Just a few years ago, it looked as though ethanol and its politically potent lobby would reshape the U.S. energy landscape, but now even the federal government has been forced to acknowledge that its projections for the biofuel simply don’t match reality.
The Environmental Protection Agency this week dramatically lowered its mandate for how much cellulosic biofuels — produced from grasses, wood and other sources and different from the type of ethanol produced from edible corn — must be mixed with the U.S. supply of gasoline and diesel. The agency did so retroactively for 2013, moving its target from 6 million gallons to 810,185 gallons, the amount actually produced last year.
A petition from the oil and gas industry and other groups that claimed the mandate was unrealistic and disruptive led to the change.
It marked the second time the Obama administration was forced to alter its lofty projections. The EPA first predicted that 14 million gallons of cellulosic biofuels would be produced last year but revised that figure to 6 million when it became apparent that supply wouldn’t match the government-mandated numbers laid out in the federal renewable fuels standard, designed to jump-start the use of renewable fuels as, for example, additives to gasoline and diesel.
Some analysts say the developments are further proof that the ethanol push doesn’t make economic sense, at least at the scale prescribed by the federal government and backed by ethanol producers.
“It’s the latest in a series of bad news for the ethanol lobby, and it’s also a very real sign that the reality of the product is catching up with the politics. Ethanol’s days are numbered as it is currently being sold, both politically and to the public,” said Thomas Pyle, president of the American Energy Alliance, a nonprofit organization often critical of government mandates such as the renewable fuels standard.
“The EPA has now admitted the program has flaws. The fact that a bunch of bureaucrats are sitting around in a room determining the volumes that should be mandated by fiat is telling enough,” Mr. Pyle said. “These guys failed to predict the market, as most people generally do. They aimed too high.”
The ethanol lobby and its backers on Capitol Hill aren’t ready to give up. They attribute the EPA’s move to a lack of companies producing cellulosic ethanol and argue that as more production facilities start operating, the industry will be able to produce enough fuel to meet or even exceed the federal mandates.
The EPA is calling for 17 million gallons of cellulosic ethanol to be blended with gas and diesel supplies next year.
“The renewable fuels standard was designed to drive investment in and the development of advanced biofuels. It has succeeded in doing that, if not at the pace Congress originally had hoped,” said Sen. Chuck Grassley, Iowa Republican and an outspoken supporter of ethanol. “But, the path the RFS put us on is working, with a number of cellulosic biofuel plants coming online this year in Iowa alone.”
Industry leaders echo Mr. Grassley’s optimism. They say the EPA made a reasonable decision to reduce its target figures because it is unfair and unrealistic to keep in place mandates that don’t match the amount of fuel in the marketplace.
“From our perspective, that is a totally reasonable decision and a reasonable use of flexibility” given to the federal government under the renewable fuels standard, said Brooke Coleman, executive director of the Advanced Ethanol Council. “What it doesn’t mean is that the EPA is going to somehow wait every year and set the standard based on what we produced the year before. What we’re not OK with is if the EPA adopts this type of approach as a methodology for administering the program.”
The administration appears to have set its sights too high this year as well.
With just 75,000 gallons of cellulosic biofuels produced in the first quarter, calls are mounting for the EPA to adjust its projections and once again confront production shortfalls.