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Ethanol, Corn Producers Await RFS Plan

Democratic Lawmakers Ask USDA to Study Effects of Small-Refinery Waivers

Sen. Amy Klobuchar, right, speaks about ethanol and small-refinery exemptions during an event Thursday at the Southwest Iowa Renewable Energy ethanol plant in Council Bluffs, Iowa, along with Rep. Cindy Axne. The two Democrats want an economic analysis from USDA on the impact of small-refinery exemptions on the agriculture economy. (DTN photo by Chris Clayton)

OMAHA (DTN) -- In what appear to be the final hours leading up to the release of a long-awaited biofuels proposal from President Donald Trump, ethanol producers and farmers reiterated on a press call Thursday the importance of EPA doing something to account for biofuel gallons waived from the Renewable Fuel Standard.

"We're in very dire circumstances and we need the issue resolved," said Geoff Cooper, president and CEO of the Renewable Fuels Association.

The Trump administration reportedly is set to release a plan sometime soon. That plan may include EPA devising a method for accounting for biofuel gallons lost to small-refinery exemptions (SRE).

In the meantime, ethanol and corn industry representatives told reporters the loss of more than 4 billion gallons of biofuels blended with petroleum products is hurting the industries.

As of Thursday, about 19 ethanol plants have either closed or idled production across the country. The latest to close is Three Rivers Energy in Coshocton, Ohio, citing the market effects of small-refinery exemptions as a reason for idling the plant. (https://www.coshoctontribune.com/…)

Since 2016, the Trump EPA has granted 85 small-refinery exemptions.

According to two previous media reports, the White House reportedly is set to require EPA to calculate a three-year rolling average of the total biofuels exempted since 2016 via small-refinery exemptions. The agency would then add the average to annual renewable volume obligations in the RFS. In addition, the White House was reportedly considering a plan to limit the price of Renewable Identification Numbers, or RINs, as a way to save refiners' compliance costs.

Details of any final plan remain tentative at best.

Cooper said ethanol industry shutdowns have taken about 1 billion gallons of production offline.

"It (biofuels package) can't come soon enough," he said. "Here we are at harvest and unfortunately we have farmers in many areas who don't know where they're going to market their corn this year. We all know when an ethanol plant shuts down a source of high-protein animal feed is lost. It raises the costs to feed. We are seeing it play out across the Corn Belt today with other communities at risk."

Neil Koehler, CEO of Pacific Ethanol, said his company has experienced firsthand the effects of lost market.

"We have nine ethanol plants and we have shut a plant down and sent people home without jobs," he said. "This is the worst year we've ever experienced. We, in good faith, have worked to implement the RFS. Fifteen billion gallons has been more like 13.6. It's a very dire situation. We as a company look at other actions if the wrongs are not righted."

Kevin Ross, an Iowa farmer and president of the National Corn Growers Association, said farmers in many regions where ethanol plants have closed face tough decisions about where to take the new corn crop.

"The small-refinery exemptions are at the forefront of a lot of farmers' minds," he said. "We're not asking for anything other than upholding the RFS. This issue has hurt a lot of direct markets for farmers. We need markets open to move crop. Without it, we have to find other places to go with the crop."

Brian Thalmann, president of the Minnesota Corn Growers Association, said the change of course in the RFS has created a lot of concern and doubt in the countryside about the future of ethanol as a market for corn.

"The RFS put together a road map for the industry," he said. "We were working up to 15 billion gallons, and suddenly the mat is pulled out from under us and we don't know which way to go. We have to get refinery exemptions resolved."

Randy Doyal, CEO of Al-Corn Clean Fuel in Claremont, Minnesota, said, "The exemptions have hammered that corn market down."

PRESSING ON AG ECONOMY

While awaiting the White House's actions on biofuels, Democrats have continued to press the administration on the state of the agricultural economy.

On Thursday, Minnesota Sen. Amy Klobuchar visited Southwest Iowa Renewable Energy's ethanol plant in Council Bluffs, Iowa, in Rep. Cindy Axne's congressional district. Klobuchar and Axne sent a letter to U.S. Secretary of Agriculture Sonny Perdue this week, asking USDA to conduct a study on the economic impact of the SREs.

"Unfortunately, the administration is saying there is no impact, and I'm not buying it," Axne said during a roundtable held at the Iowa ethanol plant.

Klobuchar said, "These waivers are going to the oil companies, big and small." She added, "The whole process was set up for just a handful of these waivers, and then we find out they are going to dozens and dozens of oil companies, including ones like Exxon."

The effects on the farm economy are felt in different ways. Citing lower sales and income expectations, John Deere announced this week it would lay off 163 employees at two factories.

Carl Jardon, vice president of the Iowa Corn Growers Association, said the combined effect of multiple years of SREs translates into about 2 billion bushels of corn demand lost, which equates closely to Iowa's corn production for the year, he said. That leads to higher corn stocks and a price loss of as much as 50 cents a bushel, he said.

"When you multiply that by 2 billion, that's significant to Iowa's economy, and significant to the individual farmers' economy," Jardon said.

Michelle Mapes, chief of legal and government affairs at Green Plains Energy in Omaha, told the two lawmakers Green Plains has been forced to sell $750 million in assets, close a Virginia ethanol plant and lay off 100 employees because of the lost margins in the ethanol business. Green Plains has 13 ethanol plants left running at the moment.

"I hate to say it, but we are one of the bad poster children of what is happening in this industry," Mapes said. She added, "We are doing what is necessary to restructure and move forward in a difficult environment."

Mapes also added, "We are hopeful we may see some relief on these SREs. Hopefully, tomorrow (Friday) we will get an announcement."

Mapes also expressed concern that EPA is held accountable in any rulemaking process for a biofuels plan, noting that the agency could provide a loophole for the oil industry.

Representatives from farm organizations told Klobuchar and Axne that Congress could do their parts by approving the U.S.-Mexico-Canada Agreement and also passing a stalled tax-extenders package for businesses that includes a $1-per-gallon biodiesel tax credit. The biodiesel credit expired at the end of 2017, and the industry is desperate to see it renewed.

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

Follow him on Twitter @toddneeleyDTN

Chris Clayton can be reached at chris.clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/CZ)

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