Driving ethanol demand: Nationwide E15 would be game-changer

Source: By Tom Doran, Agrinews • Posted: Monday, November 16, 2020

The U.S. Environmental Protection Agency’s decision in June 2019 to remove a summertime restriction on the sale of E15, a gasoline blend containing 15% corn-based ethanol, opened up enormous potential for the industry and corn growers.

There was a year-over-year 46% increase in E15 sales at those sites that had sold the blend prior to the EPA ruling.

“That’s a really good indicator of momentum. Another good indicator is when you look at what we’ve done through with COVID, plummeting fuel demand, 50% drop in fuel demand, through that we’ve seen a 10% increase in E15 billed out of retailers. By the end of the year we’ll probably get that to a 20% increase,” said Growth Energy CEO Emily Skor.

“Even when you have a lot of retailers freezing their capital investments because of the COVID experience, they still understand the appeal of selling E15, so we have good metrics and momentum.”

National Standard

Among Growth Energy’s goal is to make E15 the new national fuel and then build on that notion toward higher blends.

“When that happens (moving from the current E10 blend to E15), that is 7 billion gallons of new demand every year, 2.5 billion bushels of corn grind. That’s a game-changer and that is within reach for us. We had a great opportunity when the president opened year-round sales of E15 and we have to build on that,” Skor said.

“We have to eliminate some of the remaining barriers because in conversations with retailers they like the economic incentive, they make a better margin when they’re selling E15. It’s a shame that so much of the conversation is about the benefits to the Midwest. Absolutely we’re talking about what it does for the rural economy, but it benefits everybody and every consumer and you should have lawmakers in California fighting for this as much as they are in Iowa and Ohio.”

“We actually have grown ourselves into a position through efficiencies and better use of resources and less land to actually be able to fuel our own nation,” said John Linder, NCGA president. “The original goal was to rid ourselves of dependence on foreign oil and lest we forget, we achieved that in spades. So, we have other areas for which they are benefits that no one really saw. We have become really efficient and we need to utilize that production efficiently, as well.”

Positive Impacts

Increasing the blend from E10 to E15 also would be impactful economically to consumers and the environment.

“It changes the price structure if it’s permitted to be priced properly. It changes the impact to the environment. It impacts the number of bushels that are ground into ethanol. It also changes the dynamic for co-products that come out of the ethanol plants,” Linder said.

“If we’re blending more ethanol, we have more co-products and there’s a huge market and has great benefits from consumer beverages to the livestock industry. There’s a value chain here. If we can do domestically value-added really well, our entire country benefits, even if we export the product. Domestic use, export use, this is a win-win.”

Pump Labels

Chip Flory of Farm Journal, who served as moderator for the town hall event, said he believes one of the factors holding back E15 at the pump are some of the rules and regulations that are spelled out on the pump label.

Skor said Growth Energy anxiously awaits the EPA’s rulemaking for E15 at the pump.

“There’s some confusion on clarity. Not just the label on the pump, but what are the rules in terms of what equipment can or cannot be used to fuel E15 for the retailers. Most of the dispensing equipment in storage is approved, but when a retailer is confused and they don’t know, their default is they’re not going to deal with it and not go ahead and pump E15,” Skor noted.

“EPA has said it’s going to come out with a rule. The president twice has recently said we’re going to make sure you can use E10 existing equipment to pump E15. We hope that this rule comes out quickly and really what we want to see on the labeling is there’s no need for a special sticker to say this is E15.

“Ninety-five percent of the cars on the road are approved for E15. Ninety-seven percent of the miles traveled are with cars approved for E15, so there’s really no need for a sticker at all at this point.

“We have yet to find any retailer that has experienced any consumer confusion, any concern about mis-fueling. So, we don’t need this notion of mis-fueling mitigation. What the retailer has seen, what the marketplace has seen, when the consumer has access to this high value product they enjoy it. It’s cleaner burning, it’s better for the engine, and it’s certainly better for their pocketbook.”

Next Generation

There also is optimism in the biofuel industry with the introduction in the U.S. House of the new Next Generation Fuels Act proposed by U.S. Rep. Cheri Bustos, D-Ill. The legislation leverages greater fuel octane to reduce carbon emissions from transportation, improve air quality by reducing the use of harmful aromatics and increase demand for biofuels.

The legislation establishes a minimum octane standard for gasoline and requires sources of the added octane value to reduce carbon emissions by at least 30% compared to baseline gasoline. Furthermore, the legislation limits the use of harmful aromatics in meeting this new higher octane standard, as well as in current-market gasoline.

“Some of the key factors it brings with it is not only access to higher blends for the liquid fuels market which equates to bushels ground for farmers, but it also brings that environmental benefit. We’re talking about high octane, low carbon,” Linder said.

“Not only that, but there are updates to models that have been used for over decades that need updated so that the true story is told and the benefit is actually displayed in its full value.”

Looking ahead, Skor said fuel demand is hovering around 10% below where it was pre-pandemic.

“This has been a tough year for us, 2021 is going to be a little bit better, maybe 3% below 2019 demand. But we’ve got to focus on driving higher blends — E15 is the pathway. Then we have to make sure that we have fair and free trade and access to these critical markets abroad,” she said.