ACE urges USDA to use CARES Act funding to aid ethanol producers

By Erin Voegele | April 14, 2020

American Coalition for Ethanol CEO Brian Jennings sent a letter to Agriculture Secretary Sonny Perdue on April 13 urging the USDA to utilize funding in the recently-enacted Coronavirus Aid, Relief and Economic Security Act to provide emergency assistance to ethanol producers suffering from the economic fallout of the COVID-19 pandemic.

“As the economy grinds to a halt to slow the spread of COVID-19, ethanol production, use and prices have fallen to record lows,” Jennings wrote. “Over half of U.S. ethanol facilities have idled or reduced output, and more than 5 billion gallons of production is currently offline.” Jennings cites data from multiple sources showing that ethanol use could drop by 2 to 3 billion gallons this year. Those figures, he said, imply that corn demand will fall by at least 1 billion bushels in 2020.

“As we discussed the use of the [Commodity Credit Corp.] program with Congress, focus centered on paying ethanol producers for the grain they already purchased and consumed this year,” Jennings wrote. “This is a means to compensate ethanol producers for grain they purchased from farmers for which they are now suffering staggering economic consequences. CCC funding would represent an immediate action USDA can take to help ethanol facilities keep their workforce paid and the lights on.”

Jennings also asks Perdue for his assistance in helping the U.S. EPA recognize that it needs to correct a problem regarding implementation of the Renewable Fuel Standard. “Specifically, we would appreciate your support to ensure that EPA acts on the three specific steps we have outlined to stabilize ethanol demand in a recent letter…we sent to [EPA Administrator Andrew Wheeler],” Jennings wrote.

Jennings explains that RFS law instructs EPA to set the total percentage renewable volume obligation (RVO) at a level to “ensure the requirements” of the statutory obligation are met. When the agency set the 2020 blending obligation of 20.09 billion gallons and the RVO at 11.56 percent, gasoline demand was expected at 143 billion gallons for 2020. “Today, due to the social distancing from COVID-19, as gasoline demand falls, it leads to reductions in ethanol blending, meaning the 11.56 percent ROV will not result in the use of 20.09 billion gallons of total renewable fuel in 2020 as required in statute,” Jennings continued.

The letter ACE sent to Wheeler asks the agency to take three steps to address that issues. “First, use existing statutory authority to issue an interim final rule by July 1 to increase the RVO for 2020 to the percentage necessary to ensure that the full 20.09 billion gallons required by law are used,” Jennings wrote. “Second, restore the 500 million gallons of remanded volume as ordered by the D.C. District Court in 2017. Finally, based on the recent Tenth Circuit Court precedent regarding small refinery exemptions (SREs), EPA should deny most of the 25 SRE waivers pending for the 2019 RFS compliance year.”

Jennings notes that the administration has already used the interim final rule authority to address the economic fallout of COVID-19. “For example, the Small Business Administration (SBA) 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,” he said.

“While the administration works international channels to spur a cut in oil production from OPEC nations to aid U.S. oil interests by buoying oil prices, these actions do not help the ethanol industry,” Jennings wrote. “EPA is taking action to ensure the full 20.09 billion gallons is used under the RFS in 2020 would be a corresponding and equitable step for the ethanol industry.

“These issues are critical to the economic survival of many U.S. renewable fuel producers, farmers, and rural communities,” Jennings continued. “We urge quick action.”