By Cezary Podkul
WASHINGTON (Reuters) - Supporters of the renewable fuels industry turned out en masse on Thursday, desperate for the U.S. government to change course after last month announcing a plan to lower the amount of biofuels that must be added to the fuel supply in 2014.
About 300 people attended a public meeting held by the Environmental Protection Agency on the Renewable Fuel Standard, proposed changes which have become one of the most divisive policy issues of the year.
The number of stakeholders who signed up to testify - almost 150 - was 10 times or more the count at a similar meeting a year ago, an EPA official said.
Robert Dinneen, president of the Renewable Fuels Association, estimated that more than 100 of the speakers scheduled to testify were in favor of preserving the renewable fuel standard.
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.
Speakers ranged from representatives of the biofuels industry and petroleum refiners to anti-hunger groups, bakers, small-engine manufacturers, lawmakers and the governor of Iowa, the largest U.S. corn-producing state.
A panel of five EPA rulemakers - including Chris Grundler, director of the EPA's Office of Transportation and Air Quality - listened intently as groups of five to six speakers came up in succession to state their positions.
A PLEA FROM IOWA
Iowa Governor Terry Branstad passionately defended the ethanol mandate, warning that reducing the quota would have an "unbelievable negative ripple effect all through rural America," and even tipping the Corn Belt into crisis.
"The EPA is now caving in to the demands of Big Oil, who has always resisted renewable fuels - from the very beginning," said Branstad, flanked by five Iowa farmers and biofuel producers, all wearing "Don't Mess With the RFS" buttons.
Small-scale biofuel producers at the hearing said they felt betrayed by the EPA's decision to lower the mandate, after having invested in their plants on the assumption that the level of usage would continue to grow.
"We need a viable market with a future," said Bob Morton, who owns a small biodiesel plant in Rhode Island.
Branstad and other Iowa representatives would meet with EPA administrator Gina McCarthy on Thursday, an aide said. Branstad also requested a meeting with U.S. President Barack Obama.
Thursday's sprawling event, scheduled to last 12 hours, 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 another 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. Refiners say the blend risks damage to car engines, as well as chainsaws, boats and other equipment. E-15 is in limited use in the United States.
An influential automotive group warned that auto manufacturers' warranties could be invalidated by the use of E-15. "It will likely take another decade before the bulk of the (vehicle) fleet will be able to use, be E-15 compatible, as approved by manufacturers," said Avery Ash, director of federal relations for the American Automobile Association.
The hearing room was peppered with people wearing blue T-shirts that read "Save my Engine." Energy Citizens, a group funded by the American Petroleum Institute (API), handed out the shirts to supporters and held a rally to highlight their opposition to ethanol.
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.
Thursday's meeting will not yield any immediate response from the EPA. 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 and the biodiesel industry have warned that the lower mandate could seriously hurt U.S. corn prices by undercutting demand from refiners, and trigger job losses across rural America.
Opponents of rising renewable fuels usage make related claims, pointing to upward pressure on food prices that squeeze livestock producers and chain restaurants, among others.
"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," said food industry analyst Bill Lapp, president of Omaha-based Advanced Economic Solutions.
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," said Rob Green, executive director of the National Council of Chain Restaurants.
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 API.
(Reporting by Cezary Podkul; Editing by Ros Krasny, Lisa Shumaker, Bob Burgdorfer and Andrew Hay)