US Spending Bill Includes Allowance for More Ethanol in Gasoline

(Bloomberg) -- US ethanol producers are on the brink of getting the green light from Congress to sell higher blends of corn-based biofuel nationwide, a long-elusive goal the industry considers crucial to its future. 

Language to make a higher-ethanol blend, known as E15, available across the US year-round is part of a proposed three-month stopgap spending bill, according to text of the measure released Tuesday. If the temporary funding legislation isn’t passed and signed into law by midnight on Friday, the government will shut down. 

Ethanol makers and corn growers have fought for more than a decade to expand access to E15 amid fierce opposition from oil refining states. Yet more recently, the rise of electric vehicles has created an alliance between agriculture and Big Oil as they both face the same existential threat. 

Environmental restrictions now preclude sales of the fuel containing 15% ethanol during the summer across much of the country. Without a nationwide law, refiners will face the costly problem of dealing with a two-tiered fuel system after eight Midwestern corn states were approved by federal regulators for year-round E15 sales last February.

“My bill puts an end to years of patchwork regulations and uncertainty,” said Senator Deb Fischer, a Nebraska Republican whose measure is part of the proposed funding legislation. “Not only will my bill lower gas prices and give consumers more choices, but it will also create new opportunity for American producers, who are especially hurting right now from lower prices.”

While E15 sales in the US have been steadily rising, ethanol supporters say year-round approval is crucial to future demand. Republican Senator Chuck Grassley of Iowa, the country’s largest corn producer, said in an interview that the switch to allow year-round sales nationwide could benefit the state by hundreds of millions of dollars.

The E15 measure would potentially heighten demand for American corn at a time when lower crop prices have eroded farmer revenues in the US. The nation already uses almost 140 million metric tons of the grain — or more than one third of its harvest — for biofuel production. Corn futures in Chicago have tumbled roughly 6% since the start of the year. 

Last-minute changes to the funding measure, known in Washington as a continuing resolution, could still derail the E15 push by farm state lawmakers, though key stakeholders said they are optimistic the measure will become law. 

“We remain hopeful that the continuing resolution will move swiftly through Congress and to the president’s desk for signature,” said Geoff Cooper, chief executive officer of the Renewable Fuels Association. “This language finally removes an outdated, red-tape regulatory barrier.” 

The American Petroleum Institute — the powerful oil lobby — united this year with farm groups to support Fischer’s E15 bill, which also preserves access to lower-ethanol blends, such as the conventional 10% variety widely available across the US.

Most of the gasoline sold in the US contains 10% ethanol, while selling higher E15 through the summer months has been generally off limits without a waiver from the Environmental Protection Agency. 

The US government began to encourage the use of ethanol in the late 1970s following the oil crisis. After the 2001 terrorist attacks intensified energy security concerns, Congress established a mandate compelling ethanol and other biofuels to be mixed into the national fuel supply each year.

That set off a debate, with oil producers arguing that blending brings higher refining costs and increased prices at the gas pump. It also has spurred clashes over pollution. A federal clean air law blocks E15 sales in most of the US from June through mid-September, when summer heat boosts evaporation.

The biofuels industry has argued the summertime ban is based on flawed data, and higher gasoline-ethanol mixes are critically needed to help lower climate-harming greenhouse gases.

“E15 lowers emissions, saves drivers money, and increases American energy dominance,” said Emily Skor, CEO of ethanol lobbying group Growth Energy. “Giving consumers the chance to choose this fuel year-round would be an early Christmas present to American drivers.” 

(Updated to reflect ethanol provision is included in US funding proposal.)

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