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Next week it’s all EPA all the time

EPA Administrator Gina McCarthy has to be wishing next week was over already. It’s expected on June 2, she’ll roll out the incredibly controversial first-ever federal attempt to regulate and limit greenhouse gases (GHG). Then, likely midweek, she gets to announce her agency’s final decision on how much ethanol and other biofuels must be blended with gasoline during the rest of 2014, and probably into 2015.

This second major announcement will cap months of furious lobbying by the biofuels industry, stunned last November when EPA announced it would ignore the statutory levels for the Renewable Fuel Standard (RFS), and recommend reducing how much corn ethanol, biodiesel (plant or animal-based), renewable diesel and non-corn ethanol must be blended with gasoline in 2014.

For the livestock and poultry industries the silent prayer is EPA will stick to its guns and roll back to 13 billion gallons the amount of corn ethanol that must be blended. However, word on the street is the proposed 13 billion gallon mandate will edge up to 13.6 billion gallons or thereabouts when the final announcement is made. EPA’s reasoning will be that last fall, gasoline consumption numbers were way down, so to avoid the so-called “blend wall” – the point at which a refiner, to meet the total number of gallons it must legally blend, has to blend at a rate higher than the 10% legal maximum – the agency drastically reduced the RFS mandate. Today, gasoline demand numbers are up, so more ethanol will be needed. McCarthy has hinted at this shift for weeks in speeches and appearances on Capitol Hill.

For advanced biofuels – biodiesel, renewable diesel, cellulosic ethanol, sugar-based ethanol – the overall RFS mandate will be around 2.2 billion gallons, insiders say. Of that, the biodiesel RFS will be stay very close to the proposed 1.28 billion gallons, and if true, this will be a major disappointment for the biodiesel industry because it’s production this year is expected to be north of 1.7 billion gallons where it believes the RFS should be set.

The political fall out of the RFS announcement will be renewed calls for “fixing” the RFS. Most agree Congress was wrong to set in law specific gallon figures for the annual RFS mandate. However, among those who believe corn ethanol is the single largest cause of the last two years’ run-up in meat prices, the diehards want the RFS repealed, with those claiming the middle ground on this issue wanting to see at the very least an update in the formula for RFS calculation, with a “trigger” based on available corn stocks, requiring the RFS be waived in whole or in part.

On the GHG proposed regulation, this maiden attempt will aim at existing coal-fired power plants for two reasons. First, the President has apparently decided that controlling climate change will a big part of his presidential “legacy.” And if that’s the case, then it’s logical to go after the nation’s largest source of carbon and GHG emissions and that would be public utilities. The opposition is fierce – utilities and general industry – are throwing out number after number on increased costs of electricity to consumers, lost jobs and a major hit to the economy overall.

It’s important to watch how this plays out. In true Obama fashion, he’s first gone after the giant in the GHG game. If he can successfully get emissions control/technology rules on the books for existing power plants, then it’s a lot easier to roll up rules on future power plants, and then to impose similar rules on all other GHG emitters. However, there are those so convinced EPA is overstepping its legal authority with this rulemaking that lawsuits will abound, likely holding up any final rulemaking until well after President Obama has retired.

For production agriculture, the largest GHG source is the animals we raise. The good news on this front is the White House has said publicly more than once it won’t try and regulate the GHG emissions from this nation’s livestock and poultry farms, but rather work on a voluntary approach to get technology on farm that will aim at cutting emissions 25% in the next six years. It’s unclear how the rest of the food chain will fare.

Next week will seem like all EPA all the time. Let’s just hope Ms. McCarthy has a good public relations team trained and ready and can keep her talking points straight.

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