Steady recovery: Light at the end of the tunnel for U.S. ethanol industry

Source: By Jeannine Otto, AgriNews • Posted: Monday, December 7, 2020

ELLISVILLE, Mo. — For Geoff Cooper, president and CEO of the Renewable Fuels Association, the light at the end of the tunnel is not an oncoming freight train. Or, should we say, another oncoming freight train.

“We are coming off a couple of very difficult years. 2020 was probably the most challenging year in the industry’s history. We are really ready to turn the page and excited about what the future holds for the industry,” Cooper said.

The challenges facing U.S. ethanol have piled up, from large numbers of U.S. Environmental Protection Agency-issued small refinery exemptions over the past few years that throttled the growth of ethanol blended into the U.S. motor vehicle fuel supply, to the onset of COVID-19, which dealt a massive blow to transportation and caused ethanol plant cutbacks and closures.

Cooper sees opportunity ahead in the Biden administration for U.S. ethanol, and he talked to AgriNews about some of the challenges and opportunities for the industry and those connected to it.

For many people this time of year, some dates are so important. Let’s talk about why Nov. 30 was important for ethanol.

“By Nov. 30, we should have had a final rule for 2021 RFS requirements, and we do not have that because they haven’t even proposed it yet. It looks, at this point, like the entire rulemaking for 2021 volumes is going to get put off and will be the responsibility of the new administration.”

Let’s talk about that new administration. What are the possibilities for ethanol under President-elect Joe Biden?

“We have had a good amount of engagement with President-elect Biden’s team during the campaign and now, after the election. We are optimistic about the fate of the Renewable Fuels Standard in the new administration. We heard President-elect Biden state very strongly during the campaign that he would put an end to these small refinery exemptions. That was very encouraging to us. We also heard President-elect Biden describe the RFS as a bond with farmers, which I think is a great way of describing the program. He’s committed to making sure the RFS is properly enforced in a way that is consistent with the intent of Congress.”

What will the RFA and the U.S. ethanol industry be watching in the first weeks and months of the Biden administration?

“No. 1 is making sure we are maximizing the low-carbon benefits of the RFS. Because the EPA has done such a poor job of implementing the program the last several years, we’ve missed tremendous opportunities for the RFS to drive further greenhouse gas reduction. Step one is going to be making sure the RFS is put back on track and properly enforced. If you do that, the benefit is we are going to get immediate reductions in greenhouse gas emissions from the transportation sector, which is obviously a high priority for the incoming Biden administration. I think priority two is building upon the RFS with new policies that are focused on driving deeper carbon reductions and featuring the high octane benefits of ethanol.”

Let’s back up. Where is the industry at the moment?

“As we look at the industry today, you could say we have seen a strong recovery from the downturn we saw earlier in the year due to COVID-19. We’ve seen a steady, incremental recovery from that low point, but we still have a long road to go. Today the industry is operating at a rate that is about 10% below year-ago levels. We’ve kind of been at that level really since June. We hit a plateau in terms of recovery, and we’ve been in that 10% to 15% below normal, or below pre-COVID levels, ever since June. In a nutshell, we’re doing a heck of a lot better than we were in April, but we still have a ways to go before we climb out of the hole that COVID put us in.”

What was the impact of COVID-19 on the U.S. ethanol industry?

“We are seeing a second round of partial closures and shutdowns in certain states, and that is having a bit of an impact on gasoline consumption in recent weeks. Therefore, it’s impacting ethanol blending demand, as well, but nothing to the degree we saw in the spring. At one point in the spring, we had more than half of the industry shut down. Back in April, we had more than half of the industry’s capacity offline because of the dramatic collapse in demand that we saw in the gasoline market as people were staying home and the economy was effectively locked down.”

What are the immediate concerns for the RFA and the industry?

“There are still 41 pending small refinery exemption petitions at EPA, awaiting a decision. There are another 17 of these so-called ‘gap year’ petitions that the refiners had filed. They were hoping to circumvent the 10th Circuit decision. EPA has already rejected most of those ‘gap year’ petitions, but these remaining 17 haven’t come back from the Department of Energy yet. We’re told the second they come through the front door at EPA, they will also be rejected. That’s a separate issue from the 41 pending petitions for 2019 and 2020. We are keeping a very close eye on those petitions, and there is a good deal of concern and skepticism about what EPA may try to do with those petitions here in the waning moments of this administration.”

Any concerns about what could happen with a lame-duck administration — and it’ EPA?

“There isn’t a whole lot of accountability or leverage at this point and so that is a concern. It’s a concern not just with those small refinery petitions, but the other unresolved RFS issues. We still don’t have, for example, a 2021 RVO proposal, and typically that proposal is out in July and finalized by Nov. 30 of every year.”

 

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