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Lobbyists swarm Washington as EPA mulls cutting biofuels mandate

Cezary Podkul
Thursday, 5 Dec 2013 | 1:00 AM ET

WASHINGTON, Dec 5 (Reuters) - Industries with millions of dollars at stake over the U.S. government's plan to lower the amount of biofuel that must be used in 2014 will air their grievances on Thursday in one of the most divisive policy debates of the year.

The Environmental Protection Agency (EPA) has been flooded with interest from stakeholders ahead of what could be a raucous meeting about the Renewable Fuel Standard, or RFS.

The meeting comes nearly three weeks after the Obama administration proposed slashing how much renewable fuel - mostly corn-based ethanol - needs to be blended into the U.S. fuel supply, bowing to pressure from the petroleum industry.

The move was a historic reversal that followed intense lobbying by the petroleum industry and a coalition of groups ranging from chain restaurants to lawn-mower manufacturers.

Some 144 industry representatives are scheduled to testify on Thursday in a marathon hearing that will feature at least 24 separate panels and last for 12 hours at a suburban Washington, D.C., hotel.

Among those assigned to speak will be representatives from the biofuels industry, anti-hunger groups, bakers, petroleum refiners, small-engine manufacturers, lawmakers and the governor of Iowa, the largest U.S. corn-producing state.

"I've never seen one like this. It just shows you how strongly folks feel," said Kris Kiser, president of the Outdoor Power Equipment Institute, which represents manufacturers of chainsaws and other power equipment.

Thursday's sprawling event shows the intense interest in the future of biofuels - and caps a year of fierce lobbying that has raged in Washington between pro- and anti-ethanol interests. An unprecedented leak of the EPA's controversial proposal weeks ahead of its official release further inflamed the debate.

The 2007 law mandated a total of 18.15 billion gallons of renewable fuel blending next year. The EPA's proposal requires just 15.21 billion gallons.

The EPA has warned that the country is approaching a point where the RFS would require the use of more ethanol than can be blended into gasoline at the 10 percent level that dominates the U.S. fueling infrastructure.

Refiners have said this so-called "blend wall," if left in place, would force them to export more fuel or produce less gasoline, leading to shortages and higher prices at the pump.

The use of a higher, 15 percent ethanol blend, known as E-15, is a big part of the debate. The EPA has declared E-15 safe for cars, SUVs and light trucks built from 2001 forward, now the majority of the U.S. fleet. But refiners say the blend risks damage to car engines, as well as chainsaws, boats and other equipment.

The EPA proposed cutting the corn ethanol portion of the 2014 mandate from the 14.4 billion gallons called for by law to about 13 billion. Based on projected gasoline demand, that level of ethanol use would be slightly less than 10 percent of total U.S. gasoline consumption.

A public comment period for its proposals will run through late January, and a final rule could take months after that.

CORN PRICES AT RISK

Ethanol supporters warned ahead of Thursday's meeting that the lower mandate could seriously hurt U.S. corn prices and trigger job losses across rural America.

"The decision the EPA is going to make will have dramatic implications on the economic viability of communities all across this Midwest agricultural heartland," Iowa Governor Terry Branstad said on call with reporters that previewed his planned testimony.

Cutting the mandate could cost 45,000 jobs nationally, said Branstad. Biodiesel producers, who face a two-year freeze on production mandated by the RFS, have also warned of layoffs.

"There will be dozens and dozens and dozens of bankruptcies," said Stu Lamb, chief executive of Viesel Fuel, a Florida biodiesel manufacturer who warned he could go out of business if the EPA proposal is enacted.

CHAINSAWS AND CHAIN RESTAURANTS

But across Washington on Wednesday, lobbyists previewing their arguments in favor of cutting the mandate underscored how diverse the opposition to rising ethanol requirements has become.

Meat producers, including turkey and beef groups, have complained about the billions of bushels of corn diverted to fuel production from animal feed, driving up their costs.

"Since its inception in 2007, biofuel mandates have been a primary catalyst for rising food input costs - including corn, up 48 percent and soyoil, up 36 percent," food industry analyst Bill Lapp, president of Omaha-based Advanced Economic Solutions, said in prepared testimony.

Those higher costs - some $12 billion over seven years - are ultimately passed on to the consumer, Lapp said.

"This issue affects chainsaws and chain restaurants," Rob Green, executive director of the National Council of Chain Restaurants, said at a lunch hosted by the American Petroleum Institute, the oil industry's top lobbying group.

Green said he ended up on the same side of the issue as the oil industry because the heightened demand for corn resulting from the mandate was driving up feed prices, which in turn get passed on to restaurant owners.

The broad interest in the issue indicates that, whatever the EPA decides, a legal challenge is sure to follow.

"I fully expect that . . . the policy will be litigated," said Jack Gerard, chief executive of the American Petroleum Institute.

(Reporting by Cezary Podkul; Editing by Ros Krasny and Lisa Shumaker)