Biofuel industry responds to EPRINC report

By Erin Voegele | September 20, 2012

Representatives of the biofuel industry are speaking out against a report recently issued by the Energy Policy Research Foundation Inc., a non-profit organization that focuses on the petroleum industry. In the report, titled “Ethanol’s Lost Promise: An Assessment of Economic Consequences of the Renewable Fuels Mandate,” the organization calls for a multi-year waiver of the renewable fuel standard (RFS).

The report makes several allegations against the ethanol industry, many of which have already been debunked by sound research. For example, the Renewable Fuels Association pointed out that the EPRINC paper repeats illogical criticisms made a Massachusetts Institute of Technology economist in regard to studies produced by the Center for Agricultural and Rural Development that showed that ethanol has significantly reduced gasoline prices, even though the CARD economists who produced the studies have already addressed and debunked those criticisms.

The RFA also called the analysis of crop and animal feed markets contained in the paper “absurd and misleading.” According to the RFA, the EPRINC demonstrates a total lack of understanding with regard to the value of DDGS and published a chart that misleads readers by presenting data in such a way that it looks like corn and DDGS prices have been essentially priced at a parity since 2007, when the actual data shows otherwise.

The EPRINC paper also said that higher ethanol blends, such as E85, are failed to achieve market success, and that the energy security and cost savings benefits of ethanol have been exaggerated. Furthermore, the group alleges that RFS volumetric mandates have created inelastic demand for ethanol and that waiving the RFS volume requirements would free millions of acres of land for food and livestock.

The RFA, however, pointed out that the paper actually makes a strong case for protecting the RFS in the long term, noting that a long-term RFS waiver—which EPA is technically not authorized to grant—would require economically impractical and politically infeasible actions to fill the lost ethanol volume. For example, extracting more gasoline and less distillate from each barrel of crude out would drive up heating oil and diesel prices, which would in turn increase the cost of consumer goods. The EPRINC’s suggestion of increasing gasoline imports from Europe undercuts the RFS goal of increased energy security. Finally, the RFA stresses that EPRINC’s suggestion to add oil refining capacity in the U.S. is at odds with current regulations and policy in the U.S. that prevent the building or expansion of new oil refining capacity.

“If you do away with the RFS over the long term and less ethanol is available, as EPRINC is suggesting, you leave a gaping hole in the gasoline supply,” said RFA President Bob Dinneen. “The options available to fill that hole just don’t make economic sense and would further increase fuel prices for consumers. Ironically, the EPRINC report actually underscores why the RFS is so important; it highlights the fact that cutting ethanol out of our gasoline supply would result in increased dependence on imported oil and refined products, or would force refiners to make a choice between maximizing gasoline or diesel production. Consumers lose in either case. Clearly, the best option is not to tinker with the RFS and let it continue to work as intended.”

The Biotechnology Industry Organization has also spoken out against the paper.”The study contains multiple flaws, not least of which is the fact that EPA’s authority allows only a one-year waiver of the RFS. Moreover, the study assumes a scenario in which the petroleum refining industry circumvents the law’s intent to increase domestic production and use of renewable fuels by gaming the RFS’ system of Renewable Identification Numbers,” said Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section. “This is not a serious study but an effort to mislead policy makers and the public with misinformation.”

A full copy of the EPRINC’s report can be downloaded from the organization’s website, while the detailed responses from the RFA can be accessed here