Is Corn Ethanol in Trouble?

A bi-partisan group of Senators are looking at legislation that would remove corn ethanol from biofuel blending targets, despite the EPA's recent ruling that drastically cut next year's goal.

The EPA's target for corn ethanol blends was dropped earlier this year from 18.1 billion gallons to 15.2 billion gallons -- largely because of concerns that the rapid increase of corn ethanol was putting an undue strain on refineries.

Auto, oil, and some agriculture groups are lining up in support of the measure. Oil companies find the process of blending expensive and problematic. Auto makers claim the higher fuel blend ruins engines. And some domestic agriculture organizations believe that rapidly increasing corn ethanol blending targets harm crop land and drive up the price of food.

But the bio-fuels industry has had a stranglehold on Congress -- especially members from farm states. It will be tough to fashion a majority who wish to see the biofuels industry move in a direction more toward biodiesel and cellulosic (corn stalks, switch grass) ethanol and away from corn.

Washington Examiner:

"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," Feinstein said.

And Sens. Ben Cardin, D-Md., and David Vitter, R-La., the top Republican on the Senate Environment and Public Works Committee, also championed legislation that would curtail corn's portion of the mandate.

The biofuel industry criticized the Feinstein-Coburn bill, and no doubt will have harsh words for the Cardin-Vitter effort once its details are known.

Biofuel boosters contend the oil industry, which is pushing for a full repeal of the mandate, is concerned about the impact a growing supply of ethanol has on its bottom line.

The biofuel industry also has defended the safety of E15 — gasoline blended with 15 percent ethanol, instead of the standard 10 percent. It notes that the EPA has approved it for use in cars made in 2001 or later, but opponents charge that most automakers won't cover E15-related damage in warranties.

The biofuel industry can rest a little easier knowing it has a friend in Sen. Barbara Boxer, D-Calif., chairwoman of the Senate Environment and Public Works Committee, which oversees the fuel rule. She warned at the end of Wednesday's hearing that lawmakers should not "turn our back" on the policy.

But while the Senate is churning, the House has hit a lull.

House lawmakers began working on legislation over the summer, but the EPA proposal has cooled some of the momentum.

A GOP committee aide says that the panel is considering a variety of options.

And therein lies the difficulty.

"The reason behind the stall is that, while they all agree they don’t like the [Renewable Fuel Standard], they don’t agree on why they don’t like it," said Paul Winters, a spokesman with biofuel group the Biotechnology Industry Organization.

Nothing is likely to get done before the end of next year. And 2015 brings the quadrennial trek to Iowa where presidential candidates pay homage to how great corn ethanol is and why we should be producing more of it.

But it is also possible that in the near future, breakthroughs in using other vegetation for fuel instead of food would make corn ethanol an expensive alternative. Corn would price itself out of the biofuels market in favor of grasses and other cellulosic species that can be grown more cheaply.

Either way, it is likely that corn ethanol will be the dominant biofuel for the near future.