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Post image for Reports: Renewable Fuel Standard Imposes $22 Billion Ethanol Tax on Illinois, $42 Billion Tax on California


New reports by the Center for Regulatory Solutions (CRS), the research arm of the Small Business & Entrepreneurship Council (SBEC), detail the devastating impacts of the federal Renewable Fuel Standard (RFS) program on California and Illinois. The reports could not be more timely. EPA is expected next week to publish its final rule establishing biofuel quota (known as Renewable Volume Obligations or RVOs) for 2015 and 2016.

According to Fields of Deception: How the Corn Ethanol Mandate Harmed the Prairie State (released today), the RFS imposed roughly $5 billion in higher fuel costs on the people of Illinois between 2005 and 2014, with another nearly $17 billion to come through 2024. The ripple effects of those costs will depress labor income by almost $7 billion over 20 years, depress labor demand by more than 7,000 jobs annually, and impose hundreds of millions of dollars in higher feed costs on Illinois dairy and poultry farmers. Due to all those RFS impacts, Illinois will lose $12 billion in GDP growth by 2024.

“Contrary to conventional wisdom, our report shows that Illinois, an early supporter of ethanol, has lost thousands of jobs and incurred enormous economic costs as a result of the ethanol mandate,” said SBEC President Karen Kerrigan.

According to The Big Corn Sellout: How National Politics and Ethanol Mandates Are Hurting California’s Economy (released 11/17/2015), the RFS has imposed $13.1 billion in higher fuel costs on Golden State consumers since 2005, with another $28.8 billion to come over the next 10 years. The vast majority of that $42 billion “fuel tax” is a wealth transfer to out-of-state ethanol producers. The ripple effects of those costs will depress labor income by almost $18 billion over 20 years, depress labor demand by more than 17,000 jobs every year, and impose hundreds of millions of dollars in higher feed costs on California’s dairy and poultry farmers. Due to all those RFS impacts, California will lose $31.6 billion in GDP growth by 2024.

Both reports detail many other adverse economic and environmental effects of the RFS. Key findings follow.

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Post image for Gasoline or Ethanol: Which Is More Polluting?



Adding ethanol to gasoline makes it cleaner and reduces air pollution, right? So biofuel lobbyists would have us believe. However, a study published in Proceedings of the National Academy of Sciences (PNAS) comes to the opposite conclusion.

Lead author Jason Hill of the University of Minnesota Department of Bioproducts and Biosystem Engineering summarized key findings of the study at a recent House Science Committee hearing. To determine which is cleaner, gasoline or ethanol, researchers must “compare these fuels over their full life cycle.” Hill explains:

That is, we need to consider the damage caused by producing them in addition to using them. For gasoline, the life cycle includes extracting and refining crude oil, and distributing and combusting the gasoline itself. The life cycle of corn ethanol includes growing and fermenting grain, and distilling, distributing, and combusting the ethanol itself.

Although combustion emissions from ethanol are lower than those of gasoline, production emissions from ethanol are higher. So much so that on a life-cycle basis, ethanol is the larger source of five different air pollutants: primary fine particulate matter (PM2.5), nitrogen oxides (NOx), amonia (NH3), volatile organic compounds (VOCs), and sulfur oxides (SOx).

Ethanol vs Gasoline, Jason Hill, House Science, July 2015









Those results are an additional reason EPA should resist pressure from biofuel lobbyists to increase Renewable Fuel Standard (RFS2) blending targets for 2014-2016. As Hill cautions: [click to continue…]

Post image for Ethanol Industry Ad Campaign: Fuels America or Fools America?


As the June 1 deadline approaches for EPA to propose Renewable Fuel Standard (RFS) mandates for 2014, 2015, and 2016, biofuel lobbyists are cranking up their political and PR efforts to sway EPA’s decision. In a television and digital ad campaign launched this week, Fuels America, a coalition of biofuel interests, accuses the “oil industry” of “refusing to fulfill its obligations” under the RFS.

Fuels America also claims EPA must choose either to support “rural economies,” “permanent jobs,” and “the world’s cleanest motor fuels,” or to “reward” the oil industry, which supposedly means “more imported oil from hostile foreign regions, more pollution and spills,” “fewer American jobs,” “protecting the oil monopoly on our fuel supply,” and “even higher gas prices.”

Fools America is a much better description of what these regulatory profiteers are trying to pull off. The RFS does not benefit “rural economies,” it benefits corn farmers at the expense of beef, poultry, and hog farmers. The RFS creates “permanent” jobs only in the sense that it creates special privileges in the form of government-guaranteed market shares for biofuel companies and the corn farmers who supply them. A “monopoly” is a market with a single supplier; a commodity such as a fuel type cannot be a monopoly. Gas prices and oil imports from hostile regions are at their lowest levels in a decade, thanks chiefly to the fracking revolution and U.S. oil companies, not RFS blending requirements.

As for the RFS producing the world’s “cleanest” fuels, the program has significant environmental downsides. It expands aquatic dead zones, accelerates wetlands conversion and habitat loss, may increase smog-forming VOC emissions, and likely increases net greenhouse gas emissions. The RFS program also inflates food and fuel costs and exacerbates world hungercontributing to political instability and violence in developing countries.

Let’s delve a bit deeper into the controversy over the 2014-2016 ethanol mandates and Fools America’s campaign to influence EPA’s rulemaking.

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Post image for Is Ethanol a Green Fuel?


It’s common knowledge that the Renewable Fuel Standard (RFS) is a textbook study in the law of unintended consequences. The program inflates food and fuel costs, exacerbates world hunger, contributes to political instability and violence in developing countries, expands aquatic dead zones, accelerates wetlands conversion and habitat loss, likely increases net greenhouse gas emissions, and ushers in a reign of regulatory uncertainty rather than the predictable marketplace its creators intended.

And this just in: NOAA and NASA scientists find that ethanol manufacturing releases five to 30 times more volatile organic compounds (VOCs) than estimated in EPA’s 2011 National Emissions Inventory. VOCs are pollutants that form ozone-smog when they react with nitrogen oxides (NOx) in the presence of sunlight.

From a news article by Amanda Peterka in today’s E&E PM ($):

Ethanol refineries may emit more air pollution than commonly thought, according to a new study led by researchers from the National Oceanic and Atmospheric Administration.

The NOAA team, which also included scientists from NASA and academic institutions, measured the air downwind from an ethanol plant in Illinois and found emissions of total volatile organic compounds (VOC) to be five times higher than 2011 federal data.

Emissions of ethanol in the air — considered a type of VOC — were up to 30 times higher than previously thought downwind from the plant, the team said. . . .

The study has been accepted for publication in the Journal of Geophysical Research: Atmospheres. NOAA and U.S. EPA provided funding for the measurements taken by the team.

Using a small NOAA airplane outfitted with special instruments, the team measured air quality at 9, 12 and 30 kilometers downwind from the Archer Daniels Midland ethanol plant in Decatur, Ill., in June and July 2013. . . .

According to the results, measured emissions of sulfur dioxide and nitrogen oxides compared well with the EPA data. But they found that the National Emissions Inventory underestimated emissions of volatile organic compounds — gases that are a main ingredient in ground-level ozone — generated by the refining process by factors of five to 30.


Post image for Root Cause of Ethanol ‘Blend Wall’? Consumers Don’t Like Rip Offs


EPA is more than 15-months behind its statutory deadline (Nov. 30, 2013) for establishing Renewable Fuel Standard (RFS) blending targets for last year.

To recap, in Nov. 2013, EPA for the first time proposed to scale back the government’s overall biofuel blending target for the following year. EPA determined that the statutory target for 2014 would exceed the “blend wall” — the maximum quantity of ethanol that can be sold each year given legal or practical constraints on how much can be blended into each gallon of motor fuel.

The most common blend today is E10 — motor fuel with up to 10% ethanol. Although EPA approved the sale of E15 in October 2010, potentially increasing by 50% the total amount of ethanol sold annually, lack of compatible fueling infrastructure, warranty and liability concerns, and, most importantly, consumers’ natural aversion to paying more for a lower-value product effectively limit the standard blend to E10.

So in Nov. 2013, EPA proposed to trim the statutory target for 2014 from 18.15 billion gallons to 15.21 billion gallons — a 16% cutback. That ignited a firestorm of protest from biofuel interests, and EPA has been dithering ever since.

Biofuel lobbyists such as Renewable Fuels Association CEO Bob Dinneen claim the blend wall exists only because the oil industry has “steadfastly refused” to invest in blender pumps, storage tanks, and other infrastructure compatible with E15-and-higher ethanol blends. Weirdly unexplained is why it’s not up to the biofuel industry to pay for the infrastructure on which its success supposedly depends. The RFS forces the oil industry to buy biofuel, process and add value to it, and create a guaranteed retail market for it. Isn’t that enough?

Not for Dinneen and company. If they had their druthers, Congress would compel oil companies to build biofuel-compatible infrastructure and (as President Obama proposed during his first presidential campaign) mandate that all new cars be flex-fuel vehicles capable of running on blends up to E85 (motor fuel made with 85% ethanol).

But would even that policy wish-list eliminate the growing mismatch between market realities and the RFS production quota schedule, which requires 36 billion gallons of biofuel to be blended and sold by 2022? No.

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Post image for Cellulosic Ethanol: KiOR Files for Bankruptcy

Greenwire (paywall protected) reports that KiOR, Inc., a biofuel company backed by billionaire Vinod Kohsla, missed a $1.8 million loan payment to the state of Mississippi, now owes more than $312 million, and filed for Chapter 11 bankruptcy protection late Sunday:

The company estimated its assets are worth between $10 million and $50 million and reported debts between $100 million and $500 million (Jeff Amy, AP/ABC News, Nov. 10).

In addition, the Pasadena, Texas-based company said its default on the Mississippi loan triggered provisions of other loans, making an additional $234 million immediately due (AP/Fuel Fix, Nov. 7). — SP

EPA once pinned its hopes on KiOR to supply 9 million of the agency’s 17 million gallon 2014 cellulosic biofuel quota. As of July, however, U.S. cellulosic production was about 50,000 gallons, or 0.3% of EPA’s target, according to Platts energy analyst Herman Wang. EPA’s target is itself less than 1% of the statutory 1.75 billion gallon cellulosic target for 2014.

More proof, if any were needed, that the point of central planning is not to accomplish its stated purposes but to amass power, rig markets, and (in democratic countries) buy votes.

On August 20, commodity analyst Dave Juday contributed a guest editorial to this blog titled “KiOR News Underscores Problems with Renewable Energy Industrial Policy.” Because the column is even more timely today, I repost it (lightly edited) below:

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Post image for EPA Scales Back Ethanol Mandate for First Time!

For the first time in the history of the federal Renewable Fuel Standard (RFS) program, the Environmental Protection Agency today proposed to scale back the government’s overall biofuel blending target for the forthcoming year. Specifically, the EPA is proposing to cut the 2014 blending target from 18.15 billion gallons to 15.21 billion gallons.

Market realities forced the agency’s hand. Like all central planning schemes, there comes a point where even the commissar has to admit that it’s just not working.

Two factors compelled the EPA to make this adjustment. One is that the RFS requires obligated parties – refiners, blenders, and fuel importers – to sell 1.75 billion gallons of cellulosic ethanol in 2014. However, despite years of research and taxpayer support, commercial production of cellulosic biofuel was only 20,000 gallons last year.

The second factor is the blend wall — the maximum quantity of ethanol that can be sold each year given legal or practical constraints on how much can be blended into each gallon of motor fuel. The most common blend today is E10 — motor fuel with up to 10% ethanol. Although the EPA approved the sale of E15 in October 2010, potentially increasing by 50% the total amount of ethanol sold annually, lack of appropriate fueling infrastructure, warranty and liability concerns, and consumer skepticism effectively limit the standard blend to E10.

The EPA’s proposal is a welcome step in the right direction but does not go nearly far enough. Nobody likes the RFS program except the special interest groups who directly profit from it. Even as environmental policy, the RFS is a bust, as an extensive AP investigation published this week confirms.

Even if the RFS did not inflate food prices, increase pain at the pump, exacerbate world hunger, expand aquatic dead zones, or contribute to habitat loss, Congress should still repeal it, because the RFS flouts the core constitutional principle of equality under law. [click to continue…]

Corn Ethanol: Not Green – AP

by Marlo Lewis on November 15, 2013

in Blog

Post image for Corn Ethanol: Not Green – AP

An extensive investigation by the Associated Press (AP) confirms what many critics of the Renewable Fuel Standard (RFS) program have been saying for years — the ethanol mandate does more environmental harm than good.

The AP article begins with an overview of key findings:

But the ethanol era has proven far more damaging to the environment than politicians promised and much worse than the government admits today. 

As farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies, an Associated Press investigation found. 

Five million acres of land set aside for conservation – more than Yellowstone, Everglades and Yosemite National Parks combined – have vanished on Mr. Obama’s watch.

Landowners filled in wetlands. They plowed into pristine prairies, releasing carbon dioxide that had been locked in the soil.

Sprayers pumped out billions of pounds of fertilizer, some of which seeped into drinking water, contaminated rivers and worsened the huge dead zone in the Gulf of Mexico where marine life can’t survive.

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All energy comes at a cost. The environmental consequences of drilling for oil and natural gas are well documented and severe. But in the president’s push to reduce greenhouse gases and curtail global warming, his administration has allowed so-called green energy to do not-so-green things. [click to continue…]

Post image for Odd Bedfellow Coalition Blasts “Havoc” Caused by Corn Ethanol Mandate

An odd-bedfellow coalition of agriculture, engine manufacturer, food retail, environment, hunger, taxpayer, and free-market public interest groups are asking the House Energy & Commerce Committee to ensure that any legislation proposed to reform the Renewable Fuel Standard (RFS) address the “havoc that the corn ethanol mandate” has imposed on a “multitude of stakeholder interests.”

In their joint letter to the E&C Committee, the 44 signatories state in part:

While our reasons vary, all of us have long maintained that the RFS is a uniquely flawed policy. The mandate on corn-based ethanol in particular has had a devastating effect on the entire food economy from livestock and poultry producers facing record feed costs, to food retailers facing record food costs, to consumers here and abroad struggling to balance food budgets in tough economic times. Some signers of this letter also question the propriety of Congress establishing production quota and guaranteed market shares for any type of commercial business. Ethanol from corn also is concerning to many due to its global warming impact and the use of natural resources such as water and native grassland for producing fuel. The corn-based ethanol mandate is also having a devastating impact in communities throughout the world, where people living in poverty are facing increased food prices that threaten their food and land security.

The coalition advises that “any RFS proposal advanced by the Committee should include significant, meaningful and permanent decreases in the conventional biofuels (corn ethanol) mandate.”

Click here to read the joint letter in full.

Update (added 5:30 pm)

A Reuters article by Cezary Podkul underscores the timeliness of the odd bedfellows coalition letter. Podkul reports that House E&C ”is weighing a proposal to cap the ethanol requirement at below 10 percent for two or three years, according to a person close to the committee. The proposal, which is not yet finalized, would give the industry time to study the use of higher ethanol blends . . . and then raise the target above 10 percent, according to this source.”

Although this sort of stop-gap measure would postpone the impending blend wall crisis, it falls short of the “significant, meaningful and permanent decreases” in the corn-ethanol mandate that the odd bedfellows coalition is advocating. [click to continue…]

The New York Times ran a front page story Sunday  on a new outrage resulting from one of the biggest scams in America today, ethanol mandates, and how they have made American consumers poorer, while enriching Wall Street profiteers through ethanol credits.  The story is entitled “Wall St. Exploits Ethanol Credits, and Prices Spike,” and focuses on

the rapidly growing role of Wall Street banks in gaming the ethanol credits market. Ethanol credits (or RINs, as they’re called) were created by the Environmental Protection Agency and Congress as a way to assure the inclusion of ethanol in gasoline as an energy-saving measure. But gasoline producers who couldn’t or didn’t want to include ethanol could buy credits from those who did. . . In stepped the speculators, amassing millions of credits and making a killing on the wide spread between the bid and ask prices of the credits. Predictably, this drove the price through the roof: the credits, which cost 7 cents each in January, peaked at $1.43 in July and now are trading for 60 cents.

The net result is that consumers will pay at the pump, notes investment adviser David Kotok of Cumberland Advisors.  As he  observes, ethanol mandates are having very negative “geopolitical effects” as well.  He agrees that “Ethanol was a bad policy, primarily to buy and reward grain-state votes. It spurred grain planting to meet the mandate, but not fast enough, so prices called out for more. The poor were hurt overseas,” and unrest in the Middle East ensued.  As Kotok points out, ethanol is

a massive scam. Our national policy diverts 40% of the U.S. corn crop (14% of the global corn crop) in order to produce a fuel that requires almost as much energy to produce as it supplies. Our ethanol mandate has starved millions of people; I’ve watched it with my own eyes in many countries in my travels. A 2011 study by the National Academy of Sciences estimates that, since 2007, the expanding U.S. biofuels subsidy has fueled 20%-40% of the increase the world has seen in the prices for agricultural commodities. In a country like Guatemala, that means that tortilla prices double and egg prices triple. (Source: [New York Times]).  Ethanol damages engines, too — ask any user; I’ve seen it myself throughout the US, and Popular Mechanics concurs [Link]. Corn ethanol has poisoned our planet while it has lined certain private and politically connected pockets with billions. It has succeeded in raising our costs, for minimal net energy gains. . . .Global urban dwellers at the low end suffered again. . . .The spike in prices this year was a reaction to the shortage in corn caused by the drought last year. Rather than pay high prices for corn, blenders bought stockpiled RINs. The real story of the market was the explosion from $0.02 per RIN, when nobody wanted them, to $0.07 in August 2012 when the short corn crop became clear. This surge attracted the Wall Street players. They benefited when corn prices spiked again in Jan-Feb on the perception that South America crops would not clear the market before US crops came in in August-September. . . .Please remember that this all starts in the corn-farmed, politically charged Iowa caucuses. Which means, it is our sick and rotten political system that produces these behaviors.  That will likely continue until we repeatedly and mercilessly pound the politicians who have sold our nation down a river of ethanol.

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