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Indiana Continues To Wait On EPA's Ethanol Standards

Indiana is one of the largest ethanol producers in the U.S.

But this winter, Indiana farmers and ethanol producers are in limbo as they wait for the Environmental Protection Agency to decide how much of the biofuel should be used in the nation’s gas.

Every year, thanks to a law known as the Renewable Fuel Standard, the EPA decides on how much ethanol is mixed with gasoline. The RFS requires more and more biofuel be used by gas producers each year until 2022.

In the past few years, though, the law has come under fire from traditional oil companies, who argue that continuing to increase the amount of biofuels in gas beyond the current standard would prove difficult and cost prohibitive.

“The pressure really ramped up in 2014,” says Ken Parrent, director of biofuels at the Indiana Corn Marketing Council. “That’s when we really got to when the required volume was greater than 10 percent of the fuel supply.”

Parrent says, until recently, the required blending volumes were low enough that the gasoline supply was able to absorb the amount of ethanol that was produced. For gas companies, that meant making gasoline that was approximately 10 percent ethanol.

For traditional petroleum companies, that 10-percent-to-90-percent ratio is known as the “blend wall,” or the maximum amount of ethanol that can be realistically blended into gasoline before production prices start to increase.

The original version of the RFS says gas companies would be required to mix 14.4 billion gallons into their total output in 2014.

But once that amount was announced by the EPA, gas companies started to push back.

In response to the controversy, the EPA proposed to cut biofuel requirement for the first time.

But Purdue University energy economist Wallace Tyner says the response to the cuts was so strong, the EPA decided to postpone finalizing the changes indefinitely.

“They got thousands, tens of thousands of comments, and by law they are supposed to consider all of the comments, which is kind of hard to do,” Tyner says.

Until a decision is made, gasoline companies will just have to guess how much ethanol they blend into their fuel.

Parrent says it’s unlikely the EPA would drastically cut the RFS requirements, but the uncertainty might hinder future growth in Indiana’s multi-billion-dollar biofuels industry.

“You’re looking at a $2-3 million investment to build new ethanol plant, maybe more in some cases,” he says. “With all the uncertainty about the future of the RFS and where demand for ethanol might be, no one is going to invest that kind of money.”

Luke Logan, manager of POET Biofuels in Cloverdale, is similarly optimistic about the odds for Indiana’s ethanol industry.

“I think it will have an impact, particularly on producers that are less efficient,” he says. “But I think, long-term, there will be a need, and where there’s a need there will be a demand. And I think where there’s a demand, our government has a responsibility to respond to that.”

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