EPA: Ethanol production expected to grow in 2012

Source: DAN PILLER • Des Moines Register  • Posted: Monday, January 2, 2012

But cellulosic ethanol output is likely to fall short of a 2007 law’s goals.

The U.S. Environmental Protection Agency on Tuesday said ethanol production in 2012 should reach 15.2 billion gallons, an increase of about 1.25 billion gallons from this year.

The agency’s 2012 targets for renewable biofuels, however, shows non-corn ethanol made from crop residue, grasses or wood chips falling short of the goals set in the 2007 federal law mandating biofuel use

In a statement, the EPA projects that cellulosic ethanol will hit 8.65 million gallons, or 0.06 percent of the 15.2 billion gallon total. That is considerably short of the 500-million-gallon target for 2012 set by Congress in 2007 when it wrote the law mandating that 36 billion gallons of non-petroleum biofuels be used in the nation’s transportation fuel mix by 2022.

The EPA confirmed a 1 billion gallon mandate for biofuel diesel made primarily from soybeans or animal fats. Iowa has 14 such biodiesel plants that were largely shuttered in 2010 when Congress declined to renew the $1 per gallon tax credit. In 2011 the tax credit was restored and an 800 million-gallon mandate was put in place, which jump-started the biodiesel industry to record production.

Corn-fed ethanol, which uses century-old manufacturing techniques and enjoys a ready supply of feedstock in the Midwest, has gotten off to a fast start and now constitutes 10 percent of the nation’s gasoline supply.

In 2011 an estimated 13.8 billion gallons of ethanol were produced, 3.7 billion gallons of it at 41 plants in Iowa. Ethanol production now consumes 5 billion bushels of the 12.4-billion-bushel U.S. corn crop.

The Iowa ethanol industry now takes in about $15 billion in revenues and employs about 2,000 workers at the plants and is credited with an equal number of maintenance and transportation jobs.

So established is corn-fed ethanol that the industry allowed the expiration of the 45 cents-per-gallon tax credit for ethanol production, as well as the 54-cent fee on ethanol imports, to lapse at the end of this year, preferring to fall back on defense of the Renewable Fuel Standard set in the 2007 law.

But the so-called advanced biofuels made from non-corn ethanol have been far slower to get out of the laboratory and into gasoline tanks. Two cellulosic plants using corn stalks and leaves, Poet’s facility at Emmetsburg and DuPont’s planned plant at Nevada, are planned to begin production in Iowa in 2013.

The EPA was supposed to reveal the 2012 targets by Nov. 30, and the delay had caused the Renewable Fuels Association, an ethanol and biodiesel trade group, to publicly call out the EPA and administrator Lisa Jackson.

The other major ethanol and biofuels trade group, Growth Energy, also put similar heat on the EPA to move on the 2012 targets.

The EPA’s 8.25-million-gallon target for non-corn biofuels for 2012 is actually higher than the 6.9-million-gallon estimate it put out last April. The April figure, which confirmed the awareness of how slow non-corn biofuels have been to develop, triggered a growing debate about the biofuels mandate.

The slowness of the arrival of non-grain biofuels is making politicians and the petroleum industry, which is required to pay for credits for biofuel blending whether the fuel is available or not, restive.

“Once again, refiners are being ordered to use a substance that is not being produced in commercial quantities — cellulosic ethanol — and are being required to pay millions of dollars for failing to use this non-existent substance,” National Petroleum Refiners Association President Charles Drevna said in a statement. “This makes no sense.”

But the EPA noted that the embryonic non-corn biofuels market needs an environment that encourages investment.

“In order to provide the appropriate economic conditions for the cellulosic biofuel industry to grow in accordance with the objectives of the statute, it is important that these fuels, once produced, have a viable market.,” the EPA said in its statement.

The petroleum industry and a growing number of congressmen have questioned the biofuels mandates, particularly in light of complaints by livestock producers about high feed costs and the sudden surge of domestic crude oil production from new fields in North Dakota and the seemingly ready supply of crude from Canada.

Crude oil production from domestic sources has increased at about 20 percent annually, since 2008. The share of imported crude oil in the U.S. petroleum mix has dropped from 60 percent in 2007 to 48 percent last year. In 2011, for the first time in more than 30 years, the U.S. became a net exporter of oil.

Also, the rising supply of natural gas from new fields not only in the traditional energy belt in the U.S. Southwest but also in Ohio, Pennsylvania, West Virginia and New York, has given rise to calls for conversion of much of the U.S. transportation fleet, particularly trucks, to natural gas.

The sudden and unanticipated rise in the U.S. domestic production of crude oil and natural gas has added another dimension to the political argument over biofuels. Opponents of corn-fed ethanol have argued against its expansion on both moral grounds — the food vs. fuel debate — and environmental, because of the amount of water and natural gas used in ethanol production.

For that reason, Congress put a limit on corn-fed ethanol, saying that when the full 36-billion-gallon limit is reached only half of that total could come from corn feedstock.

The demand for corn ethanol is given as one reason, along with strong foreign demand for red meat and livestock feeds, for the tripling of corn prices since 2005. That in turn has helped feed a land price boom in Iowa and other Midwestern states which in 2011 reported increases in farm land prices of 30 percent or more.