EPA scaling back ethanol goals

Source: By LORI POTTER, Kearney Hub Staff Writer • Posted: Thursday, October 15, 2015

KEARNEY — More windows of opportunity are opening for ethanol market growth, but uncertainty lingers as Environmental Protection Agency officials seek to scale back original Renewable Fuel Standard goals set by Congress.

Claiming authority under the Clean Air Act, the EPA is expected to announce its adjusted targets for corn-based ethanol and other advanced biofuels on Nov. 30.

Nebraska Ethanol Board Administrator Todd Sneller is taking a wait-and-see attitude toward that deadline. In Kearney Tuesday during a break from an Environmental, Health and Safety Summit for ethanol plant operators and others within the industry, he said Nov. 30 is the latest of several dates promised for a final RFS report.

The EPA targets circulated before a June 25 public hearing in Kansas City still included industry growth, but the goals were much lower than standards set for corn-based ethanol and advanced biofuels such as cellulosic ethanol and biomass-diesel by the Energy Independence and Security Act of 2007.

For example, the original 2015 standard for corn-based ethanol is 15 billion gallons and the target in the June EPA proposal is 13.4 billion gallons. A record 14.3 billion gallons were produced by U.S. plants in 2014 that have a combined capacity of 15.1 billion gallons.

Sneller said EPA officials had to make some recalculations, so their final rollback numbers may be slightly higher, “But no one expects them to be anywhere near where statutory limits are.”

If the numbers are lower than the 2007 standard, the biofuels industry probably will file a lawsuit over EPA’s authority to make changes, he said, and if the numbers are too high, oil companies probably will go to court.

Either way, the uncertainty that ethanol industry leaders believe has stalled investment in biofuels will remain.

“The governor (Pete Ricketts) really heard this in his trade mission,” Sneller said. Officials of some international companies said uncertainty for the U.S. industry is a reason for their lack of investment interest.

In a June Hub story, KAAPA Ethanol Chief Executive Officer Chuck Woodside said, “If investors are unsure if we’re solid in our energy policy on renewable fuels, they will not invest in that space.”

Also in June, Upland farmer and Nebraska Corn Growers Past President Joel Grams told the Hub that farmers have proved they can raise enough corn to supply all needs. Farmers worry that if demand from the renewable fuels industry does not grow along with corn production, market prices will continue to fall.

Sneller said that more than 700 million bushels of Nebraska corn are processed through ethanol plants annually as fuel and distillers grains. That would be about 42 percent of the 2015 harvest, which is projected by the U.S. Department of Agriculture’s National Agricultural Statistics Service at a record 1.66 billion bushels.

Sneller said ethanol is “a reliable, predictable demand factor” for corn growers.

Nebraska is positioned better than other states to take advantage of new opportunities to the west. It is the second largest ethanol-producing state and the one farthest west in the U.S. Corn Belt.

The California Air Resources Board recently approved a carbon fuel standard to cut pollution from all transportation fuels by 10 percent in the next five years. Sneller said Oregon and British Columbia already have such standards and Washington is working on them.

The demand and higher value will be for ethanol with a good “carbon intensity score,” which Sneller says measures the energy input for the ethanol produced. Factors inventoried include grain production, processing, co-products and the types of fuel used at plants.

Verification surveys must be done by independent professional engineers, Matt Henry of Pinnacle Engineering of Omaha said Tuesday in his summit presentation.

“KAAPA (Ethanol) was one of the original qualifiers,” Sneller said. Because the plant’s distillers grains, the co-product valued as livestock feed, are not dried there is less energy use and a better carbon intensity score for the ethanol produced.

Sneller said modifications have been made at some Nebraska ethanol plants that want to qualify for those markets, so carbon standards are driving innovation.

The Trans-Pacific Partnership agreement reached last week that involves 12 countries also may open more export opportunities for Nebraska’s ethanol industry. Sneller said non-TPP member China is the top importer of distillers grains from Nebraska plants, but several of the top-10 export targets for ethanol are part of TPP.

“Having a viable export market is very important because that’s the only relief valve for the excess ethanol production,” he said.

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