For those of you familiar with Senator Mike Rounds, during his time as Governor he had a strong commitment to the accelerated development of the ethanol industry in South Dakota.
So, why is Senator Rounds, along with Congressman Kevin Cramer (ND) and several other members of Congress from the Midwest, now calling for an end to the mandate in 2023?
There’s a good reason. You can blame our friends in the federal government. Specifically, the EPA, which continues to cause chaos for South Dakota’s ag producers.
The Renewable Fuel Standard, or RFS, is an American federal program that requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels. The RFS originated with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007
The Renewable Fuel Standard (RFS) has established a vibrant and sustainable market for conventional ethanol, which has resulted in billions of dollars of operating income for the corn and ethanol markets in South and North Dakota since its inception.
After 2022, the Environmental Protection Agency (EPA) is set to take full control of the RFS, which would be detrimental to South Dakota’s economy. In a recent congressional hearing [Senate Committee on Environment and Public Works, “Oversight of the Renewable Fuel Standard,” 2/24/16], Senator Rounds asked an EPA administrator if corn ethanol would be part of the renewable volume obligations (RVOs) post-2022. The response from the EPA? There is not a specific standard for corn ethanol after 2022 and the future is unclear.
The bottom line is that the EPA’s only blending requirement is for levels of advanced biofuels (including cellulosic and sugarcane ethanol), and the agency has the authority to completely cut corn ethanol out of the mix. The EPA has always viewed conventional ethanol as a temporary filler until the program could shift to full reliance on advanced biofuels, as some greenhouse gas reports claim an increase or only a marginal decrease in emissions compared to gasoline.
Given the Obama Administration’s commitment to reduce U.S. greenhouse gas emissions by 26-28 percent below 2005 levels by 2025, it is likely that the EPA could seize on these claims as justification to shift all of the biofuel requirements to advanced and cellulosic after 2022.
As Congressman Cramer stated in a recent opinion editorial, this ultimately means that “the EPA could force these more expensive biofuels onto consumers after 2022 through a program like California’s Low Carbon Fuel Standard. California regularly has the nation’s highest gas prices, and a Boston Consulting Group study concluded compliance with the program could cost “between 33 cents per gallon and $1.06 per gallon by 2020.” Such high fuel costs will disproportionally impact lower-income Americans, who spend larger percentages of their income on energy.”
Members of Congress, such as Senator Rounds, are right to question the future of the RFS. Historically, the EPA has not been a friend to corn farmers and ethanol producers, and has already begun waiving down required blending volumes for conventional ethanol.
Trust me, it’s not to the benefit of South Dakota farmers to give the EPA full control over the program after 2022.