In Real Clear Energy, IPI resident scholar Dr. Merrill Matthews says ethanol has become the epitome of the Washington “swamp,” and the need for a gasoline substitute has largely vanished.
The Environmental Protection Agency recently exempted dozens of small oil refineries from a federal mandate that requires them to blend corn-based ethanol into their gasoline.
The move would decrease demand for corn and therefore enraged corn farmers. Now, President Trump is reportedly looking at rescinding some of the exemptions, or making other concessions, to appease the corn lobby.
That’d be a mistake. Blending corn-based ethanol into our gasoline no longer improves national security, and environmentalists increasingly agree it’s not environmentally friendly.
Besides, President Trump already took steps to placate the corn lobby last May.
The Energy Policy Act of 2005 phased out ethanol subsidies but established a Renewable Fuel Standard, which requires refiners to blend a specific amount of ethanol into gasoline and diesel fuel. A 2007 law increased the amount of ethanol that must be blended in each year.
While about 98 percent of gasoline sold in the United States includes some ethanol, most of it is capped at about 10 percent, or E10. But the ethanol industry wants that blend level bumped to 15 percent.
Gas containing 15 percent ethanol has been available to consumers since about 2005, but the EPA traditionally banned it during summer months because of concerns it increases smog levels.
In addition to harming air quality, E15 can harm older car engines and boat motors.
Nevertheless, on May 31, EPA Administrator Andrew Wheeler announced that the agency “would remove the key regulatory barrier” keeping E15 from being sold year-round.
The ethanol industry cheered. Growth Energy, a leading ethanol lobbyist, expects the EPA’s recent E15 ruling to increase ethanol demand by more than a billion gallons over the next five years.
But the elation didn’t last long. The EPA recently announced it would grant 31 out of 40 ethanol-blending exemption requests from small refineries.
Small refineries — which produce less than 75,000 barrels of oil a day — typically don’t blend ethanol into gasoline themselves. Instead, they buy a type of credit, referred to as renewable identification numbers, from large refineries that do.
The RIN market has become opaque and lucrative, with hundreds of millions of dollars changing hands. The waivers the EPA just granted allow these small refiners to forego purchasing the credits.
Given that the vast majority of ethanol is made from corn, farmers were livid. As Iowa Senator Chuck Grassley put it, “They screwed us . . . when they issued 31 waivers.” Sen. Grassley claims there were only 10 waivers granted during Obama’s eight years in office.
But the EPA did the right thing.
Ethanol once offered the United States a way to reduce its dependence on foreign oil. But today, America leads the world in oil and natural gas production. We’ve already beat out competitors like Russia and Saudi Arabia. And just last year, the United States became a net exporter of oil for the first time in 75 years.
In other words, the need for a gasoline substitute has largely vanished.
But that’s not all. Ethanol has become the epitome of the Washington “swamp,” with various interest groups vying for political influence and concessions.
Some level of ethanol would likely still be blended into gasoline even without the Renewable Fuel Standard mandate because it raises octane levels. But that’s something consumers and manufacturers, not politicians, should decide.
The Institute for Policy Innovation is an independent research organization based in Dallas. IPI resident scholar Dr. Merrill Matthews is available for interview by contacting Erin Humiston at (972) 874-5139, or firstname.lastname@example.org