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Biofuel Boondoggle
A Post-Mortem of Big Corn's December Defeat

Last November, America’s ethanol policy got a mite smarter. The EPA walked back on some of the mandates it had in place for fuel refiners to blend in supposedly “green” ethanol, part of the country’s Renewable Fuel Standard. Since then, the ethanol lobby, affectionately (or not) called “Big Corn,” has been railing against the decision as one coerced by the far more insidious-sounding “Big Oil” lobby. But as Reuters reports in an in-depth look back on the process, this was more complicated than just a tug of war between two special interest giants:

The clash has been portrayed as a battle between “Big Oil” and “Big Corn,” two powerful and deep-pocketed lobbies. But a Reuters review of public records and interviews with lawmakers, lobbyists and executives reveals a more complex picture.

A private equity firm and an airline helped convince the Obama administration to backtrack, at least temporarily, on a policy it has supported for years: requiring steadily-rising volumes of ethanol to be blended into gasoline each year, a key to shifting U.S. energy consumption toward renewable sources.

Among those lobbying against the ethanol mandates was Delta Air Lines, brought in to the fight by their ownership stake in Philadelphia fuel refineries. Many of those refineries were on the brink of annihilation in 2011, struggling to stay afloat in a business of ever-decreasing margins. Biofuel mandates threatened to push them over the edge; “the cost of these mandates “eclipse[d] the salaries of all refinery workers combined.”

The biofuel boondoggle is a complicated mess, but here’s the long and short of it: Current mandates, according to the 2007 RFS, are so high that it’s difficult for producers to meet the quotas. Moreover, refiners are butting up against a so-called “blend wall,” a 10 percent level of ethanol mixed in to gasoline, after which the fuel blend has been shown to have adverse effects on older car engines. Declining American fuel consumption, driven (no pun intended) by higher mileage vehicles, means having to blend more ethanol in to less gasoline, hence the blend wall problem.

And if that wasn’t enough, the vast majority of this ethanol is being sourced from corn, a decidedly non-green process. This ethanol mandate isn’t environmentally friendly or economically feasible. The EPA heeded the wishes of some special interest groups back in November when it rolled back on its mandates, but it made the right decision.

We need to go one step further and reform or repeal the RFS. Legislation is already working its way through Congress to do just that. We’ll be watching.

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