Ethanol producers applaud RFS waiver decision, stay vigilant

By Holly Jessen | November 19, 2012

The ethanol industry breathed a collective sigh of relief on Nov. 16, with the U.S. EPA’s announcement that it was denying the renewable fuel standard (RFS) waiver request submitted in August. “It was added pressure we didn’t need to have at these times,” Walt Wendland, president and CEO of Golden Grain Energy and Homeland Energy Solutions, told Ethanol Producer Magazine.

Ultimately, the drought was the real cause for high corn prices, not ethanol. “Our industry was fairly confident that we were not causing severe economic harm. Matter of fact, I think just the opposite,” he said. “I was confident that the EPA would recognize that.”

Todd Becker, president and CEO of Green Plains Renewable Energy Inc., had said previously he didn’t think the waiver request would be successful and he remained unworried until the end. “The right decision to make, with all the analyses, was to deny the waiver,” he said, pointing to studies that concluded an RFS waiver would only have a small effect on corn pricesin the short term.

Becker considered it a far-reaching request, especially considering that corn prices had already fallen 15 or 20 percent from the high. Ethanol production also moderated with some plants reducing run rates and others idling temporarily. “The market was beginning to take care of itself and didn’t need a waiver,” he said.

Mike Jerke, general manager of Chippewa Valley Ethanol Co., was at a meeting with representatives from other ethanol companies when the news broke. Even though it had nothing to do with the RFS waiver request, the news spread quickly. “The devices were lighting up,” he said with a laugh.

Unlike Becker, Jerke had been worried. “The request certainly didn’t rise to the standard that was in the statute and [I thought that,] given good thorough review, the EPA would come to that conclusion,” he said. “But it’s a process and you just don’t know how these things will play themselves out. Cautiously optimistic is maybe an overused term, but that’s a good characterization.”

Jerke characterized the waiver request as simply the first round in what he expects will be continued attacks on the RFS. “I don’t think any of us should lose focus, there will be many entities motivated to attack the RFS,” he said, adding that the next step will likely be pursuing legislative changes. The industry needs to stay ready to come to ethanol’s defense and help educate legislators, he said.

Groups like the National Chicken Council and National Cattlemen’s Beef Association aren’t ready to give up. A coalition of meat, feed, dairy, poultry and other livestock-related associations responded to the waiver request denial with disappointment. How many more jobs and family farms have to be lost before we change this misguided policy and create a level playing field on the free market for the end users of corn?” the coalition asked in a Nov. 16 press release.  “It is now abundantly clear that this law is broken, and we will explore remedies to fix it.”

It remains to be seen, however, if those efforts will be successful. Rep. Ed Whitfield, R-Ky., said Nov. 15 that he doubted Congress would change the RFS. Whitfield is chairman of the House Energy and Power subcommittee.

REX American Resources Corp. sent out a press release that touched on the topic of efforts to alter the RFS though alternate methods. “We applaud the EPA's decision and view this result—along with the built-in flexibility in the RFS allowing the ethanol industry to adapt output to market conditions—positively in anticipation of the discussions over the RFS set to take place in Congress next year,” said REX CEO Stuart Rose. He added the denial of the RFS waiver was welcome news for consumers searching for more affordable fuel options.

Lyle Schlyer, president of Calgren Renewable Fuels LLC, also pointed to the fact that the markets are responding appropriately, with ethanol production and corn exports both reduced. “The EPA wisely chose not to distort the proper functioning of the markets to chase what was projected to be a temporary 1 percent reduction in corn prices,” he told EPM.  

The California-based ethanol production company was hopeful, but far from certain that this would be the outcome. The EPA’s decision not to grant the waiver seems to indicate a desire to maintain policy stability. “Commercial interests need consistent, predictable policies,” he said. “When policy uncertainty exists, investors are hesitant to pull the trigger on capital expenditures, thus depriving the economy of new jobs and much-needed growth.”