E15 uncertainty, trade barriers hitting ethanol industry

Source: By Tim Krohn ,Mankato Post Herlad • Posted: Sunday, May 12, 2019

The ethanol industry is facing strong headwinds from trade barriers, Trump administration waivers that allow refiners to use less ethanol and by pushback on efforts to allow higher ethanol blended fuels to be used in the summer months.

In October 2018, President Donald Trump instructed the Environmental Protection Agency to lift summertime restrictions on the sale of E15 blends, a fuel blend of 15 percent ethanol to 85 percent gasoline. Currently, a 10 percent ethanol blend is the maximum allowed during summer.

The EPA released its proposed rule saying it would make the fuel available between June and September. The public comment period on the rule closed April 29.

The National Corn Growers Association and ethanol industry groups are urging the EPA to get the new rule in place by June 1. Oil industry lobbyists have opposed the proposal, saying it will drive up gas-pump prices. They argue that ethanol production is bad for the environment and that E15 can harm vehicles that aren’t designed to accept it.

Kyle Gilley, a senior vice president of Poet, which has a plant near Lake Crystal, said he’s confident the new rule will come out June 1, but he worries about what the final rule will look like.

“I’m unsure if the rules are going to come with no strings attached. I’m growing concerned because there’s a little history developing now where EPA keeps granting relief to the oil industry. It’s hard for me to envision a rule that doesn’t have some other giveaway to the oil guys.”

Gilley said that if E15 were allowed in the summer, without strings attached, the ethanol industry would see an additional 7 billion gallons annually in production.

He said the industry has felt the effects of the various pressures.

“We’ve experienced better days than what we’re in right now, which is why it’s so important for the president to have the EPA finalize this E15 rule in a way that does create more demand.”

Scott Irwin, an agricultural economist with the University of Illinois, said in a recent report that even if expanded access to E15 ethanol blends comes to pass, it won’t lift corn prices out of the doldrums.

Irwin, who specializes in evaluating the economic factors that affect corn and soybean prices, published a recent analysis that doesn’t provide a favorable outlook for the ethanol industry in the years ahead.

He said there is a projected 26-billion-gallon decline in yearly U.S. gasoline usage by 2030 that will cut 2.6 billion gallons of U.S. ethanol use.

While Trump has expressed support for biofuels, he has angered many farm groups because the White House allowed retroactive ethanol blending exemptions for nearly 50 refiners. Smaller gasoline refineries can apply for the waiver, arguing that requiring them to blend in ethanol is too much of a hardship. The Trump waivers cost ethanol makers 2.25 billion gallons in sales in 2018.

Jeanne McCaherty, CEO of Guardian Energy, which has a plant near Janesville, said she’s hoping the administration won’t continue handing out those waivers in the future.

And she said she’s trying to be optimistic about the expansion of E15, “but I don’t have any insight into what progress is being made.”

She said Minnesota has the highest blend rate in the nation thanks to state laws that have encouraged ethanol production and use. The state now has 350 convenience stores with pumps dedicated to E15 ethanol blends.

“We need more infrastructure,” McCaherty said of the installation of pumps and tanks at gas stations to handle higher ethanol blends. There is state legislation being considered to help fund more pumps.

The pumps being put in could handle up to a 30 percent ethanol blended fuel. Increasing the blend level is something the industry wants but is opposed by oil interests.

“Brazil runs ethanol at 27 percent and no one thinks about it. Any 2001 and newer vehicle can safely use 15 percent ethanol,” McCaherty said.

Beyond the E15 debate, trade barriers remain enemy No. 1 for the industry. “Trade is really a big deal for us. We really, really need to make that happen,” she said.

Follow Tim Krohn on Twitter @TimKrohn