SD Farmer: Thune Must Deliver on E15

MINNEAPOLIS (DTN) -- With national, permanent year-round E15 legislation sitting in a farm bill stalled in the U.S. Senate, count South Dakota farmer Troy Knecht among the frustrated.

The president of the American Coalition for Ethanol and a member of the board of directors for Redfield Energy in Redfield, South Dakota, told an audience of ethanol producers and farmers at ACE's annual conference in Minneapolis that it's particularly frustrating because Senate Majority Leader John Thune is from his state.

"I remember being in the audience (at a farm show in 2004-2005) and how Sen. Thune was running against then Sen. (Tom) Daschle," Knecht said on Thursday during a panel discussion.

"And the RFS was about three votes from getting passed, I think, didn't get it across into the end zone the first time. So that was Sen. Thune's comment, 'Tom, you had the opportunity to get this thing done and you couldn't get it across into the end zone. You couldn't push it in.' And here we are 22 years later, it's the same exact situation."

Knecht told the farmers and ethanol producers they "need to apply the pressure."

"This is important," Knecht said. "We got the Senate majority leader in our state, an ag state, right? This is the cross you die on if you put it like this is your career right here, right? You can deliver this to the people of South Dakota and to the upper Midwest, to rural America. And this is frustrating."

The lack of movement on E15 legislation, after the U.S. House of Representatives passed a bill, comes at a time of good margins in the ethanol industry.

"It's especially frustrating when the economics of ethanol are working for everybody right now," Knecht said. "People that are selling it, refining it, producing, you know, for agriculture, we see our corn price going up a little bit now. Consumers are saving money. We're blending at an 11.25% annual blend rate. I mean, the economics are working, and this thing's just sitting there."

ACE CEO Brian Jennings said it's difficult to see why E15 hasn't moved as the industry had hoped, even with bipartisan support.

The Senate is now in recess, and members are facing a midterm election.

"And the cold, hard reality facing U.S. senators is that pump prices remain stubbornly high," Jennings said.

"And for farmers, returns remain stubbornly negative, right? Prices are relatively low. Input costs are relatively high. You would think those would be ingredients that E15 could help solve for, and you think those would be ingredients that the Senate may be compelled to act."

E15 PATH FORWARD

Jonathon Lehman, chief consultant and policy adviser for ACE, said he believes there is a legitimate path forward for E15.

The House passed a version of an E15 bill that provides so-called relief to refiners from the Renewable Fuel Standard, protecting them from RFS reallocation of gallons waived.

"They were able to kind of craft together a majority vote to get that through, which is a pretty big accomplishment," Lehman said.

"The math at the second is a little different, just based on representation, who's in kind of key leadership positions."

Sen. John Barrasso, R-Wyo., is the majority whip and from a refiner state, and Sen. John Boozman, R-Ark., is the chairman of the Senate Ag Committee.

"And the real fight right now is between kind of those two entities (refiners and ag) and how to solve that issue," Lehman said. "We haven't gotten to the tipping point yet where it pushes somebody to make compromises. And I think we're getting to a time where we can hit that tipping point, right?"

Lehman said that with just 14 workdays left in the Senate before the election, there are members who "want to be able to claim victories on things."

"And it really comes to, kind of the top of the leadership gently nudging for kind of arm-twisting and opponents to find a compromise with the representative, larger, kind of refiner capacity and make the argument that, hey, our Senate majority potentially might come to this. So, I think there is a path. I think it's just a political path."

THE MATH ON E15

ACE Chief Marketing Officer Ron Lamberty said that seeing refiner demands on small-refinery exemptions hold up permanent E15 doesn't make sense.

"If you take Sinclair (Refining Company), fourth quarter of last year, which apparently gets an SRE because they can't blend, but they sold $330 million worth of RINs (renewable identification numbers)," he said.

"They had $330 million worth of RIN income, which means not only can they blend, they do, but if they have an exemption, they don't have to turn them into EPA. They could have this whole thing, on the other hand, by just putting a couple percent more ethanol on their fuel, and then the RINs would be worthless."

Lamberty said gasoline retailers understand the value of E15, as they are making more money on the fuel.

"It's getting easier because of the price situation because, last year, I think, the gap between E10 and E15 was 2 to 7 cents wholesale," he said.

"Now it's at least 15 (cents) most places, sometimes 20. And if you're a station who has equipment they can use right now, regardless of what they've been told, to just put E15 in and start selling it for 95% of the cars on the road, there's no reason not to do it. But that message needs to be amplified too."

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

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