Editorial: EPA announcement helps, but much uncertainty remains for ethanol sector

Source: By Editorial Board, Omaha World Herald • Posted: Monday, October 14, 2019

The ethanol industry is under great strain, with plant closures and reduced production. Amid that uncertainty, Midlands ethanol producers and corn growers have directed strong criticism at the Environmental Protection Agency this year for its ethanol-related actions. The Trump administration announced a measure of relief earlier this month. How much benefit the changes will

The ethanol sector’s fortunes, positive or negative, have a big impact on individual Midlands communities. Nebraska, the country’s No. 2 ethanol producer, has 25 plants with a production value of $2.8 billion. The industry employs more than 1,300 Nebraskans, with average annual wages of $71,600. Ethanol is now the third-largest component in the state’s agricultural economy, behind corn and cattle, according to a University of Nebraska-Lincoln analysis.

Corn producers near a Nebraska ethanol plant receive a boost in their selling price, UNL economists report. Such a farm producing 220 bushels of corn per acre would receive an additional $11.44 per acre annually.

Iowa, the No. 1 producer, is home to about 42,000 ethanol production jobs with an average wage of nearly $70,000 and a $4.7 billion economic impact.

Ethanol production for the 2018-19 marketing year is 4.4% lower than the previous year, a new analysis from the University of Illinois says. The number of corn bushels used for ethanol production dropped 4.3%.

The federal government’s Renewable Fuel Standard requires that refineries incorporate 15 billion gallons of ethanol into fuel each year. The EPA has granted 85 waivers to refineries, however, allowing them to forgo using about 4 billion gallons of ethanol. The EPA policy has spurred heated criticism from the ethanol sector and corn growers, who say the policy has contributed to the sector’s woes.

In early October, the EPA and the U.S. Department of Agriculture announced that gallons lost to such waivers in the future would be reallocated back into the blending requirements, to ensure the 15 billion gallon guarantee each year. The announcement included additional provisions:

» E15. The EPA will look to streamline labeling and remove other barriers for the sale of E15 (gasoline with a 15% ethanol blend) nationally.

» Blender pumps. The USDA will strive to increase the number of blender pumps at retail outlets, currently one of the main obstacles to boosting consumer demand.

» Trade. The Trump administration will work to open up greater trade opportunities. The U.S. ethanol export total this year has been essentially unchanged from the previous year. China has announced plans for a major expansion of ethanol use, but current trade frictions block an increase in U.S. sales. U.S. ethanol exports to Brazil, a major customer, are down 17% from a year earlier.

» Possible increase in future requirements. The EPA says it will consider increasing its biofuel blending requirements in the future.

The EPA’s pledge to guarantee 15 billion gallons per year is a help, but much remains unclear at this point, Monte Shaw, executive director of the Iowa Renewable Fuels Association, said in reaction to the administration’s announcement. “What the proposal does is it puts on a tourniquet to stop the bleeding,” he said.

Meanwhile, the oil industry and its supporters have pledged to fight the EPA’s change in regard to refinery waivers. “We will vigorously challenge this new policy in the weeks to come and continue advocating for Congress to reform the RFS,” the presidents of the American Petroleum Institute and the American Fuel & Petrochemical Manufacturers said in a joint statement. Sen. John Barrasso, R-Wyo., chairman of the Senate Environment and Public Works Committee, voiced a similar perspective: “In my home state of Wyoming alone, refineries employ thousands. This proposal risks mass layoffs and higher gasoline and diesel prices. It’s not a winning strategy for American workers or our nation’s economy.”

In short, the policy battle will continue. So will the uncertainties. The ethanol sector will need to remain vigilant in advancing its interests and managing its operations efficiently in the face of ongoing complications.