Industry looks to Vilsack for pandemic relief

Source: By Marc Heller, E&E News reporter • Posted: Sunday, December 20, 2020

Still smarting from the COVID-19 pandemic, biofuel producers getting little help from Congress are shifting their focus to the presumptive incoming Agriculture secretary, Tom Vilsack.

An unfolding COVID-19 assistance measure on Capitol Hill won’t contain targeted assistance to biofuel producers that have struggled from falling demand, industry sources said. But funds directed toward the Department of Agriculture could be used for that purpose — if USDA’s leadership wishes.

“We believe Vilsack would be more inclusive,” the president and CEO of the Renewable Fuels Association, Geoff Cooper, said in a conference call with reporters.

The emerging deal in Congress will contain around $12 billion or $13 billion in agricultural assistance, to be used largely at USDA’s discretion. Agriculture Secretary Sonny Perdue hasn’t been inclined to sign off on direct aid to the biofuel industry, but with Vilsack — a former Democratic Iowa governor with a history of supporting biofuels — running the department, renewable fuel advocates are counting on an ally there.

Vilsack was secretary of Agriculture during the Obama administration.

Ethanol plants have only partly recovered from the economic shock of the pandemic, RFA Chief Economist Scott Richman said. After tumbling by as much as 50% in April, consumption surged with a resumption of travel but still remained about 10% behind year-earlier levels in the summer.

By this fall, with increased COVID-19 cases, consumption is trailing by about 15%, Richman said. “We never really got to normal,” he said.

Transportation fuel sales overall are down around 20%, Richman said, a reflection of the pain in the petroleum business as well.

Ethanol producers rely on strong demand for petroleum, on account of federal requirements to blend ethanol into gasoline. That mandate under the renewable fuel standard results in gas that’s mostly 10% ethanol around the country, with an increasing number of stations also selling 15% ethanol fuel called E15.

But despite pressure from biofuel advocates such as Sen. Chuck Grassley (R-Iowa), Congress has passed on opportunities to include industry relief in pandemic-related legislation (E&E Daily, Aug. 6).

Sen. James Lankford (R-Okla.), a member of the Appropriations Committee, and other lawmakers critical of biofuel mandates have opposed those efforts, and Lankford doesn’t support targeted relief from USDA either, according to his office.

To the petroleum industry and its congressional allies, ethanol producers already benefit greatly from government through the RFS, and they dispute biofuel industry arguments that government policies like small-refinery waivers put ethanol in a weak position even before the pandemic.

As the industry’s troubles endure, farmers have seen economic strain, since most ethanol is made from corn. Some states have offered support of their own to biofuel supporters, Cooper said.

The industry received further bad news this week when trade negotiations with Brazil failed to reach a deal on biofuel, and the country imposed a 20% tariff on all ethanol imported from the United States. Brazil is the top U.S. export market, and the tariffs will be “extremely disruptive,” Cooper said.

Some help is coming from USDA through programs already in place, such as grants to retailers through the Higher Blends Infrastructure Incentive Program. And the industry group Growth Energy called on Congress to extend tax incentives for biofuel producers before the end of the year.

In the longer term, groups on both sides of the biofuel debate are looking out for any moves in the new administration and Congress to advance a low-carbon fuel standard. That could benefit the ethanol industry if it’s designed to coexist with the renewable fuel standard, biofuel group say.

EPA could craft regulations resembling that idea, Cooper said, but a true low-carbon fuel standard would require legislation.