Op-Ed: Ethanol industry needs to toot its own horn

Source: By Rochester Post Bulletin • Posted: Monday, January 14, 2019

President Donald Trump’s October 2018 executive order allowing year-round use of E15 across the country has the potential to be a win for farmers and the biofuels industry. However, challenges that involve pump availability at gasoline stations, resistance from Big Oil and opposition from environmental groups must be overcome.

The president’s action means the summertime ban on the sale of E15 that was in effect from June 1 to mid-September falls by the wayside once it earns regulatory approval.

The decision is sure to boost demand for ethanol and other biofuels at a time when profit margins are tight for ethanol producers and corn prices remain at below-cost-of-production levels. However, the rule making process and potential legal challenges to the order may mean that the impact of the change may not be felt until much later this year.

The biofuels industry is dogged by limited access to E15 pumps. It’s estimated that only 1 percent of all filling stations in the United States are equipped to handle E15 product.

Environmental groups protested the action saying the previous ban was enacted because E15 biofuel doesn’t meet Environmental Protection Agency air-quality standards.

Big Oil contends that added ethanol has the potential to damage engines not designed to handle it and reduces fuel efficiency in many engines. Environmentalists argue that E15 use year-round will increase smog and worsen air-quality problems.

The ethanol industry’s financial performance has shifted wildly in recent years. Producers reported record profits of $1.31 per gallon in 2014 when crude oil prices reached more than $100 per barrel. Profit margins declined sharply following that to a point where many small ethanol plants operated at a loss while bigger operations managed to break even. Crude oil prices declined sharply in the second half of 2018 and the slide continues into the new year as gasoline demand falls at a time when output is increasing.

Boom or bust, ethanol has had a huge economic impact. The Renewable Fuels Association reported in 2017 that ethanol production directly employed 71,900 workers, supported 285,000 indirect jobs, added $24 billion to household income, contributed $10 billion to federal, state and local tax collections and spent $32 billion on goods and services.

An industry that has contributed so much to local, farm state and national economies continues to be treated with disrespect by Big Oil, which is obviously afraid of losing market share. The industry must shout about its immense value as a rural economic development tool along with touting biofuels’ obvious environmental benefits.

The industry also must work in partnership with state governments across the country to provide financial incentives for retailers to install thousands more of ethanol-accessible pumps.

The president’s order should provide the industry with additional momentum that will be needed to capture a greater share of the fuel market despite continued well-funded opposition.