In the last 20 years, corn use for ethanol production has grown from 996 million bushels and 10.5 percent of total use to an estimated 5.25 billion bushels, and 37.8 percent of use during the 2022 crop year according to the March WASDE Report from USDA. The Renewable Fuel Standard Program, created by Congress in 2005 and expanded in 2007, (RFS2) has been a major success for farmers, shifting the demand curve for corn and ushering in a period of higher corn prices. E10, the name for motor gasoline blends of 10 percent ethanol and 90 percent gasoline, is commonplace, and when you include a few gallons sold as E15 and E85, the overall blend rate in the U.S. has averaged between 10.2 and 10.3 percent over the last four years. American Farm Bureau Federation (AFBF) policy 404 / Renewable Fuels 1.6 states, “We support The Renewable Fuels Standard 2 (RFS2) as passed in the Energy Independence and Security Act of 2007, and that Congress maintain administrative control over renewable volume obligations after 2022.”

The Issue

In the long run, E10 likely won’t cut it. The recently released Annual Energy Outlook, from the Energy Information Agency (EIA) estimates as fuel efficiency in the U.S. auto fleet continually improves, miles driven level off or potentially decline, and we see more electric vehicles on the road over the next 20 years, motor gasoline consumption will decline 25 percent, going from 134.55 billion gallons in 2022, to 100.62 billion by 2042. 

We estimate that at the current 10.3 percent blend rate, ethanol for blending would decline from 13.86 billion gallons in 2022 to 10.36 billion in 2042, and corn use for ethanol would drop 32 percent, from 5.250 billion this crop year to 3.549 billion by 2042 as ethanol plants grow more efficient. The result of all this will be lower corn prices, the need for fewer corn acres or a combination of both. 

To maintain corn use for ethanol at today’s 5.25-billion-bushel level, given motor gasoline consumption of 100.62 billion gallons in 2042 would require an increase in the national average ethanol blend rate to 15-16 percent. To grow feedgrain use for ethanol beyond the current 5.25-billion-bushel level would require blend rates exceeding 16 percent nationally.

The Ethanol Road Forward

On the policy front, two significant efforts have been in the news. The first involves efforts to expand the use of E15 and Environmental Protection Agency (EPA) efforts to regulate fuel volatility[1]. 

Background on expanding E15: 

  • The previous administration eliminated the 1.0 psi Reid Vapor Pressure (RVP) waiver, allowing for year-round use of E15 but a 2021 court decision ended those sales. 
  • In April 2022, the current administration, facing fuel supply challenges, directed EPA to use existing agency authority to prevent a disruption in E15 availability between June 1 and Sept. 15. As a result, continued availability of E15 increased the nation’s fuel supply and according to Kansas Corn, “saved drivers an average of 16 cents per gallon nationwide during those three months, for a total savings of $57 million to U.S. consumers.”
  • On April 28, 2022, eight state governors (IA, IL, KS, MN, ND,NE, SD and WI) wrote to EPA, requesting them to remove the 1-psi volatility waiver for gasoline-ethanol blends containing 10 percent ethanol beginning with the summer of 2023. Gov. Laura Kelly later removed Kansas, citing concerns that the Missouri governor had not signed on. Since then, Missouri has joined the letter.
  • On March 6, 2023, EPA responded to the governors’ request by proposing to remove the 1-psi volatility waiver for Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin. But citing time constraints and petitions from stakeholders, the effective date is summer 2024.
  • On March 14, 2023, the Consumer and Fuel Retailer Choice Act was reintroduced. In short, the legislation would allow the year-round, nationwide sale of ethanol blends higher than 10 percent by removing the 1-psi volatility waiver.
  • On March 30, 2023, Kansas wrote to EPA, asking them to again use agency authority to allow for the sale of both E10 and E15 in 2023.

AFBF policy supports the Consumer and Fuel Retailer Choice Act, as policy 404 / Renewable Fuels, 2. Biofuels, 2.1.7 states, “We support legislative and regulatory approval for an increased octane fuel standard utilizing higher blends of ethanol to help automobile manufacturers meet fuel efficiency standards and reduce their carbon footprint.” Additionally, 2.1.9 supports “The continuation of programs such as the Renewable Fuel Standard as legislated to promote increased sales and higher blends of biofuels.”

The second ethanol-related policy front was the reintroduction of the Next Generation Fuels Act in the U.S. Senate on March 22, 2023. Farm Bureau policy also supports this legislation. The act would establish a minimum research octane number (RON) standard of 98 for gasoline, higher than the typical octane of 91, and require the added octane value reduce carbon emissions by at least 40 percent compared to regular gasoline, clearly favoring ethanol as the octane enhancer. Additionally, the act would remove the 1-psi volatility waiver, allowing for the year-round, nationwide sale of ethanol blends higher than 10 percent. AFBF policy 404 / Renewable Fuels, 2. Biofuels, 2.1.7 states, “We support legislative and regulatory approval for an increased octane fuel standard utilizing higher blends of ethanol to help automobile manufacturers meet fuel efficiency standards and reduce their carbon footprint.” Additionally, 2.1.8. supports, “Standardization of all new gasoline dispensers to be Underwriters Laboratories (UL) certified for a minimum of E-30.” 

It should be noted in the 2019/20 KFB policy year, the KFB Feedgrains Advisory took a deep dive into ethanol policy, especially as it pertained to the RFS post 2022, when legislative volumes would cease. The committee made three recommendations that went to the AFBF annual meeting, and while the committee’s exact language was not fully adopted, the committee’s intent was and is reflected in the above policy.

 

[1] Gasoline must have volatility to ignite properly but excessive volatility can cause problems such as vapor lock and increased emissions of volatile organic compounds (VOCs) that contribute to the formation of smog (ground-level ozone). Over the years, a volatility level of 9.0 psi RVP has been established to which auto maker emission control systems have been designed and certified to meet. The Clean Air Act (CAA) requires EPA to establish volatility restrictions on RVP, during the high ozone/summer season defined as June 1 through September 15 for retailers and wholesale purchaser consumers. Because blending ethanol increases the volatility of the resulting fuel due to chemical differences between ethanol and gasoline, Congress also codified a 1-psi volatility waiver for E10, allowing such blends to have a 1.0-psi higher RVP than otherwise allowed for gasoline during the summer season. EPA’s regulations do not impose any volatility requirements on any type of blend of gasoline outside of the summer season. Note: Blending “current” gasoline mixtures with ethanol increases volatility beyond the 9.0 psi RVP, but “different” gasoline mixtures could be formulated that when blended with nearly any level of ethanol, would NOT exceed 9.0 psi RVP. This is why many ethanol proponents suggest removing the 1-psi volatility waiver, because the advantages of ethanol (lower cost, cleaner burning, decreased carbon footprint) would force gasoline producers to formulate a less volatile gasoline mixture.