Bipartisan Senate group seeks to kill US corn ethanol mandate

12 December 2013 21:12 Source:ICIS News

WASHINGTON (ICIS)--A bipartisan group of senators on Thursday moved to kill the federal requirement for corn ethanol fuel consumption, charging that the mandate is bad policy that has cost taxpayers billions of dollars and raised fuel and food prices.

Senator Dianne Feinstein (Democrat-California) and Senator Tom Coburn (Republican-Oklahoma) said that their bill, the Corn Ethanol Mandate Elimination Act of 2013, also would “eliminate the unnecessary pressure on corn prices”.

Feinstein said that under the eight-year-old corn ethanol mandate, some 44% of the annual US corn crop is being diverted from food to fuels production, “pushing up the cost of food and animal feed and damaging the environment”.

She said that she is seeking elimination of only the corn ethanol part of the renewable fuel standard (RFS).

“I strongly support requiring a shift to low-carbon advanced biofuel, including biodiesel, cellulosic ethanol and other revolutionary fuels, but a corn ethanol mandate is simply bad policy,” she said.

Coburn said that “The time to end the corn ethanol mandate has arrived.”

“This misguided policy has cost taxpayers billions of dollars, increased fuel prices and made our food more expensive,” he said.

“Eliminating this mandate will let market forces, rather than political and parochial forces, determine how to diversify fuel supplies in an ever-changing marketplace,” Coburn added.

The RFS required US consumption of 16.5bn gal (62.5bn litres) of renewable fuels this year, of which more than 13bn was to be met with corn ethanol. The mandate would require still higher corn ethanol consumption targets in subsequent years.

Feinstein said that in addition to driving prices higher for food and livestock feeds, the RFS mandate for corn ethanol consumption has hit the so-called “blend wall”, the point at which US gasoline refiners cannot use additional corn ethanol supplies without exceeding the 10% limit of ethanol to gasoline mix.

She said that her bill, which is backed by three Senate Democrats and seven Republicans, would eliminate an artificial pressure on corn prices, “allowing the multi-billion dollar corn ethanol industry to compete directly with oil based on price and quality, not mandates”.

The Renewable Fuels Association (RFA), a leading bio-ethanol trade group, was quick to condemn the Feinstein-Coburn bill, charging that the legislation is “monumentally stupid”.

RFA president Bob Dinneen said the bill ought to be titled “The Oil Monopoly Protection Act”.  He charged that the bill would “set this country back in its quest to gain energy independence”.

But as domestic US production of oil and natural gas has grown exponentially over the last several years, sharply reducing the nation’s reliance on crude oil imports, the corn ethanol industry’s reliance on an energy independence argument has lost appeal.

Dinneen also argued that eliminating the federal mandate for corn ethanol would undermine progress toward the more cutting-edge biofuels that Feinstein and other backers of the bill support.

“By removing first generation [corn-based] ethanol from the RFS, the foundation will be pulled out from under cellulosic ethanol and other advanced biofuels,” he said.

He argued that investors would shy away from the advanced ethanol fuels sector “because the infrastructure needed to deliver future fuels and the market for them will evaporate if this bill would ever become law”.

There appears little prospect for action on the Feinstein-Coburn bill in the few days that remain in the Senate’s 2013 legislative calendar, so the matter is likely to be taken up soon in the new year.

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