Ethanol consumption sinking

Source: By AgriNews • Posted: Tuesday, October 2, 2018

Refinery hardship exemptions could cost 1.6 billion bushels

COLUMBIA, Mo. – University researchers have found if the EPA’s current practice of refinery exemptions continues it will have a major impact on the U.S. ethanol industry and corn growers.

The University of Missouri’s Food and Agriculture Policy Research Institute’s updated analysis of U.S. agricultural markets estimates the U.S. ethanol industry could lose 4.6 billion gallons of domestic demand and nearly $20 billion in sales revenue over the next six years with continued EPA small refinery hardship exemptions.

“It shows that if EPA continues this practice of handing out dozens of exemptions to refineries that are highly profitable and probably not in need of any bailout from the government, that U.S. ethanol consumption is going to sink dramatically in the years ahead to the tune of almost 800 million gallons per year,” said Geoff Cooper, Renewable Fuels Association executive vice president, in a recent podcast.

“That means we’re going to be grinding less corn, there’s going to be less corn demand on the order of 1.6 billion bushels between now and 2023. It means that the average inclusion rate for ethanol falls well below that 10 percent level rather than trending up well above 10 percent, and it means ethanol prices are going to fall.”

The waivers were designed for refineries producing less than 75,000 barrels per day that can demonstrate that they suffer a “disproportionate economic hardship” from the costs of Renewable Fuel Standard compliance.

Exemptions Climb

It has been widely reported that EPA exempted as many as 25 to 30 refineries from the RFS blending obligations in 2017 and about 20 refineries in 2016. There were two to three waivers in previous years.

The EPA does not disclose the exact number of exemptions granted or the volume of required renewable fuel blending that is erased by the small refinery exemptions.

In an attempt for more transparency, RFA recently filed a lawsuit in Washington, D.C., District Court against the EPA and Department of Energy.

“Back in March and April when the public was first hearing about some of these exemptions, and we weren’t hearing about it from EPA, we were hearing about it from the media. So we filed a Freedom of Information Act request to get that information from the agency,” Cooper said.

“We also filed a request with DOE to get some information from them because they have a role in this as well. We didn’t get any response from either agency in terms of providing the type of information we were looking for.”

“We filed a second Freedom of Information Act request and continued to get stonewalled by the agencies. Other groups filed some similar requests. Some reporters had filed FOI requests.

“None of us have been able to get the information from EPA or DOE that we think our industry deserves and the public deserves to know who’s getting these exemptions, what is the decision-making process at EPA and DOE. We continue to be stonewalled by the agencies.”

The lawsuit was filed to force the issue and use the courts to get the information that Cooper believes is necessary for the ethanol industry to understand the EPA moves. This was the third lawsuit filed by RFA regarding small refinery exemptions.

“It’s unfortunate that we have to go that direction but we don’t really see any other alternatives at this point. The agency has just been completely unwilling to provide the sorts of information that we think is in the public interest,” he said.

Year-Round E15

Cooper then turned to allowing the year-round use of an E15 ethanol blend. The blend currently can’t be sold during the summer in some areas where smog is a problem. President Donald Trump outlined a plan in late spring to lift the summertime restrictions. It has yet to be implemented by EPA.

USDA Secretary Sonny Perdue said at the Farm Progress Show that the president is anxious to get the issue resolved.

“The way we look at it today is the oil industry got what they asked for. It has resulted in demand destruction for us but it’s given them the low RIN (Renewable Identification Number) prices they wanted,” Cooper said.

RIN values dropped from 70 cents a gallon in 2017 to 24 cents per gallon this year. They are projected to drop to 7 cents a gallon next year.

“When do we get what we asking for which was Reid vapor pressure relief for E15 which would allow us to sell E15 year-round in most of the country, and now in addition to that we think we need to be asking for reallocation of these small refinery exemptions moving forward,” he said.

“We don’t want to see continued attrition and erosion of the RFS. It’s our position that when Congress said 15 billion gallons they meant it, and we don’t care if it’s the large refiners that are blending that amount or all refiners, including small refiners, but the law says 15 billion gallons and that’s what we need blending year-in, year-out.”