Action could pay off politically in farm states that produce ethanol, but oil companies question the benefits

The Biden administration said Tuesday it would allow high-ethanol content gasoline to be sold in the hot summer months, in an effort aimed at lowering prices at the pump that could pay political dividends in farm-country states.

“It reduces our reliance on foreign oil. Adding this fuel to our gasoline, 10% or 15% or even more, stretches the supply,” President Biden said at a Poet LLC ethanol-processing facility in Menlo, Iowa. “It gives you a choice at the pump. When you have a choice, you have competition. When you have competition, you have better prices.’’

Most gasoline sold in the U.S. contains 10% ethanol, a liquid fuel made from corn. Under the decision announced Tuesday, the U.S. will allow gas with 15% ethanol content—known as E15—to be sold between June 1 and Sept. 15, when it normally isn’t allowed because it can create more air pollution.

Only a small percentage of gas stations in the U.S. sell E15 now, but ethanol advocates hope ethanol use will increase with Tuesday’s decision.

Mr. Biden arrived in Iowa on Tuesday amid rising prices for gasoline and other consumer goods. The Labor Department on Tuesday said inflation hit a new four-decade peak of 8.5% in March from the same month a year ago, driven by surging energy and food costs.

Allowing fuels with a higher ethanol content would lessen reliance on oil and give drivers more options, senior administration officials said, adding that it would save drivers 10 cents a gallon at current prices.

Oil-industry officials have questioned whether such moves would lower prices. Higher ethanol blending can sometimes raise prices on refiners. Corn prices, like oil, also have seen sharp increases this year because of Russia’s invasion of Ukraine.

“We’re concerned that the administration is not focused on the real structural problems here and is attempting to find short-term fixes that don’t get at the heart of the issue,” said Frank Macchiarola, the American Petroleum Institute’s senior vice president of policy, economics and regulatory affairs.

The Environmental Protection Agency is expected to issue an emergency waiver before June 1 to allow the sale of E15 over the summer. Environmentalists have opposed past attempts to raise the summertime cap over concerns that it would increase air pollution and lead to more loss of wildlife habitat to corn production.

The use of ethanol “has resulted in the conversion of millions of acres of marginal croplands and wildlife habitat into corn production” while also increasing fertilizer pollution in waterways and raising pressure on food prices, said David DeGennaro, climate and biofuel specialist at the National Wildlife Federation.

He called on the White House to invest in “sustainable strategies that don’t come at the expense of people facing food insecurity, clean water, wildlife and the climate.”

E15 is sold at about 2,300 gas stations, according to the Biden administration. There are more than 150,000 fueling stations nationally, according to the American Petroleum Institute. Because E15 is such a small part of the market, most drivers won’t see any benefit, said American Fuel & Petrochemical Manufacturers, the refiners’ trade group.

Ethanol advocates say year-round approval of E15 will lead more gas stations to invest in the equipment needed to sell the higher-ethanol fuel. They have long pushed for an end of the summertime ban.

“This [is] welcome news for all American drivers seeking lower-cost options at the pump,” said Emily Skor, the chief executive of the ethanol trade group Growth Energy, who was scheduled to attend Mr. Biden’s Iowa event. She said it will also lead to “a stronger rural economy.”

Congress created and expanded the ethanol program, the Renewable Fuel Standard, with bipartisan support under President George W. Bush, when lower U.S. oil production had policy makers looking for new sources of energy.

Expanded ethanol production under the program raised corn prices by 30% and the prices of other crops by 20%, according to a report published earlier this year in Proceedings of the National Academy of Sciences. The report also said growing more corn for ethanol led to increased amounts of water pollutants from U.S. farms and negated ethanol’s climate benefits.

Mr. Biden campaigned advocating for tougher environmental rules but has been under pressure for months to address historically high gasoline prices. Polls show voters are frustrated by inflation fed by those prices, and some congressional Democrats are anticipating midterm elections that could cost them control of the House and Senate.

Promoting use of ethanol is popular in Midwestern states such as Iowa, where presidential hopefuls and election-year political leaders have often courted voters with big promises to expand federal ethanol mandates.

Last month, nine Republican senators including Sen. Chuck Grassley (R., Iowa) and seven Democrats including Sen. Dick Durbin (D., Ill.) wrote a joint letter to Mr. Biden asking for approval of higher ethanol content fuel.

On Tuesday, Mr. Grassley issued a statement in which he took credit for getting Mr. Biden to take the action after months of lobbying.

“Iowa producers stand ready to meet the moment and ramp up production to lower gas prices for all Americans,” Mr. Grassley said. “Unlike tapping into the Strategic Petroleum Reserve and begging OPEC for more dirty oil, this is a step toward energy independence.”

Ahead of Mr. Biden’s arrival, Iowa Republicans told reporters on a conference call that rising costs of fuel and fertilizer are hammering farmers as well as others in the state.

“It’s hitting our Midwest even harder than the rest of the country,” said Sen. Joni Ernst (R., Iowa).

Tuesday’s visit will mark Mr. Biden’s first presidential visit to Iowa, where he placed fourth in the 2020 Democratic caucuses. In the general election, he lost the state to former President Donald Trump by about 8 percentage points.

Under Mr. Trump, the EPA moved to permanently allow summertime sales of gasoline with a 15% mix of ethanol, in what his administration described as a compromise between agriculture and energy interests.

U.S. refiners sued, and a federal appeals court struck it down last summer, saying the Trump administration overreached its authority.

A three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit said the EPA had improperly reinterpreted legal language in the Clean Air Act long understood as limiting ethanol to 10% of the content of gasoline during summer months.

Senior Biden administration officials say their decision is based on different authority. They also said the EPA has determined there won’t be environmental harm from the change.

Iowa’s status as the first voting state in the presidential nominating process has brought national attention to the state and to issues of importance to voters there, such as ethanol. But Iowa’s clout may be dwindling because it is in danger of losing its first-in-the-nation status for one of the two major parties in presidential contests. The Democratic National Committee is reviewing changes to the process that could favor primaries and other criteria for deciding which states cast early ballots. Republicans haven’t proposed similar changes.

In Canada, Sen. Joe Manchin criticized Mr. Biden for canceling the Keystone XL pipeline project and said the U.S. needs to do more to increase energy cooperation with Canada. “The XL pipeline is something we should never have abandoned,” said Mr. Manchin (D., W.Va.) at the tail-end of a two-day tour of Canada’s oil sands.

Mr. Manchin said it would be difficult to revive the project, which has been abandoned by its operator TC Energy Corp. Still, he suggested the Biden administration should re-examine the possibility. “I can’t guarantee there’s a company up here that wants to re-invest again, or if the administration is going to entertain that, but they’d be foolish not to.’’

On Jan. 20, 2021, Mr. Biden signed an executive order canceling the permit that allowed the pipeline to cross Canada’s border with the U.S., citing the climate-change crisis as a reason.

Source: https://www.wsj.com/articles/epa-will-allow-more-ethanol-in-gas-this-summer-in-bid-to-tame-prices-11649754000