Biden Administration Preparing Policy Shift on Rule to Boost Ethanol

Reuters writers  Jarrett Renshaw and Stephanie Kelly reported yesterday that, “The Biden administration is expected on Wednesday to recommend for approval a rule that would allow expanded sales of gasoline with a higher ethanol blend in certain U.S. Midwest states, based on a request from governors in those states, four sources familiar with the matter said on Tuesday.

“The approved rulemaking is not expected to take effect until summer of 2024, the sources said.

“The rule would be a win for the ethanol industry, which has sought for years to expand sales of so-called E15, which contains 15% ethanol, and for the farm industry, as ethanol is made from corn.”

The Reuters article explained that, “The U.S. Environmental Protection Agency is expected to seek a public comment period on the rule, sources said.

“In April, governors from major corn-producing Midwestern states including Iowa, Nebraska and Illinois requested that the EPA effectively lift the ban in their states.”

Renshaw and Kelly added that, “The EPA enforces a summertime ban on E15 over concerns it contributes to smog in hot weather, though research has since shown E15 blend may not increase smog relative to the more common E10 sold year-round. E10 contains 10% ethanol.

“President Joe Biden lifted the ban last summer in an attempt to lower historically-high gasoline prices.”

Also yesterday, Bloomberg writer Jennifer A Dlouhy reported that,

The Biden administration is preparing to advance a fuel policy shift demanded by Midwest governors that would encourage filling stations to sell higher-ethanol E15 gasoline and offer it year round.

“The administration is set to outline its plans to formally propose the change soon, setting the change in motion in time for next year’s summer driving season, according to people familiar with the matter who asked not to be identified before a public announcement.”

“Ben Hengst, deputy director of the agency’s Office of Transportation and Air Quality, is set to address the matter and other renewable fuel policy issues during a presentation Wednesday at the industry’s National Ethanol Conference in Florida.,” the Bloomberg article said.

Dlouhy explained that, “At issue is a push by some governors from corn-producing Midwestern states to stop giving conventional E10 gasoline a partial waiver from volatility limits meant to curb air pollution. That would put E10 and E15 on the same regulatory footing in their states — and potentially encourage more sales of the higher-ethanol variety.”

In its February Feed Outlook report, the USDA’s Economic Research Service indicated that, “While total corn supplies remain unchanged from last month, total domestic use in 2022/23 is forecast at 11,965 million bushels—down from January—on a 25-million-bushel cut to FSI [food, seed, and industrial use], led by weaker ethanol demand. According to the USDA, National Agricultural Statistics Service (NASS), total U.S. corn consumed for fuel alcohol production in the first 4 months of 2022/23 (September through December)—of 1,708 million bushels—was down 9 percent from the same period in 2021/22.

“Lower gasoline demand and periods of tight ethanol processing margins have pressured ethanol production thus far in the marketing year. The February WASDE report projects corn used in the production of ethanol (and ethanol by-products) in 2022/23 at 5,250 million bushels, down 1 percent from last year but slightly ahead of the previous 5-year average.”