Governors' Biofuels Coalition

Speaking at the National Ethanol Conference, Secretary of Agriculture Tom Vilsack, praised the worked being done by the ethanol industry that is benefitting rural America. Corn ethanol has added 15 cents to the value of corn, he pointed out, and created 400,000 direct and indirect jobs.  Off farm income reached a record in 2015, he said, “in spite of softening commodity prices and farm income declining, because in part of the work you’ve done to create good paying jobs. The overall income is at its highest point ever.”  He listed a number of other benefits to consumers and rural communities, and told the over 1,000 attendees, “You’re actually creating a new American economy. You are moving us away from a fossil-fuel based economy and helping America to innovate.”

Held Feb. 15 to 17 in New Orleans, the NEC painted a strong future for the ethanol industry in the speakers addressing the conference theme, “Fueling a High Octane Future.” Following the state of the industry address by Renewable Fuels Association president and CEO Bob Dineen, keynote speaker, John Hofmeister, CEO of Citizens for Affordable Energy and former president of Shell Oil Co., laid out his view of the current situation with low oil prices, and his proposal for a new regulatory approach.  “Why aren’t we developing, on a strategic basis, the alternative fuels that we have in this country,” he asked. “To fully utilize biomass to liquid fuels, natural gas, other alternatives, to displace 7 billion barrels of oil.” Calling the oil market a contrived market, he described the U.S. system as full of entrenched interests using gross payoffs, “only made legal because the people receiving the money get to declare the legality of it.”

Hofmeister laid the case for a governance change to create an independent regulatory body for energy, covering, he said, “all the electrons and all the molecules produced in this country, just as the Fed controls all the dollars within a free market for money.” That new energy agency would write the big rules in which all energy sectors would compete, much in the way that the Federal Reserve Bank sets the rules and enables the economic forces of the market to work in the banking sector. “The Fed’s not perfect, but in 2008 it knew to expand the money supply to avoid the slippery slope into depression.”  Under the big rules for the nation’s energy sector, the agency would make sure we have a supply of energy from all sources to meet the needs of the economy, domestically when at all possible. The agency would drive efficiency through technology and make sure the environment is protected from physical, liquid and gaseous waste. Finally, the agency would need to oversee infrastructure development. “We can become energy independent,” he said, “We don’t have to live at the mercy of a contrived oil market that destroys the nature of our society.” Such a change won’t be easy, and will have to be done through elected officials, but in recounting the development of the Fed, it came in 1913 after two major banking collapses. He predicted that the U.S. oil industry is not going to easily recover from the current downturn.

Several other speakers talked about the promise of octane. Tom Leone, powertrain research and advanced engineering at the Ford Motor Co., talked about the work being done now to research how best to meet the mandated fuel efficiency of 54.5 miles per gallon by 2025.  They are finding that they can raise the compression and get more efficiency with higher ethanol blends, saving consumers money on fuel consumption and saving greenhouse gas emissions. Brian West, Oak Ridge National Laboratory, cited similar findings. “If we make engines smaller, we need to run them harder and we need higher octane,” he said. One challenge is getting there, particularly when it requires newly designed cars to run on the new fuel with sufficient availability of the fuel. West pointed out that we’ve seen it happen before when unleaded gas replaced leaded gas in 1974, a transition that took over a decade, as both fuels had to be offered. Whether a similar regulatory change will occur with higher ethanol blends to achieve greater fuel efficiencies and carbon reductions is still unknown.

Speaking later in the conference, Bob McCormick, principal engineer at the National Renewable Energy Laboratory, showed a map of ethanol availability at terminals, which today covers the entire country, including Alaska. A move to higher ethanol blends might require some terminals to add tanks, but he said, “there are few barriers at the terminal level to higher blends.” He described the modeling done to look at the benefits and barriers to higher ethanol blends, adding at the end of his remarks that,  “in a post 2025 market, there will competition in a low-carbon environment with electric cars and fuel cells for the oil industry. The high octane option may be the key to liquid fuels’ viability.”

In addition to the octane focus and other speakers dealing with markets and margins, the NEC ended on an international note with an international buyer program led by the U.S. Commerce Department. With the help of the U.S. Grains Council, 37 buyers were recruited to attend the NEC for a total of 150 business-to-business meetings. “We bring the buyers to you,” explained Kenneth Hyatt, deputy under secretary for international trade at the commerce department. In his remarks to the group, he described the services his department offers to companies wanting to being exporting. He encouraged interested producers to check out an upcoming trade mission to Mexico that has a renewable energy emphasis. The deadline for signing up is in early March and more information can be found on www.export.gov.

Speaking on the last panel, Mike Dwyer, chief economist with the U.S. Grains Council, encouraged producers to participate in upcoming outreach efforts to build ethanol exports. There is a lot of disinformation out there and many potential importers do not understand the role of octane, he said. The USGC is planning to invite participation from Brazil and the EU in a couple of overseas workshops, one focused on the benefits of ethanol blending and the other on the role of policy.

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