Ag Policy Blog

Inaction in Congress Helping Ethanol Right Now

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Experts on renewable-fuel policy battles were among those who addressed ethanol producers Thursday as the Nebraska Ethanol Board kicked off its forum on emerging issues in the industry.

Ethanol continues some of the same battles with EPA over lifecycle emissions and carbon intensity of the fuel, but there are prospects for improving sales and making a convincing argument that ethanol remains a better alternative for air quality than gasoline.

"I think our bigger challenge going forward is figuring out how we can explore new markets," said Todd Sneller, administrator for the Nebraska Ethanol Board.

Right now the industry is waiting for EPA to announce the Renewable Volume Obligation for 2017, which EPA has submitted to the White House Office of Management and Budget for review. EPA is expected to announce its proposed numbers in June, which would then have a public-comment period before moving to a final rule. Corn ethanol takes up 14.5 billion of the Renewable Volume Obligation now and can go to as high as 15 billion gallons. Beyond that level, refiners can continue to blend more corn ethanol, but they won't get any further credit under the RFS for doing so.

"The next phase of the Renewable Fuels Standard is really punitive to corn and we can't pick up much of that at all," said Doug Durante, executive director of the Clean Fuels Development Coalition.

Ethanol also remains stuck in a battle with EPA over vapor pressure with 15% ethanol over the summer months. 10% ethanol, E10, has such a waiver so it can be sold during the summer months, but EPA did not extend that waiver to E15. The agency insists Congress needs to change the waiver on vapor pressure. This could hinder ethanol at higher blends beyond as well.

Countering the conflict with EPA over the vapor pressure, more states are looking at following California's lead on low-carbon fuel standards. Durante said he believes those states will see that higher blends of corn ethanol can help meet those standards. Because of that, the Urban Air Initiative has been pushing EPA to reevaluate its assessment on ethanol's emissions. The group concluded approving blends as high as 30% ethanol would reduce greenhouse gas emissions as much as 330 million tons a year. Further, higher octane requirements and higher fuel standards could help drive EPA to approve higher blend levels.

Hurting ethanol, though, are tax credits for car manufacturers to sell electric cars while similar credits for flex-fuel vehicles have expired.

Exports have bounced around since early 2015 and spiked in January 2016 at 87 million gallons before falling by 20 million gallons in February. China has been buying larger amounts of U.S. ethanol since last July, buying more than 100 million gallons in that span. Yet, Chinese imports dropped in February while demand in Brazil increased.

An opportunity for further boosting exports in the future could come from the Paris climate agreement. Nearly 60 countries, nearly all of them considered developing countries, listed using biofuels as a way to reduce their carbon footprint. U.S. ethanol groups criticized the Obama administration for not adding biofuels to that list for the U.S., but most the major world economies did not include biofuels as part of their commitments.

Tom Buis, chairman of Growth Energy, told Nebraska ethanol producers that the RFS remains on firm political ground right now leading into the 2016 election. Congress won't take action and most of the GOP senators up for reelection this year come from states representing roughly 70% of U.S. corn production. Any victor coming out of those states is likely going to be a supporter of biofuels. Additionally, biofuel supporters have successfully stymied the petroleum industry's efforts to eliminate the RFS.

"The American Petroleum Institute has made us their No. 1 priority to eliminate the RFS for five years in a row," Buis said.

Congressional inaction on renewable-fuel legislation is a good thing considering the desire of API and its allies to eliminate the RFS, reduce blend levels or sunset the RFS after 2022, Buis said.

"Don't get down in the dumps over this stuff. We're winning. They're not," Buis said of the battles with the petroleum lobby.

Buis also pointed out the leading presidential candidates --- Hillary Clinton and Donald Trump --- have both declared their support for the RFS.

Yet, Buis also added that the industry needs to start thinking better about how to market its products to consumers. Most consumers don't know what a "blender pump" is, or what "DDGs" are. The terms themselves need definition.

"In the future we have to communicate to the general public," Buis said.

While E15 has had difficulty getting onto fuel islands at retailers, the Iowa-based Kum & Go has plans to add more than 110 stations by the end of 2016. The company, which is already the nation's largest E85 retailer, plans to add to E15 stations throughout the Midwest. That's going to require a little education for consumers and include differentiating pumps by color, such as a dark blue pump handle designating 15% blend.

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