Jennifer Jacobs

jejacobs@dmreg.com

It looks like presidential hopeful Rand Paul has found a clever way to champion ethanol, with an issue that's in harmony with his keep-government-out-of-the-marketplace mentality.

Paul, a Republican U.S. senator from Kentucky, has teamed up with Iowa's popular U.S. Sen. Chuck Grassley, to introduce the Fuel Choice and Deregulation Act.

Ethanol industry backers say the bill would grant relief from a regulatory quirk that's thwarting free market sales of E15, fuel that's 15 percent ethanol and 85 percent gasoline.

MORE: Ethano l debate could come to a head in Washington this year

The bill dropped on Thursday, with little fanfare from either senator's office.

Industry insiders are applauding it, even as they warn it's not a substitute for support for the all-important renewable fuel standard – a government mandate that Paul frowns upon.

"There's a big gulf. If you ask us for our top three priorities, it's RFS, RFS, RFS," Monte Shaw, executive director of the Iowa Renewable Fuels Association, told The Des Moines Register Tuesday. "But fixing this issue for ethanol would be number four."

GOP and Democratic leaders in Iowa are pressing presidential candidates to voice full-throated support for the renewable fuel standard, arguing it's crucial to Iowa's corn-centric economy and necessary to break through oil's near monopoly on transportation fuels after a century of government subsidies. The RFS requires oil refiners to steadily increase over the years the amounts of ethanol and biofuels they mix into the nation's fuel supply.

Paul is working hard to cultivate voters in first-in-the-nation Iowa. He has done more campaign-style events in Iowa than any GOP contender other than Rick Perry and Rick Santorum, and returns Friday, April 10 for a big speech in Iowa City.

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Paul hasn't explicitly said he opposes the renewable fuel standard, but has implied it. He has said he prefers to let the market decide which forms of energy to support.

"Nobody should be voting on which industry should win over another," Paul said in Iowa in May 2012.

Paul skipped the Iowa Ag Summit in early March, thus avoiding the grilling on the RFS that nine other GOP presidential contenders faced. But Paul's aides said he opposes "government telling consumers or businesses what type of fuel they must use or sell."

The new Paul/Grassley bill would grant a waiver to a regulation set by the U.S. Environmental Protection Agency.

It's a technical, weedy matter but it has significant implications — far more retailers would sell E15 if this bill passes, industry backers said.

Here's the background: In summertime, fuel has volatility limits intended to prevent it from evaporating too easily into the atmosphere and causing smog. But a distribution monopoly prevents some parts of the country, including Iowa, from getting enough lower-volatility gas suitable for mixing with 15 percent ethanol. The result is that in hotter months, retailers can't sell E15. Unwilling to deal with a product that can't be sold year round, and risk confusing consumers, only about 30 retailers in the state carry E15.

To solve the problem, Paul and Grassley want the EPA to give the same volatility waiver to E15 that it has given for E10, which has 10 percent ethanol. That would allow year-round sales of E15, supporters say.