Bob Dineen, writing in Ethanol Producer Magazine:
This may seem a daunting task but the industry has no other choice than to do the hard work necessary to drive ethanol market expansion and accelerate this industry’s evolution. As we have clearly seen, no one is going to do it for us. The success of E15 and the future of this industry are firmly in our capable hands.
That about sums up their attitude. Wouldn’t it be easier if the government would do it for us? Because years of tax credits, foreign tariffs, loan guarantees, national mandates that require other companies to purchase your products, and state support have not been enough. No, they face the daunting task of actually having to convince consumers to buy more of their product than they’re already required to. Poor guys. After the EPA approved E15 for use in MY2001-present vehicles, the ethanol industry is charged with the difficult task of convincing gas stations to sell E15 (and for consumers to buy it) despite it providing lower fuel efficiency per dollar spent.
This time its former Rep. Jim Nussle (R-Iowa) writing in The Hill’s Congressional Blog:
But what people often forget is that the ethanol industry has been suggesting reform for more than a year. We recognized that the industry has changed, and that the policy must change as well.
The blender’s tax credit has been instrumental in developing the ethanol industry, but the most important challenge our nation faces today in securing our energy independence is not the continuation of this incentive, but access to a fair and open marketplace.
We have suggested a pathway that will not only create that market access but continue to provide the necessary incentives for developing the next generation of biofuels – cellulosic ethanol – to help our nation meet our stated goals of 36 billion gallons of renewable fuel by 2022.
Consumer choice at the pump is the most critical component of this plan to help us achieve this goal. Today there are about nine million Flex Fuel Vehicles in this country and the owners of these vehicles have a choice of fuel blends when they pull up to a Flex Fuel pump: E30, E50 or more. But unfortunately, there are fewer than 300 Flex Fuel pumps in the entire nation. Even as domestic automakers commit to making half their fleet Flex Fuel, the lack of pumps to serve this fleet means that most Flex Fuel Vehicles have never run on anything but gasoline.
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Well, what many predicted has come true, subsidies for ethanol aren’t actually going away:
Ethanol advocates Sens. John Thune (R-S.D.) and Amy Klobuchar (D-Minn.), meanwhile, won multi-year extensions of tax credits for producing “cellulosic” ethanol — which isn’t made from corn — and installing ethanol blender pumps at gas stations.
The deal will steer $1.33 billion — two-thirds of the savings from ending the blenders’ subsidy — into deficit reduction, while the balance of $668 million would support the other incentives, according to the lawmakers.
Any rational proposal for the future of ethanol should aggravate industry trade groups, and they’re predictably cheer-leading about how they’re being fiscally responsible, fueling our freedom, and all that other nonsense. It seems as if they saw the light at the end of the tunnel was fading fast, and they hopped on a train that would funnel a remaining 600 million into the industry. [click to continue…]
Under attack from almost everyone these days, the ethanol industry has been digging deep to find ways of convincing America that they really are the best. They’ve been running advertisements everywhere claiming that ethanol (and presumably, federal ethanol policies) have helped to keep the price of gasoline up to $0.89 per gallon cheaper in 2010. They commissioned a report from the Center for Agriculture and Rural Development at Iowa State University. The report itself merely updates similar research from past years, the original study can be found here. The abstract (of the 2010 report):
This report updates the findings in Du and Hayes 2009 by extending the data to December 2010 and concludes that over the sample period from January 2000 to December 2010, the growth in ethanol production reduced wholesale gasoline prices by $0.25 per gallon on average. The Midwest region experienced the biggest impact, with a $0.39/gallon reduction, while the East Coast had the smallest impact at $0.16/gallon. Based on the data of 2010 only, the marginal impacts on gasoline prices are found to be substantially higher given the much higher ethanol production and crude oil prices. The average effect increases to $0.89/gallon and the regional impact ranges from $0.58/gallon in the East Coast to $1.37/gallon in the Midwest. In addition, we report on a related analysis that asks what would happen to US gasoline prices if ethanol production came to an immediate halt. Under a very wide range of parameters, the estimated gasoline price increase would be of historic proportions, ranging from 41% to 92%.
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Today the EPA announced its proposed 2012 Renewable Fuel Standard requirements:
The Energy Independence and Security Act of 2007 (EISA) established the annual renewable fuel volume targets, which steadily increase to an overall level of 36 billion gallons in 2022. To achieve these volumes, EPA calculates a percentage-based standard for the following year. Based on the standard, each refiner, importer, and non-oxygenate blender of gasoline or diesel determines the minimum volume of renewable fuel that it must ensure is used in its transportation fuel.
The proposed 2012 overall volumes and standards are:
Biomass-based diesel (1.0 billion gallons; 0.91 percent)
Advanced biofuels (2.0 billion gallons; 1.21 percent)
Cellulosic biofuels (3.45 – 12.9 million gallons; 0.002 – 0.010 percent)
Total renewable fuels (15.2 billion gallons; 9.21 percent) [click to continue…]
Reuters is reporting that the White House has given its seal of approval to the EPA’s proposed label for E15 (85% gasoline, 15% ethanol). The picture above is of an earlier draft label, no actual images are public yet (to my knowledge) of what the final image ended up being. I suspect the label will be quite similar though it will change 2007MY to 2001MY.
Despite cheers from the ethanol industry, its not clear where the path goes from here. The EPA has suggested that E15 could be sold across the country by September, but a number of gasoline stations are in opposition. Here is a letter (.pdf) sent to Lisa Jackson from the National Association of Convenience Stores (NACS) and the Society of Independent Gasoline Marketers of America (SIGMA), whom together represent roughly 80% of retail fuel sales in the United States. In it they write:
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In what is being described as an ambush, Senator Tom Coburn (R-OK) has successfully forced a vote (next Tuesday, June 14) on legislation that would, upon July 1, terminate the ethanol tax credit and corresponding tariff. A back of the envelope calculation suggests it would save approximately $3 billion in the remainder of 2011.
According to the article, Coburn is cautiously optimistic that he has 60 votes. Politico gets it right, this is a big deal regardless if it passes:
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In announcing his intention to seek the GOP nomination in 2012, Tim Pawlenty visited Iowa yesterday to deliver so-called “hard truths” to the American people. Given that he was in Iowa, Pawlenty’s stance on ethanol is the perpetual elephant in the room. Most non-Iowan fiscal conservatives seemed happy with Pawlenty’s comments, though its not clear why. The WSJ, today, wrote a short op-ed praising the Pawlenty for his unprecedented, “amazing” steps in Iowa:
One of the immutable laws of modern American politics is that no candidate who wants to win the Iowa Presidential caucuses can afford to oppose subsidies for ethanol. So it’s notable—make that downright amazing—that former Minnesota Governor Tim Pawlenty launched his campaign for the Republican Presidential nomination Monday by including a challenge to King Corn.
I suppose its worth praising him for making a slight improvement to the Obama/Bush/Gingrich/*insert politician* doctrine, but it ends with slight. The “don’t pull the rug out from under them,” slowly-end the subsidy approach isn’t a real stance, and its not an end to the subsidies. [click to continue…]
On E&E TV. The title mistakenly claims that the NCGA supports ending ethanol subsidies, which they don’t. They are willing to give up a specific tax credit in exchange for different government subsidies or incentives to continue lining their pockets with taxpayer dollars by encouraging ethanol production.
Rick Tolman, the CEO, discusses the reasons the corn industry has come under attack, noting that they have moved into selling a lot of corn for ethanol production. He kind of hides the whole reason for this, which are the corn ethanol production mandates, preferring to vaguely refer to “productivity improvements” which allowed them to also begin exploring additional markets. Unfortunately, markets are blind to everything except prices, so if the mandates had been stringent enough, corn would be converted to ethanol even if we weren’t producing enough additional corn to meet other needs.
He also notes that the oil industry is very upset that the ethanol industry has taken about 10% of their market. Well of course they’re upset, as they should be. There’s no other industry (energy) in America that I can think of which is so heavily reliant on government policies for their existence. Imagine if the government began requiring that 10% of your daily calories come from Starbucks? Isn’t it reasonable that every other food industry (to say nothing of citizens) in America would be justifiably furious? Note that ethanol already has its own E-85 market through flex-fuel vehicles, and its very small, because ethanol is more expensive than gasoline. [click to continue…]
The ethanol industry has found a friend — the US Department of Agriculture. The industry will be less reliant on new legislation to encourage ethanol consumption, thanks to a new USDA announcement that the department will begin funding grants and loan guarantees for gas stations that choose to install new E-85 blender pumps. This was one of the primary legislative goals of the renewable fuels lobbyists.
The funding for the program will be provided by the 2008 farm bill which included funding that can be used to promote renewable energy development. The total fund amounts to $70 million in 2011 and another $70 million in 2012.
From the article:
Most gasoline sold in the U.S. is 10% ethanol, but a growing fleet of flexible-fuel vehicles can run on an 85%-ethanol blend, or E85. However, there are fewer pumps available to dispense it, Mr. Vilsack said.
In the U.S., only about 2,350 fueling stations out of more than 110,000 offer E85 pumps, according to the USDA.
It’s obvious why gasoline retailers are hesitant to install E-85 pumps, adjusting for energy content its not a better deal than gasoline.
When really pressed on why the USDA and the Obama administration continue to support corn based ethanol, they point to using it as helping support the fledgling cellulosic ethanol industry, which seems to always be just 5 years away from commercial viability.
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