By Todd Neeley
DTN Staff Reporter
OMAHA (DTN) -- Both sides of the Renewable Fuel Standard debate made their best arguments Thursday during a public hearing in front of the U.S. Environmental Protection Agency in Arlington, Va.
Opponents want to cut the RFS because they say corn-based ethanol doesn't provide real declines in greenhouse gases and has also stymied feed-intensive industries. Supporters of ethanol say the cut will hurt rural economic development and kill budding cellulosic- and advanced-biofuels industries.
More than 140 people testified to EPA. The agency will continue to accept public comments until Jan. 28, 2014, on a proposal to cut 2014 RFS mandates across the board by 3 billion gallons -- including some 1.4 billion gallons from the corn-ethanol mandate.
The proposed RFS cut to the cellulosic mandate comes at a time when the industry is set to launch commercial production.
Kevin Potas, business development manager at POET-DSM Advanced Biofuels said in his testimony that his company's cellulosic pursuits depend on a healthy corn-ethanol sector. POET-DSM is building a cellulosic ethanol plant in Emmetsburg, Iowa, using corn stover and cobs as feedstocks.
POET-DSM's plans to sell its technology to corn-ethanol producers that wish also to produce cellulosic ethanol.
"Expanding that cellulosic capacity became much more difficult when the EPA released its proposed 2014 volumes under the Renewable Fuel Standard," Potas said. "The prospects I am talking to are facing a major investment decision. They see this proposal as an indicator of an uncertain future, and therefore an uncertain return on their investment."
Without market growth sparked by the RFS, Potas said "cellulosic ethanol cannot make headway into the U.S. fuel supply."
Michael McAdams, president of the Advanced Biofuels Association, said in his testimony that the RFS cut could spell the end of cellulosic ethanol and other advanced biofuels.
"If EPA sticks with anything close to 2.2 billion gallons in the final rule, the agency will pull the rug out from underneath the developing advanced biofuels sector and destroy this industry," he said.
"Let me be clear that the advanced biofuels industry is here today and investing for tomorrow. Innovative companies have responded to the challenge of producing cleaner, low-carbon fuels by spending a collective $14 billion on the development of advanced and cellulosic biofuels. But EPA's proposal will devastate that progress and chill any future investments."
McAdams said the Obama administration could be stranding some $500 million of its own investments in advanced biofuels with the RFS cut. The administration has provided guaranteed loans and grants to help spur advanced fuels.
American Soybean Association Director Mike Cunningham, a soybean farmer from Bismarck, Ill., said EPA's proposal to cut the 2014 and 2015 biomass-based diesel mandate from 1.7 billion gallons at 1.28 billion gallons would be a "significant setback."
"Soybean farmers are extremely proud of the major role we have played in the development of the U.S. biodiesel industry," he said in written testimony.
"The biomass-based diesel and total advanced biofuels levels set forth in the proposal are unnecessarily low and will stifle the growth and job creation potential demonstrated by the biodiesel industry over the past several years."
Iowa Secretary of Agriculture Bill Northey said EPA's proposal would "significantly damage our state's economy."
"Iowa farmers, businesses and communities have invested heavily to support the development of the renewable fuels industry to help meet the standard and have seen tremendous benefits from having these facilities in their communities," he said in written testimony.
"The renewable fuels industry has the capacity to produce well beyond the levels set by the EPA. What they need now is fair access to the fuel distribution system, which is unfortunately controlled by the big oil companies."
A number of environmental, poultry, cattle and other industry interests expressed support for the proposed RFS cut.
National Cattlemen's Beef Association's past president Steve Foglesong, a cattle feeder and corn-grower from Astoria, Ill., said the RFS should be reformed.
"I am a corn farmer, I just choose to feed it to cattle, it's value-added," he said in testimony. "It's not that different from the ethanol industry who takes corn to feed it into their plants and produce ethanol, dried distillers grains and carbon dioxide instead of beef. The process is identical, all but the RFS mandate, which gives the ethanol industry an advantage in purchasing corn. We're not opposed to corn ethanol, but it's time to look at reforming the RFS and let the market pick winners and losers instead of the government."
Foglesong said the rise in corn prices sparked by the RFS has hurt cattle producers. During the past four years, the average cost to grain-finish a market steer has increased by more than $200 per head, according to NCBA.
Mike Brown, president of the National Chicken Council, said last year more than 40% of the nation's corn crop went to ethanol production and not to food or feed. Corn makes up about 70% of the feed given to chickens, the single largest input cost.
"This rising demand for corn has artificially forced prices for the commodity up by nearly 40% since 2005, to the detriment of U.S. food producers and hungry families," he said.
"The volatility and uncertainty in the market has been equally damaging for poultry producers."
Alex Rindler, policy associate with the Environmental Working Group, said corn ethanol has proven "disastrous" for the environment. He said in his written testimony that RFS reform should include a bigger emphasis on expanding the production of advanced biofuels.
"But as long as the RFS remains a defacto mandate for corn ethanol, these low-carbon, second-generation biofuels will not have a viable market in which they can compete," he said.
"The proposed 2014 standards lower the overall mandate enough to stave off the blend wall, but this reduction will do little to weaken corn ethanol's chokehold on the market and it won't help the cellulosic ethanol industry gain a foothold in the E10 pool."
Todd Neeley can be reached at email@example.com
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