EPA's coming decision on ethanol in fuel looms over politics, food prices and energy markets

The Environmental Protection Agency is expected to announce within the next few days "how many billions of gallons of ethanol it will require refiners to blend into gasoline and diesel fuel in 2014," with a leaked October draft showing the agency will lower amounts to 2012 levels, Darren Goode reports for Politico. If the federal requirement for blending ethanol into fuel is reduced, it could have a major impact on "farm-state politics, food prices and the nation’s energy markets," Keith Good of FarmPolicy.com writes. "No matter where EPA sets the volume requirements for ethanol and other biofuel blends in 2014, the standard is going to face push-back," Clare Foran of National Journal writes.

"The debate over how much ethanol should be forced into the American gasoline supply pits powerhouse special interests against each other," Goode reports. "On the pro-ethanol side: the renewable fuels industry, corn growers and many Midwestern lawmakers. On the anti-ethanol side: the oil industry, restaurant owners, livestock and poultry producers and, increasingly, a disenchanted environmental movement that no longer believes the plant-based fuel is a greener alternative to fossil fuels. In addition, a new generation of tea-party Republicans — viscerally opposed to government mandates and fuel subsidies — has joined the fight against ethanol."

Ethanol backers, who "say a pullback would contradict Obama’s goals of reducing dependence on oil and lessening vehicles’ carbon dioxide emissions," have threatened to file a lawsuit "if EPA scales back the mandate," Goode writes. "The agency can reduce the volume mandate for traditional biofuels — corn ethanol — only if the requirements would harm the economy or environment, or if 'there is an inadequate domestic supply,' according to the law." On the other hand, "Opponents say the mandate distorts fuel markets and will raise gasoline prices, especially as the increased blending requirements collide with declining demand for gasoline. They also note that production of 'cellulosic' forms of ethanol from sources like husks and switchgrass have been a small fraction of what Congress expected six years ago." (Read more)

UPDATE, Nov. 13: Agri-Pulse, citing "some analysts," says in its weekly newsletter that whatever rule EPA issues, it is likely to land in court; meanwhile, "In the court of public opinion, latest flap arose over release Tuesday of a lengthy Associated Press story that characterized government policies promoting ethanol as failing to meet proposed greenhouse-gas reduction goals and causing widespread soil water degradation by promoting the over-production of corn." (Read more) Chris Clayton, policy editor for DTN/The Progressive Farmer, writes, "The AP report did not touch upon any positive developments of biofuels. . . . You know who is going to be thrilled to distribute the AP story to every member of Congress? The American Petroleum Institute." (Read more) Ted Bridis, the AP's lead editor on the report, gives background on AP's blog, The Definitive Source.