Industry reacts to EPA announcement

The ethanol industry gears up to provide comment on the EPA's RFS proposal to lower required volumes of renewable fuel and advanced biofuels.
By Holly Jessen | November 18, 2013

Last week was a tough week for the ethanol industry. First, early in the week, it was the release of a one-sided Associated Press story that put the ethanol industry in an unfavorable light. Then, on Nov. 15, the U.S. EPA released its official proposal for the 2014 renewable volume obligations (RVO).

In both cases, the news story and the EPA draft proposal were leaked ahead of time. That’s probably just a coincidence but it’s certainly notable.

Ethanol industry advocates responded swiftly, speaking in teleconference with reporters as well as by sending out a storm of press releases. The ethanol industry, both first-generation and advanced biofuels, is disappointed in the proposal and feels it will have negative effects if it becomes a final rule. Many groups have vowed to submit comments during the 60-day comment period, which will begin as soon as the proposal is published in the Federal Register.

More reactions to the news continue to come in. For example, it has been reported that Debbie Stabenow, D-Mich., the Senate Agriculture Committee chairwoman, is strongly opposed to the proposal. She called the blend wall a crisis manufactured by the oil industry and predicted that, if the proposal becomes final, it will be harmful to the energy sector, a job creator. Sen. Joe Donnelly, D-Ind., also reacted with frustration and disappointment, and a group of four Minnesota Senators and Representatives came out against it as well, just to name a few lawmakers that feel the EPA proposal is on the wrong track. 

The American Council on Renewable Energy called weakening the RFS the wrong decision for the economy and the environment. “The Renewable Fuel Standard has been a boon for the American people. The truth is that biofuels have significantly contributed to the American economy, contributing over $43 billion to the Gross Domestic Product.” said Michael Brower, ACORE interim President and CEO. “The Renewable Fuel Standard saves us money at the pump, often times over a dollar a gallon. It decreases our reliance on foreign oil and has created a new revenue stream for America’s farm communities, all while supporting roughly 300,000 jobs here at home. And lastly, it protects our environment by mitigating the amount of carbon produced by our transportation fleet.”

Agriculture Secretary Tom Vilsack, who has always been a strong supporter of biofuels, including corn-based ethanol, put out a statement Nov. 15 that reaffirmed that commitment on behalf of the Obabma Administration. The statement didn’t mention ethanol specifically but did address “the production of clean, renewable energy from homegrown sources” as well as advanced biofuels.

“It's important to take a long-term approach to the RFS,” he said. “Clearly, as Governor of Iowa and as U.S. Secretary of Agriculture, my support for the RFS has been steady and strong. But I also believe that improved distribution and increased consumer use of renewable fuels are critical to the future of this industry. We are proud of our record to support increased demand for renewable fuels. USDA has invested in the creation of advanced biorefineries across the nation; developed a unique partnership with the U.S. Navy and Department of Energy to create new biofuels for marine and aviation use; and boosted markets for nearly 3,000 U.S. companies that are creating biobased products from homegrown materials.”

Vilsak also pointed to the comment period, adding that he hopes the biofuels industry will “provide constructive suggestions,” he said. “Together, we will be able to chart a path forward that maintains President Obama’s strong commitment to an ‘All of the Above’ energy strategy for our nation.”

Personally, I think there are some key things that need to be kept in mind. First off, this isn’t the first time the ethanol industry has gone through difficult times. If you talk to the people who have been part of the industry long-term, they’ll tell you inspiring stories about the many difficulties the industry has gone through to get where it is today. We will preservere.

Which brings me to a comment made by Todd Becker, president and CEO of Green Plains Renewable Energy Inc., back at the end of October, that pointed to some possible positive effects, at least in the shorter term. He predicted that if the RVO is reduced ethanol demand will go down, which means lower corn prices. Lower corn prices means U.S. ethanol will be competitive with Brazilian ethanol, increasing export demand. “At $3.50 corn, that’s 7.5 cents per pound for sugar, and at that point, nobody can make ethanol cheaper than us, and it’s the cheapest fuel in the world,” he said.

Which isn’t to say the industry will or should take this laying down. The importance of the comment period on the RVO proposal can’t be overemphasized. Groups like the American Coalition for Ethanol, Growth Energy, the Renewable Fuels Association and others will no doubt be submitting comments. I’m guessing that individual ethanol producers and other related businesses that will be impacted by this decision will as well. Now is the time to make your voice heard.