Dinneen at NEC: Ethanol industry 'under siege and fighting back'

By Holly Jessen | February 06, 2013

The ethanol industry faced one of the most challenging years in its history during 2012, Bob Dinneen said on Feb. 6 during his state of the industry address at the National Ethanol Conference in Las Vegas, Nev. And, it faces a fierce battle against E15 opponents and efforts to repeal the renewable fuel standard (RFS) in 2013. Though times are tough but the industry is tougher.

“Together, we remain resolute,” he said. “Together, we will see E15 commercialized. Together, we will open new markets here and abroad. And, together, we will make sure the RFS is preserved—because we will, never, ever, let them mess with the RFS!”

2012 began with great promise of a bumper crop and ended in the worst drought in 50 years. Although E15 was approved by the U.S. EPA, falling demand for gasoline and regulatory and commercial barriers have slowed implementation of the fuel. “And the angry birds at the Chicken Council, the mad cows at the American Meat Institute and the big spending oil companies have blended a witches’ brew of half-truths, untruths and downright distortions to wreak havoc with the public understanding and political support for the continued growth and evolution of our vital industry,” he said.

The real story is that the ethanol industry has kept bouncing back under challenging conditions. Ethanol supports tens of thousands of jobs, saves drivers money at the gas pump, is good for rural economies, reduces U.S. dependence on imported oil and is good for the environment. (see chart on lifecycle GHG emissions) Although “the nay-sayers keep writing obituaries for cellulosic ethanol” the fuel is in production today, with additional facilities under construction. And, the grain-ethanol industry has an innovative spirit too. “Despite the downturn in the market, indeed perhaps because of it, corn ethanol plants are also adopting new technologies, and improving efficiencies,” he said, pointing to how quickly the industry added on corn oil extraction as well as work to implement technologies such as combined heat and power and anaerobic digesters as well as creating high-value chemical streams and more.

Today, 36 of the 211 existing U.S. ethanol plants are temporarily idled and, of those operating, many have cut back production levels. The industry is operating at about 85 percent capacity, with output falling by more than 600 million gallons compared to production levels of 2010. It’s the first time in 17 years that production levels were lower than the previous year.

The industry is challenged to produce profitably at the plant level, to find new demand in the marketplace and to reclaim its reputation as an American-made, cost-effective and environmentally friendly fuel. The greatest challenge, however, is artificially constrained demand, with the American Petroleum Institute waging a war to repeal the RFS and AAA pushing back against E15. In short, the industry is “under siege but fighting back,” Dinneen said, summing up the state of the industry in five words.

The fight for higher ethanol blends, especially E15, is a battle for the barrel. “E15 will not come easily or quickly,” he said. “But it will come. Indeed, it has come—a handful of pioneering stations in Kansas, Iowa and Nebraska are today offering E15 commercially.”

The most critical challenge the industry will face in 2013 and likely the most critical challenge the industry has ever faced, is the fight over the RFS. “Let me be blunt: Our adversaries are not dedicated to destroying the RFS because it has failed,” he said. “Our adversaries are dedicated to destroying the RFS because it is succeeding.” The U.S. was 60 percent dependent on foreign oil in 2005, a number that had dropped to 41 percent in 2010. (see chart on oil import dependence) “Is it all because of biofuels,” Dinneen asked. “No. But could it have happened without biofuels, without the RFS? Absolutely not.”

API’s fight to dismantle the RFS will be epic but not ultimately successful, he predicted, repeating the phrase “Don’t mess with the RFS” multiple times at various points in his speech. The same phrase was printed on buttons passed out with conference materials to each attendee, and was worn by many.

Dinneen also addressed the idea that increased domestic oil production means renewable fuels are no longer needed. He pointed to multiple discoveries of domestic oil, in Alaska, New Mexico and Montana, which were once enthusiastically hailed as vast sources of oil but ultimately didn’t pan out that way. Even recoverable oil in the N.D. Bakken oil field, which is currently booming, is estimated by the U.S. Energy Information Administration at 3 to 4 billion barrels and by the oil industry at 20 billion barrels. Looking at annual U.S. refiner input of crude oil the Bakken promises six months to 3.5 years of crude oil consumption in the U.S., proving the nation cannot frack its way to energy independence and that domestic renewable fuels are still needed. “We will win the battle for the barrel—not only for ourselves but for America’s families, America’s economy, America’s rural communities, America’s energy security and America’s natural environment,” Dinneen said.