UPDATE 2-Renewable fuel backers try to change EPA's mind at hearing

Fri Dec 6, 2013 5:29am IST

(Adds comments from biodiesel producers, automobile
association)
    By Cezary Podkul
    WASHINGTON, Dec 5 (Reuters) - Supporters of the renewable
fuels industry turned out en masse on Thursday, desperate for
the U.S. government to change course after last month announcing
a plan to lower the amount of biofuels that must be added to the
fuel supply in 2014. 
    About 300 people attended a public meeting held by the
Environmental Protection Agency on the Renewable Fuel Standard,
proposed changes which have become one of the most divisive
policy issues of the year.  
    The number of stakeholders who signed up to testify - almost
150 - was 10 times or more the count at a similar meeting a year
ago, an EPA official said. 
    Robert Dinneen, president of the Renewable Fuels
Association, estimated that more than 100 of the speakers
scheduled to testify were in favor of preserving the renewable
fuel standard.
    The meeting comes nearly three weeks after the Obama
administration proposed slashing how much renewable fuel -
mostly corn-based ethanol - needs to be blended into the U.S.
fuel supply, bowing to pressure from the petroleum industry.
    Speakers ranged from representatives of the biofuels
industry and petroleum refiners to anti-hunger groups, bakers,
small-engine manufacturers, lawmakers and the governor of Iowa,
the largest U.S. corn-producing state. 
    A panel of five EPA rulemakers - including Chris Grundler,
director of the EPA's Office of Transportation and Air Quality -
listened intently as groups of five to six speakers came up in
succession to state their positions.   
    
    A PLEA FROM IOWA     
    Iowa Governor Terry Branstad passionately defended the
ethanol mandate, warning that reducing the quota would have an
"unbelievable negative ripple effect all through rural America,"
and even tipping the Corn Belt into crisis.
    "The EPA is now caving in to the demands of Big Oil, who has
always resisted renewable fuels - from the very beginning," said
Branstad, flanked by five Iowa farmers and biofuel producers,
all wearing "Don't Mess With the RFS" buttons.  
    Small-scale biofuel producers at the hearing said they felt
betrayed by the EPA's decision to lower the mandate, after
having invested in their plants on the assumption that the level
of usage would continue to grow.     
    "We need a viable market with a future," said Bob Morton,
who owns a small biodiesel plant in Rhode Island. 
    Branstad and other Iowa representatives would meet with EPA
administrator Gina McCarthy on Thursday, an aide said. Branstad
also requested a meeting with U.S. President Barack Obama.
    Thursday's sprawling event, scheduled to last 12 hours,
shows the intense interest in the future of biofuels - and caps
a year of fierce lobbying that has raged in Washington between
pro- and anti-ethanol interests. 
    An unprecedented leak of the EPA's controversial proposal
weeks ahead of its official release further inflamed the debate.
    The 2007 law mandated a total of 18.15 billion gallons of
renewable fuel blending next year. The EPA's proposal requires
just 15.21 billion gallons. 
    The EPA has warned that the country is approaching a point
where the RFS would require the use of more ethanol than can be
blended into gasoline at the 10 percent level that dominates the
U.S. fueling infrastructure.
    Refiners have said this so-called "blend wall," if left in
place, would force them to export more fuel or produce less
gasoline, leading to shortages and higher prices at the pump.
    The use of a higher, 15 percent ethanol blend, known as
E-15, is another part of the debate. The EPA has declared E-15
safe for cars, SUVs and light trucks built from 2001 forward,
now the majority of the U.S. fleet. Refiners say the blend risks
damage to car engines, as well as chainsaws, boats and other
equipment. E-15 is in limited use in the United States.
    An influential automotive group warned that auto
manufacturers' warranties could be invalidated by the use of
E-15. "It will likely take another decade before the bulk of the
(vehicle) fleet will be able to use, be E-15 compatible, as
approved by manufacturers," said Avery Ash, director of federal
relations for the American Automobile Association.      
    The hearing room was peppered with people wearing blue
T-shirts that read "Save my Engine." Energy Citizens, a group
funded by the American Petroleum Institute (API), handed out the
shirts to supporters and held a rally to highlight their
opposition to ethanol.
     The EPA proposed cutting the corn ethanol portion of the
2014 mandate from the 14.4 billion gallons called for by law to
about 13 billion. Based on projected gasoline demand, that level
of ethanol use would be slightly less than 10 percent of total
U.S. gasoline consumption. 
    Thursday's meeting will not yield any immediate response
from the EPA.  A public comment period for its proposals will
run through late January, and a final rule could take months
after that.
 
    
    CORN PRICES AT RISK
    Ethanol supporters and the biodiesel industry have warned 
that the lower mandate could seriously hurt U.S. corn prices
 by undercutting demand from refiners, and trigger job
losses across rural America. 
    Opponents of rising renewable fuels usage make related
claims, pointing to upward pressure on food prices that squeeze
livestock producers and chain restaurants, among others. 
    "Since its inception in 2007, biofuel mandates have been a
primary catalyst for rising food input costs - including corn,
up 48 percent and soyoil, up 36 percent," said food industry
analyst Bill Lapp, president of Omaha-based Advanced Economic
Solutions. 
    Those higher costs - some $12 billion over seven years - are
ultimately passed on to the consumer, Lapp said.    
    "This issue affects chainsaws and chain restaurants," said
Rob Green, executive director of the National Council of Chain
Restaurants. 
    Green said he ended up on the same side of the issue as the
oil industry because the heightened demand for corn resulting
from the mandate was driving up feed prices, which in turn get
passed on to restaurant owners.
    The broad interest in the issue indicates that, whatever the
EPA decides, a legal challenge is sure to follow. 
    "I fully expect that . . . the policy will be litigated,"
said Jack Gerard, chief executive of the API. 

 (Reporting by Cezary Podkul; Editing by Ros Krasny, Lisa
Shumaker, Bob Burgdorfer and Andrew Hay)
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