Ethanol Industry Presses President Obama for Help in Tight Election Year
Policy + Politics

Ethanol Industry Presses President Obama for Help in Tight Election Year

Iva Hruzikova / The Fiscal Times

As the Administration moves closer to a ruling that could put more ethanol made from corn in the gasoline tanks of ordinary cars and trucks, the U.S. automobile industry is urging President Obama to put on the brakes.

At issue is whether to waive current limits set by the Clean Air Act, and raise by 50 percent the amount of ethanol than can be mixed with the gasoline sold at service stations. But a coalition led by auto manufacturers and the oil industry warn that more ethanol in the gas tank could damage engines and lead to more pollution, and they have urged the administration to postpone a decision until next year, pending the outcome of studies.

The collision between Detroit and the ethanol industry — which has strong bipartisan support from the influential farm bloc in Congress — is rife with political implications. Ethanol refineries from the Dakotas to Ohio are suffering from a glut of supply caused by rapid growth in refining capacity and a downturn in U.S. gasoline use during the recession. The already heavily subsidized industry wants help from Washington on a number of fronts.

With ethanol production on track to reach or exceed 10 percent of the U.S. transportation fuel market this year, the corn belt sees the proposed 50 percent increase in blending limits as crucial to the continued health of the industry and rural economies.

For its part, the Obama administration appears to be hoping that its support for ethanol will partially deflect farm-state criticism of administration proposals to revamp and reduce farm subsidies and enact a climate change law — initiatives that are unpopular in many rural communities. On an April swing through the Midwest aimed at boosting farm-state Democrats in coming tough congressional races, Obama visited an ethanol plant and said there should be “no doubt that renewable homegrown fuels are a key part of our strategy for a clean-energy future.”

E15: Engines and Emissions

The Environmental Protection Agency (EPA) has hinted that it may grant a waiver of the Clean Air Act in coming months that will permit gasoline blends containing up to 15 percent ethanol, up from the current limit of 10 percent. But auto companies, the oil industry and manufacturers of smaller engines want EPA to wait for the results of more studies on the effect of such “midlevel blends” on engines and tailpipe emissions. That would mean postponing a final decision until 2011.

Tom Buis, president of Growth Energy, the ethanol industry trade organization that initiated the Clean Air Act waiver request last year, said in an interview with The Fiscal Times last week that allowing 15 percent blends, or E15, was essential because “right now we’re producing more than they [the refineries] can use.”

“We’re saying that a problem with E15 doesn’t exist, based on all the research data we’ve submitted, and we think [federal] testing will support that,” he said. The Department of Energy is presently completing a series of tests examining the issues of engine wear and tear, and possible degradation of catalytic converters that limit pollutants in tailpipe emissions. Even if EPA grants the waiver, Buis noted, the oil industry will not be required to increase the amount of ethanol in its gasoline blends. But he said there could be strong market pressures to do so. Ethanol is selling now for 75 cents a gallon less than unleaded gasoline, he said.

Buis  said the industry also wants Congress to make changes in EPA’s renewable fuel standard, allowing some ethanol to qualify as an “advanced biofuel.” Ethanol production from corn is capped at 15 billion gallons a year under the 2007 energy act, but the provision sought by Growth Energy could raise the ceiling to 21 billion gallons, Buis indicated. The industry is on course to turn out 12 billion gallons this year, according to figures from the Energy Information Agency, and it has unused capacity to produce even more.

Buis called the prohibition of counting ethanol produced at efficient plants as an advanced biofuel “discriminatory and just not equitable,” because some recent studies show fuel from these plants results in 50 percent less greenhouse gas emissions than gasoline.

But such a change is sure to encounter resistance from environmental organizations that are skeptical of industry claims that the use of ethanol reduces greenhouse gases. They claim that a 45 cent per gallon tax credit that goes to blenders of ethanol, federal production requirements, and a tariff on imported ethanol far outstrip federal support for less controversial renewable energy sources such as wind and solar.

The effort to increase the share of ethanol in motor fuels also faces considerable uncertainty.

Acceptance of E15 could be delayed if U.S. auto companies refuse to warranty cars that use it. “Misfueling” would be cause for not honoring warranties, noted Coleman Jones, biofuels implementation manager for General Motors. In an interview last week he said that ethanol “is a great fuel — for equipment it was designed for.” But he said more study was needed to determine the effect of E15 on fuel pumps, cylinder heads, seals and catalytic converters. “We don’t want to see ethanol get a black eye on our cars, or on boats and chain saws,” he said.

Independent retail gasoline stations, which make up the bulk of fueling stops, are also leery of liability issues connected with E15, according to a Department of Energy source. Early this month, U.S. automakers, along with representatives of the American Petroleum Institute and the Outdoor Power Equipment Institute, warned EPA officials that an E15 decision this year was premature.

"These decisions will have real world impacts and we urge the EPA to refrain from setting a deadline that ignores reliable, scientific data about the effects of higher ethanol blends on emissions, durability and consumer safety," the groups said in the statement.