The Message is Clear: We Must Create Demand

FROM THE OCTOBER ISSUE: Growth above 15 billion gallons will require new markets and widespread understanding of ethanol's carbon-reduction value.
By Dave VanderGriend | September 18, 2017

The U.S. Environmental Protection Agency hearing in August on the proposed volume obligations for 2018 under the Renewable Fuels Standard left me noticing several things. First of all, it was night and day from previous years when the anxiety level was through the roof and there was a near hysterical plea to give us the maximum volumes we are entitled to under the law.

There was a civility to this year’s proceedings that clearly was a result of the conventional biofuel category being proposed at the maximum 15 billion gallons for the second consecutive year. While other feedstocks are not precluded from being used in this category, corn has proven to be the most cost-effective and efficient source. The climb to get to 15 billion was a gradual journey that was delayed in some years, but the fact is, we are at the maximum demand pull we can expect for corn ethanol from the RFS.

Now that we are here, it’s somewhat like being a kid at Christmas when all the hype and build-up have passed: Now what?

That’s where we find ourselves — there are no more presents under the tree. The guaranteed market for 15 billion gallons has been achieved and anything we do beyond that volume will have to be a result of true market-driven demand. And frankly, if the RFS goes away or is altered in some way, even that base is not ensured. With many of our commodities at the breaking point in terms of cost of production, it’s on us to develop new markets and make the case for our value. It is unlikely the Farm Bill will provide any relief. Even if Congress can pass another five-year authorization, it is unlikely there will be assistance for ethanol.

 But that’s OK. We know ethanol can compete as a high-octane, low-carbon fuel that is attractive to automakers and the petroleum industry alike, but they are not going to hand it to us. And we need to put all the hype about electric vehicles in perspective. It’s one thing to recognize a trend, but it’s another to overreact and assume ethanol must take a back seat in terms of being a clean fuel. The internal combustion engine is going to remain the dominant force for some time as electric vehicles struggle to crack a 5 percent share of the market.

It is time to get creative, sort of like drawing up a play in football where we have a half dozen options to score. Certainly, the need for higher-octane fuels is paramount. Even if there is a relaxation of fuel economy standards, the trend line for efficient cars is pointing up. Corn ethanol has been shortchanged in its ability to reduce carbon emissions. At the Urban Air Initiative, we are working with the California Air Resources Board and other California agencies to ensure they are receiving the most up-to-date information possible. We supported a workshop recently where we were able to present the latest data on corn's carbon sequestration value, which is key in reducing our carbon footprint.

We also know ethanol can reduce emissions, including harmful particulates that are major health threats and ozone precursors. Interestingly, the EPA under new administrator Scott Pruitt recently announced it is sticking to the ozone control schedule of the Obama administration and it is on us to get them to see that ethanol reduces every criteria pollutant in the mix that forms ozone.

But none of this works if we don’t get the regulatory barriers removed at EPA that limit the volume of ethanol that can be added to gasoline. Expanding our markets gives the current administration more tools to meet its very clear objectives of boosting the economy, increasing domestic energy supply, and creating jobs. It is on us to understand the science of fuels and emissions and use that to grow beyond the RFS.
 

Author: Dave VanderGriend
President, Urban Air Initiative
CEO, ICM Inc.
316-796.0900
cfdcinc@aol.com