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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Following up on Marlo’s post yesterday concerning the difficulties of bringing cellulosic ethanol to market, the Wall Street Journal wrote an editorial about the (lack of) fuel, and EPA’s decision to require refiners to buy ‘credits’ — Cellulosic Ethanol and Unicorns:
The EPA set the 2011 standard at six million gallons. Reality hasn’t cooperated. Zero gallons have been produced in the last six months and the corner isn’t visible over the next six months either. The EPA has only approved a single plant to sell the stuff, operated by Range Fuels near Soperton, Georgia. The company used to be a press corps favorite and has been lauded by the last two Presidents, but it shut down its cellulosic operations earlier this year to work through technical snafus.
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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 $668 million would support the other incentives, according to the lawmakers.
Any rational proposal for the future of ethanol should aggravate industry trade groups, and they’re predictably cheer-leading about how they’re being fiscally responsible, fueling our freedom, and all that other nonsense. It seems as if they saw the light at the end of the tunnel was fading fast, and they hopped on a train that would funnel a remaining 600 million into the industry. [click to continue…]
The EPA has finalized label requirements for E15, backing down a bit from initial proposal which included the word ‘caution.’ The new label, as you can see, is a slightly less alarmist ‘attention.’ I will note that the new label does not point out in any form that ethanol will provide fewer miles per gallon for your vehicle. Adjusted for energy content, ethanol is more expensive than gasoline. However, if you do not adjust for energy content, ethanol costs less than gasoline. Being that the label doesn’t point this out, it seems that consumers might fill up with E15 as it will be slightly cheaper than E10, as few are aware that they will be reducing their fuel economy when moving from E10 to E15. I suspect that the government would be taking action if a private company were to do this.
The Corn Grower’s Association has weighed in, and they are unsurprisingly less than thrilled despite the fact that the EPA kowtowed to their demands:
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We recently posted about the EPA’s decision to reduce the cellulosic ethanol blending requirement from 500 million gallons in 2012 to somewhere between 3.45-12.9 million gallons, which is 0.69- 2.5 percent of the original “mandate.”
Via Greenwire ($ubscription required), we see that refiners are still required to purchase “credits” from EPA indicating that they are complying with the mandate, despite its impossibility:
The proposal fine-tunes blending mandates for 2012 called for by the federal renewable fuel standard, and EPA said yesterday it expects to require a total use of between 3.45 million and 12.9 million gallons of cellulosic biofuels next year. Officials said the final figure could come out to more or less than the 6.6 million gallons required in 2011.
Charles Drevna, president of NPRA, said given that EPA’s own data show the ethanol industry has produced no qualifying fuel in the past year, the requirement for blenders to either use the fuel or pay EPA about $1 per gallon for a credit makes no sense. [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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As was widely reported, the Senate voted last week on a bill that would terminate the ethanol tax credit and corresponding tariff. While many were excited by the prospect of finally moving towards better energy policy, it seems likely that things will still get worse before they get better. The ethanol industry does not seem worried.
Consider the following: John McCain (R-AZ) offered additional legislation, while the Senate was voting down the tax credit, that would have ended federal subsidies for ethanol fuel pumps at gas stations. This was voted down 41-59:
“It lost because of the influence of the ethanol lobby,” McCain said on Fox News Thursday, alleging ethanol “is probably the greatest rip-off that I’ve seen since P.T. Barnum.
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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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