Why Ethanol Makers Are Actually Relieved With New EPA Cuts

December 1, 2015, 2:09 PM UTC
EPA Proposes Changes To Ethanol Mandate In Gasoline
PEMBROKE PINES, FL - NOVEMBER 15: Jessica Martinez pumps gas into her car from a pump with a sign indicating the gas is containing up to 10 % ethanol at Victory gas station on November 15, 2013 in Pembroke Pines, Florida. Today, the federal Environmental Protection Agency announced a proposal to ease an annual requirement for ethanol in gasoline. (Photo by Joe Raedle/Getty Images)
Photograph by Joe Raedle — Getty Images

The Environmental Protection Agency issued revised energy guidelines that reduce targets set in a 2007 law for the amount of biofuel that must be added to gasoline in the U.S., but the cuts were less than expected.

The new renewable fuel standards call for refiners to mix 18.11 billion gallons of ethanol or equivalent biofuels in the country’s fuel supply in 2016. Earlier this year, the agency had recommended blending in 17.4 billion gallons of the corn-derived product.

Farmers and ethanol companies welcomed the change, according to the Wall Street Journal, since the cuts laid out earlier this year were originally more severe. But they were still dissatisfied that the requirement did not meet higher expectations set nearly a decade ago. (See a copy of the Energy Independence and Security Act of 2007, which called for 22.25 billion gallons to be added next year, here.)

Ethanol-producing companies shares rose on the news, as the Journal noted. Greenland Plains (GPRE) climbed 5%, Pacific Ethanol (PEIX) leapt 21%, and Archer Daniels Midland (ADM), the sector’s largest contender edged up slightly.

The purpose of the 2007 energy law was to wean America off foreign oil and to curtail carbon emissions. A domestic energy boom in the U.S. has lessened the urgency of the first concern, while higher efficiency standards and stricter regulations have helped to lower consumption.

Refiners continue to oppose the EPA’s fuel-blending standards. This EPA chart tracks the amount of renewable fuel growth over time, including projections for this year and next.

EPA Total Renewable Fuel Growth Over Time 2015

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