The EPA’s new proposed 2014 rule for the RFS sets large vol­umes of biofuel use across several broad categories of fuel types but represents a significant reduction in mandated volumes from legislated levels. The EPA has again proposed to significantly reduce the cellulosic ethanol mandate from 1.75 billion gallons to just 17 million gallons.

But, in contrast to previous years, EPA has also proposed to reduce the overall mandate by more than 3 billion gallons from the level set in original legislation.

Total biofuels use for 2014 was set at 18.15 billion gallons in the original legislation, but the EPA is proposing to set use at 15.21 billion gallons. That implies use of corn-based ethanol at around 13 billion gallons. The EPA’s proposal will be open to a 60 day comment period before a final rule is implemented by next spring.

The proposed rule includes complex calculation of alternative probabilities in order to set the mandated usage levels, according to USDA economists Seth Meyer and Rob Johanssen.

They warn that the complexity of the EPA’s calculations may give rise to a sense of precision in the various volumes outlined, whereas the reality is that “significant uncertainty remains, with different potential mandate volume outcomes highly interdependent”.

For example, the assumed amount of ethanol that can be consumed right up to the blend wall via E10 and E85 usage is included to arrive at the total proposed mandate level for all biofuels of 15.21 billion gallons for 2014.

The split between advanced and non-advanced biofuels, which determines the maximum potential share of corn-based ethanol, appears to have been set by add­ing the estimated non-ethanol advanced biofuel available to the biodiesel mandate, resulting in a total advanced component of 2.2 billion gallons. The remainder (13.01 billion gallons) is corn ethanol’s maximum potential contribution toward the RFS.

But if the EPA’s estimates of the potential for E85 consumption are too high and the actual blend wall proves lower than the estimated 13 billion gallons, then the potential use of domestic corn ethanol would be reduced to about 12.9 billion.

Fur­thermore, any RFS-related incentives to import sugarcane ethanol would be reduced unless it was priced below domestic ethanol, which would further crowd out demand for domestic corn-based ethanol.

Other news from Washington:  

  • The farm bill conference committee is pressing hard, trying to complete work so that any compromise bill can be voted on by both houses of Congress before the final session on Dec. 13. With Congress set to take a two week break for Thanksgiv­ing – that leaves very little time (or chance) for the bill to be finalized. Congress also has another incentive to get the bill done quickly: Falling crop prices will cause the “saving” associated with the new farm bill to shrink significantly. Congress will only be able to claim the savings if the bill gets passed before the Congressional Budget Office recalculates. Various studies show that some of the proposed new price and revenue programs will kick in for 2014 if corn prices stay low. Analysis by the Na­tional Corn Growers shows that some farmers would get payments that are twice the size of the current direct payments.
  • Several groups are lobbying Congress to get rid of the new COOL standards that go into effect this weekend. The WTO sided with Canada and Mexico, fining the old rule impeded world trade and the new rules will also be challenged. Country Of Ori­gin Labeling (COOL) has been part of the farm bill since 2002 and the groups that oppose it want the requirement eliminated. It may be too late to get the elimination of COOL included in the new farm bill.