U.S. Ethanol Makers Plan Export Boost as Domestic Use Stagnates

Source: By Mario Parker, Bloomberg News • Posted: Tuesday, February 23, 2016

Saddled with excess capacity, flat domestic demand and political uncertainty, the U.S. ethanol industry is pinning its hopes on the export market, where it plans to more than double shipments.

The industry is aiming to export 2 billion gallons a year by 2022, up from 836 million in 2015, Tom Buis, the chief executive officer of Washington-based trade group Growth Energy, said Monday at the group’s conference in Orlando, Florida.

The industry’s production capacity increased more than threefold in the past 10 years to 15.5 billion gallons annually. That’s about 1 billion gallons more than what the government currently mandates that refiners use.

In November, President Barack Obama changed the amount of the grain-based biofuel that refiners are mandated to blend with gasoline, lowering it from the levels outlined in the 2007 Renewable Fuels Standard. That’s forced ethanol makers to increasingly rely on exports, which is “the easiest way to boost demand in the short run,” said Jerrod Kitt, an analyst at Linn Group in Chicago.

“There’s less certainty surrounding the fact that the RFS is going to go up every year in perpetuity,” said Kitt said in a telephone interview Monday. “It’s smart not to put all your eggs in one basket.”

Meanwhile, petroleum and agricultural interests are locked in battle over whether the U.S. should abandon the biofuel mandate. The Senate Environment and Public Works Committee has a hearing planned for Wednesday at 10 a.m. in Washington with industry and government officials, including Janet McCabe, assistant administrator for the Office of Air and Radiation at the Environmental Protection Agency, to examine the RFS.

Buis, the Growth Energy CEO, cited increased global efforts on climate change and smog reduction as a way for the ethanol industry to find new customers.

Last week, the Renewable Fuels Association, a separate Washington-based ethanol lobby, said its strategy for growth would include touting the biofuel as a source of octane for a U.S. vehicle industry looking to produce more efficient engines.