Money & Business

Associations Grapple Over Ethanol Showdown

By / Mar 26, 2013 (iStockphoto/Thinkstock)

While ethanol producers and oil companies have previously worked together, the approval of a new mix that increases the level of ethanol in gasoline has become a sore spot between the two industries.

Next time you fill up your tank, you may be in the middle of an industry conflict without realizing it.

In recent months, major ethanol plants in 13 states have kept quiet, without much to do, as high corn prices and lower demand for fuel have stalled the industry. However, a new effort to increase usage of the biofuel is causing fresh conflict between renewable fuel producers and oil suppliers.

More details on the conflict below:

The root cause: With suppliers unlikely to hit the federal Renewable Fuels Standard (RFS) requiring 13.8 billion gallons of ethanol in the fuel supply in 2013—rising to 15 billion gallons by 2015—biofuel industry groups have been pushing for a blend with higher ethanol content, above the current standard of E10, or 10 percent ethanol. The Environmental Protection Agency approved use of E15 last year, but members of Congress—most notably Rep. Chris Stewart (R-UT) and Sens. David Vitter (R-LA) and Lisa Murkowski (R-AK)—have raised concerns about the blend. Stewart said after a hearing last month that the EPA “has led a haphazard transition to E15 usage.” Most cars don’t formally support the higher E15 blend, which is currently available in only a few locations.

Our position is that we are strong supporters of the RFS. It’s doing what it’s supposed to do. We would hope Congress will continue to allow it to work.

The groups for E15: The Renewable Fuels Association (RFA) is leading the charge to maintain E15′s approved status and pushing for wider distribution of the blend. “It is the oil industry’s own behavior that is limiting E15’s availability,” the group’s CEO, Bob Dinneen, told the Peoria Journal Star. The Obama administration, through Secretary of Agriculture Tom Vilsack, has favored the ethanol producers. “Our position is that we are strong supporters of the RFS. It’s doing what it’s supposed to do. We would hope Congress will continue to allow it to work,” Vilsack said.

The groups against E15: Among the groups arguing against using the higher ethanol mix include the American Automotive Association. AAA president and CEO Robert Darbelnet told the Detroit News that the blend still needs further testing, with just 5 percent of cars approved to use the new fuel mix. “AAA believes it is both premature and irresponsible to sell E15 to consumers while these issues remain unresolved,” he said. The American Petroleum Institute, meanwhile, argues that there would be significant financial costs if the mandate is upheld, and the Environmental Working Group wrote an op-ed for The Hill critical of the usage of corn ethanol. And while not specifically opposing E15, American Fuel and Petrochemical Manufacturers last week encouraged the EPA to waive the RFS requirement, claiming that it could lead to higher fuel prices. Ethanol groups dispute that claim.

A major flash point: Last July, the convenience store company Zarco 66 became the first chain in the country to offer the new E15 at the pump. But it wasn’t long before the chain ran into trouble, according to the Renewable Fuels Association. “ConocoPhillips quickly threatened to terminate Zarco 66’s franchise agreement and charge Zarco 66 hundreds of thousands of dollars in penalties unless Zarco 66 started offering ‘premium’ gasoline, gasoline that would replace the ethanol housed in one of Zarco 66’s fueling tanks, and a gasoline that is likely to result in far fewer sales than the ethanol blends that would be available if Zarco 66 maintained the current ethanol contents,” RFA’s Dinneen told Ethanol Producer Magazine. The chain has thus far resisted switching out the ethanol mix.

The EPA will accept further comments on the ethanol mandate until April 7, Reuters notes.

Ernie Smith

Ernie Smith is the social media journalist for Associations Now and a former newspaper guy. More »

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