Ethanol Blog

With ethanol and gasoline demand plummeting in the face of the COVID-19 crisis, ethanol producers across the country are in dire straits. Many plants have been forced to shutdown or cut production, as a lack of demand has created backlogs at ethanol supply facilities.

As a result, the head of one ethanol interest group has asked EPA Administrator Andrew Wheeler to consider making changes to the renewable volume obligations for 2020, to reflect a sharply fallen demand for fuel.

In a letter to Wheeler on Friday, American Coalition for Ethanol Chief Executive Officer Brian Jennings asked the agency to take a number of steps to help ethanol producers.

On Dec. 19, 2019, EPA set the overall RFS volume requirement for 2020 at 20.09 billion gallons. In addition, EPA set the total 2020 renewable volume obligation 11.56%.

"Importantly, the statute specifically instructs EPA to set the total RVO at a level that 'ensures the requirements' of the statutory obligations are met," Jennings writes.

"Circumstances have changed dramatically since Dec. 19 which necessitate the immediate attention of EPA if the statutory requirement is to be fulfilled. COVID-19 has exposed a flaw in EPA's rulemaking approach. Social distancing, stay-at-home, and shelter-in-place orders are cutting gasoline demand by more than 50% in most of the country. As gasoline demand plummets during the coronavirus pandemic, so does ethanol demand meaning the 11.56% RVO will not result in the use of 20.09 billion gallons in 2020 as required by statute."

Jennings said in the letter EPA has to adjust the RVO or the agency would be "violating the RFS statute which amounts to an illegal waiver of blending volumes."

He said depending on how long gasoline demand continues to fall, ethanol use in the RFS could fall by between 1 billion and 2 billion gallons this year.

"If EPA fails to act, this reduction in ethanol use would correspond to a loss of between 350 million and 700 million bushels of corn demand," Jennings said.

"This would cost ethanol producers over $2 billion based on the six-month average price and farmers over 1.35 billion in 2020 according to current pricing information. Fortunately, EPA has authority to quickly address these crippling consequences."

Jennings asked the agency to issue an interim final rule by July 1 to increase the RVO for 2020 to ensure that the full 20.09 billion gallons required by law are used.

Second, he asked EPA to restore the 500 million gallons of remanded volume as ordered by the U.S. Court of Appeals for the District of Columbia Circuit in 2017. And last, Jennings asked EPA to deny "most" of the currently pending 25 small-refinery exemptions for 2019.

"The Trump administration has already used the interim final rule authority to address the economic fallout of COVID-19," Jennings said.

"For example, the Small Business Administration (used this authority to provide economic assistance on April 2, 2020 stating the economic impacts resulting from federal, state, and local public health measures to minimize exposure to COVID 19 justified such action."

Jennings said the proposed agency actions were "critical to the economic survival of many U.S. renewable fuel producers, farmers, and rural communities."

Read Jennings' letter here: https://ethanol.org/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow me on Twitter @toddneeleyDTN

(TN)

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