A gas pump offering 20, 30, 50, and 85 percent blends is seen at a Cenex gas station in Granite Falls, Minn., Friday, June 20, 2008.  Despite warnings,
A gas pump offering 20, 30, 50, and 85 percent blends is seen at a Cenex gas station in Granite Falls, Minn., Friday, June 20, 2008. Despite warnings, some Midwest drivers are mixing gasoline and ethanol to support corn economy and save money. (AP Photo/Elizabeth Dunbar)

Has the nation produced as much ethanol as it can use this year?

If you ask petroleum refiners, the answer is yes. On Friday, March 22, the American Fuel and Petrochemical Manufacturers group called on the Environmental Protection Agency to waive the Renewable Fuel Standard that calls for blending 13.8 billion gallons of ethanol into the nation's gas this year.

By the refiners' calculation, that's about 600 million more gallons than they'll need to create the familiar blend of 10 percent ethanol-infused gasoline sold around the nation and in Minnesota.

If the waiver is not issued, the additional ethanol would cause gas prices to rise by as much as 10 cents per gallon, the refiners predict.

But ethanol producers scoff at the refiners. Their trade associations said Friday that the refiners were using scare tactics to prevent the widespread adoption of a higher blend of ethanol called E-15.

E-15 contains 15 percent ethanol, and while the EPA cleared it last year for sale, only a handful of service stations carry it.

The faceoff between the two energy lobbies has ramifications for Minnesota, the nation's fourth-largest ethanol producer with about two dozen ethanol plants. Several plants have been idled because demand for ethanol has dropped as Americans drive less and use more fuel-efficient cars.

The ethanol mandate, known as the Renewable Fuel Standard, or RFS, has so far provided a floor for most ethanol producers.


But the American Fuel and Petrochemical Manufacturers joined major oil companies who are calling on Congress to repeal the 6-year-old law. The RFS increases the amount of ethanol to be blended each year, ending with 36 billion gallons in 2022 -- regardless of what percentage ends up in the gasoline.

At the time of its passage, gasoline consumption was steadily climbing, so the percentage of the blend would have been the same, but the recession ended that trend, AFPM President Charles Drevna said.

"The RFS is totally broken," Drevna said Friday. "We hope Congress steps in and fixes the issue before the train wreck occurs." He wants an EPA waiver over several years.

The refiners have nearly reached "the blend wall," which is the maximum amount of ethanol that can be added to gasoline to create a 10 percent ethanol mixture, Drevna said.

The refiners don't want to go above that amount and blend E-15, which can't be used in cars made before 2001 -- about 30 percent of the vehicles on the road, Drevna said. Small engines, including those on lawn mowers and boats, could be harmed by higher ethanol blends, he added.

So instead of ethanol, the refiners are buying up the ethanol credits, known as Renewable Identification Numbers, or RINs. Each gallon of ethanol sold has an RIN, and previously, they've sold for pennies a gallon.

But the price skyrocketed earlier this year to more than a $1 a gallon as refiners, worried about hitting the blend wall, began buying the RINs to comply with the law, Drevna said.

Ethanol trade associations Friday blasted the refiners and oil companies, saying the worries about E-15 and the call to repeal the Renewable Fuel Standard were simply a way to muscle ethanol out of the picture and raise prices.

"While they pretend to advocate for the consumer, they are actually intentionally blocking a choice and savings at the pump, while taking in excessive profits at the consumer's expense," Tom Buis, CEO of renewable-fuels trade group Growth Energy, said in a statement.

Instead of raising the price of gas by a dime a gallon through RINs, the oil industry could have invested a tiny fraction of a penny a gallon of expected 2013 sales to build the infrastructure to sell E-15 blends, added the Renewable Fuels Association, another trade group.

Flint Hills Resources, which owns Pine Bend Refinery in Rosemount, Minn., declined to say how the RFS and blend wall specifically are affecting it this year, but spokesman Jake Reint said the refiner does not like the mandate.

"Mandates such as the Renewable Fuel Standard are inherently inefficient and run counter to the free market competitive forces that naturally keep prices low and drive innovation," he said in a statement.

On the other side of the argument is Randy Doyall, CEO of Al-Corn Clean Fuel, a farmer-owned cooperative with an ethanol plant in Claremont in southern Minnesota.

By refusing to help sell E-15, refiners and oil industry created a demand for RIN credits that will eventually show up at the pump in the form of higher prices, he said.

"I feel almost like they are forcing the market up," he said. "It's like they're playing a game of chicken."
