White House playing politics with biofuel policy, oil group says

[September 12, 2014]  By Ayesha Rascoe
 
 WASHINGTON (Reuters) - The American Petroleum Institute on Thursday accused the White House of attempting to use 2014 biofuel targets to influence a tight U.S. Senate race, saying that the Obama administration was putting politics ahead of consumer needs.

Management of the biofuel program has taken center stage in an election battle between Democrat Bruce Braley and Republican Joni Ernst.

Braley has repeatedly pressed the administration to reverse steep cuts proposed in November for this year's targets for the use of fuels such as corn-based ethanol.

Bob Greco, group director of downstream and industry operations at API, said recent statements from administration officials hinted that a potential increase in biofuel targets from November's proposal could be aimed at securing a victory for the Democrat.

The API contends that an increase in the targets could raise the price of gasoline. Braley and his supporters say the targets have to be maintained as part of efforts to reduce U.S. dependence on fossil fuels.

The election in Iowa, the top U.S. corn and ethanol producing state, is among a handful of competitive races that could help determine whether Democrats - Obama's party - maintain control of the Senate in November.

Recent opinion polls show Braley holding a small lead over Ernst, but within the margin of error, and the race is regarded as a toss-up.

"Harry Reid's job is on the line here," Greco said on a conference call, referring to the Senate Majority Leader. "You're starting to see the political calculations intrude, as opposed to what's good for the consumer."

The Renewable Fuel Standard requires increasing amounts of ethanol and biodiesel to be mixed into U.S. fuel supplies each year until 2022.

API has argued that the targets must be cut to avoid a collision with the blend wall, the point when the law will require ethanol to be blended into gasoline at levels higher than the 10 percent per-gallon mixture that dominates retail fuel stations.

Breaching the blend wall could lead to dramatically higher compliance costs for refiners, which oil companies contend would eventually be passed on to consumers.

Ernst, a Republican, has said she supports the federal biofuel program. But she has faced criticism from some ethanol backers who say she is too close to the oil industry, which favors repealing the mandate.

Renewable fuel companies fighting to preserve the biofuel mandate blame the oil industry for the fuel infrastructure restraints. Restoring the biofuel use targets to levels contained in the original RFS statute would force oil companies to invest in new fuel pumps that can support higher blends, they argue.

"The RFS is supposed to push us over the blend wall," said Brent Erickson, of the Biotechnology Industry Association (BIO), on a call Thursday sponsored by a coalition of biofuel supporters.

When asked about API's contention that the Iowa race was affecting biofuel policy, Jon Doggett, vice president of public policy with the National Corn Growers Association, said it is not surprising that politics could play a role in the administration's decision.

Political angles are "being played all over, by all sides," Doggett said.

(Reporting by Ayesha Rascoe, editing by Ros Krasny and Andrew Hay)

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