are more environmentally destructive and expensive than ethanol produced from Midwestern corn, he said.

But corn ethanol isn't necessarily a very clean fuel either.

There are lots of pollution and carbon emissions associated with producing and transporting it.

Franz Matzner, associate director of government affairs for the Natural Resources Defense Council, described the EPA's move is a positive first step away from corn ethanol.

"One certainty in our biofuels policy is that the nation does not need more corn ethanol," Matzner said.

One consequence of the Renewable Fuel Standard has been an economic boom in farm country driven by the demand for ethanol that's encouraged farmers to plant more corn, often on environmentally sensitive land.

The days of sky-high corn prices would likely end if the fuel standard is changed, said Wally Tyner, an energy economist at Purdue University.

"The implication for corn markets is that the demand will not increase," he said.

But corn ethanol still has plenty of allies and they're promising to put up a vigorous fight as the EPA opens its proposal for public comment.

Dineen said his group plans to work with other trade associations to make its case.

"There are going to be plenty of voices that will be telling the administration 'you've made a mistake; you need to correct it,'" he said.

If the rule survives the lobbying blitz, Peterson predicts a legal battle.

"If they actually go through with the rule and it's implemented, they'll be sued," he said.

One route that's unlikely for now: additional legislation. In part, that's due to congressional dysfunction, said Matzner, of the Natural Resources Defense Council.

"This is a complicated policy that needs to be done thoughtfully, and it's hard to see how that could possibly happen right now, especially in a way that's good for our environment," he said.

The EPA will hold its first public hearing on the proposed rule on Dec. 5.