Minnesota looks for answers to ethanol waivers

Source: By Trey Mewes, Mankato Free Press • Posted: Monday, September 23, 2019

Area lawmakers, industry experts and even Gov. Tim Walz are asking federal officials to cease issuing ethanol and biodiesel standard waivers to oil refineries in the wake of the damage those waivers have caused to the biofuels market.

A group of Senate Republicans, including area lawmakers Julie Rosen and Rich Draheim, sent a letter to President Donald Trump last week asking him to cease issuing ethanol waivers.

“These waivers are just putting everything in disarray,” said Rosen, R-Vernon Center.

The letter follows after Walz and South Dakota Gov. Kristi Noem wrote Trump earlier this month with a similar request.

Much of southern Minnesota has been left reeling over the past month after the Environmental Protection Agency issued 31 waivers. The resulting shock to the biofuels industry, combined with ongoing agricultural struggles due to ongoing trade disputes and low commodities prices, has since led 21 biofuels refineries across the country to close.

That includes the Corn Plus ethanol plant in Winnebago in Faribault County, which shuttered at the end of August. Minnesota has 18 ethanol plants and is the fourth-largest producer among U.S. states.

Agricultural experts blame the August waivers for collapsing the demand for ethanol and other biofuels, which is mandated by federal renewable energy standards.

The waivers have reportedly affected 1.4 billion bushels of corn for ethanol alone. Ethanol isn’t the only biofuel affected, however. There’s been about 2.45 billion gallons of demand destruction for biodiesel, made from soybeans, according to the Minnesota Soybean Growers Association. A Soybean Growers spokersperson said the waivers have caused about $7.7 billion in economic damage in the biodiesel industry.

Federal officials have issued 85 waivers since 2017, which is estimated to have prevented about 4 billion gallons of biofuel from being mixed into other types of fuels. Those waivers have gone to small, independent refineries as well as ones owned by large companies such as ExxonMobil.

In the U.S., about 10% of gasoline comes from blended ethanol. While Trump made headlines in June for promising to raise the ethanol standard to 15% with year-round production, agricultural experts say the waivers have significantly hurt farmers’ abilities to sell their products.

“The bottom line is we’re in serious financial and emotional challenges out there,” said Minnesota Farm Bureau President Kevin Paap, a Garden City farmer.

Paap said ag producers and biofuels experts are concerned the U.S. won’t make its mandated goal of 15 billion gallons of ethanol this year due to the waivers.

U.S. Rep. Jim Hagedorn, R-1st District, said he’s also concerned the waivers are subverting the renewable fuel standards. He said he thinks Trump will soon address the waivers and present a solution.

“We need to implement the RFS the way that Congress intended it,” Hagedorn said.

The waivers have become a bipartisan cause in Minnesota, where politicians have split at times on renewable energy issues. Yet state lawmakers agree their options are limited, as Congress and federal officials largely set agricultural and energy policy.

“I feel like our hands are a little bit tied because it is a federal issue,” said Rep. Jeff Brand, DFL-St. Peter.

Brand, the vice chair of the House agricultural committee, said the issue could have implications for ongoing struggles between federal and state rights. While he’d like to see more done on the state level to encourage renewable fuels production, he’s concerned federal officials could intervene the way the Trump administration recently did in California by revoking its air pollution standards concerning auto emissions.

That said, Brand, Rosen and ag experts see potentially increasing the state’s renewable fuels standards as a way to help corn and soybean farmers in the meantime. Walz announced a new advisory group recently on biofuels, while lawmakers are starting to explore what the state could do to offset those market losses.

“I think there needs to be a strong campaign for pro-ethanol,” Rosen said. “It’s time to renew those conversations about how important biofuel is to our environment.”

Minnesota already requires diesel fuel have a 20% biodiesel blend, as well as a 10% ethanol standard. Lawmakers from both sides say an increase to 15% ethanol in gasoline would be a potential solution, though Paap said it may be smarter to increase the standard by 1% or 2% to smooth over the transition for the oil industry.

“Oil refineries and oil companies are pretty big players,” Paap said. “Just a little bit of market share, we’ve found, they’re willing to fight tooth and nail over.”

Lawmakers say something needs to be done regardless before communities are hit harder. Local officials say farmers are already hit hard by the summer’s weather, and many will likely sell crops at a loss or collect crop insurance. And lawmakers have already heard the city of Winnebago’s utilities collection is down ever since Corn Plus closed.

“I’m afraid for the co-op in Winthrop,” Brand said. “I’m afraid because they’re also tied to the processing facility in Janesville. There’s a ripple effect here if we don’t do anything.”