Ethanol industry eagerly awaits EPA ruling

June 1 will mark the day when the Environmental Protection Agency finally gets around to issuing its new requirements for the Renewable Fuel Standards Act, after a delay of more than two years.

The EPA found itself between a rock and a hard place in 2013, when declining gasoline consumption pushed the ethanol production value specified by the 2006 act over the “blend wall” — the 10 percent mark at which ethanol mixture allegedly surpasses the 10 percent threshold for E10 blended gasoline. This can be a problem, because higher concentrations of ethanol are only approved in relatively newer vehicles.

The EPA punted in 2013, then again last year. Now at least the EPA seems ready to resume its responsibilities. The agency sent its proposal over to the White House Office of Budget and Management earlier this month, but no word has leaked out. The June 1 proposals will not be finalized until November.

Some biofuels producers argue that the agency should push past the 10 percent blend wall. The EPA has already approved E15 — a blend of up to 15 percent ethanol — for light duty vehicles, including trucks, SUVs and cars, made in model year 2001 and since then. Flex-fuel vehicles can also tolerate blends of up to E85. But there are questions about whether some older vehicles built before 2001 could potentially be harmed by higher blends. Automakers have threatened to void warranties for these cars if they use ethanol blends higher than E10.

The oil industry, which opposes raising the RFS, argues that the infrastructure for distributing blends higher than E10 does not exist and would be very expensive to put into place. Outfitting a gas station with E15 and E85 pumps brings added cost. Since 95 percent of gas stations are owned by independent operators, the chances that they will make this investment are very slim. Oil company and gas station operators say it is the biofuels industry that should make this investment. No one has been able to resolve this stalemate.

The EPA’s decision will come at a time when things are looking up for the biofuels industry. The Energy Information Administration recently announced that biofuel production hit 14.3 billion gallons last year, the highest output ever. Moreover, this increased production has been driven by new technologies. “If ethanol plant yields per bushel of corn in 2014 had remained at 1997 levels, the ethanol industry would have needed to grind an additional 343 million bushels, or 7% more corn,” reports Energy Global.

“To supply this incremental quantity of corn without withdrawing bushels from other uses would have required 2.2 million additional acres of corn to be cultivated, an area roughly equivalent to half the land area of New Jersey.”

Improvements in ethanol’s productivity have come from:

1) Larger-scale operations that have allowed better process technology such as finer grinding of corn to increase starch conversion
2) Better temperature of fermentation, which optimizes productivity
3) Better enzymes and yeast strains used in the process

Much of this extra production has been absorbed by revving up exports. U.S. ethanol exports reached an all-time peak of 1.087 billion gallons in 2011-2012, then slumped to 554 million gallons in 2012-2013 but bounced back to 792 million gallons in 2013-2014. This year exports are once again up 9 percent and may approach the 2011-2012 record.

Canada is our largest export target, but most of the ups and downs depend on what is happening in Brazil. That country has a mandate of 27 percent ethanol — mostly from sugar cane — but high sugar prices have cut into Brazilian production, and 70 refineries have gone out of business. Therefore Brazil has become more dependent on American corn ethanol to fulfill the requirements. As a result, the U.S. has been a net exporter of biofuels for the last five years.
Ethanol producers are also making progress in making the higher blends more recognizable and acceptable to motorists. American Ethanol just celebrated a five-year partnership with NASCAR that resulted in the circuit’s race cars running on E15.

“This has been a tremendous partnership,” Tom Buis, CEO of Growth Energy, told AgriNews. “We are thrilled to help NASCAR in its green efforts and NASCAR’s high-performance racing has been the perfect validator for E15, a cleaner burning fuel that is less expensive and has a higher octane content, which improves performance.”

Biofuels advocates claim the use of E15 has reduced greenhouse gas emissions by 20 percent over the 7 million miles traveled by the race cars in the last five years.

In Rensselaer, Indiana, the Iroquois BioEnergy Co. has opened a retail gas station that will offer ethanol blends E10, E15, E30 and E85. The station was partially funded by an Indiana Corn Marketing Council Flex Fuel Infrastructure grant.

“We want to use this pump to show the public the economic advantages of higher ethanol blends,” said Gunner Greene of Iroquois BioEnergy. “Our intent is to target those with flex-fuel vehicles who may not have a thorough understanding of the advantages of those vehicles.” The company was surprised to discover that 75 percent of its initial sales were for E85, with E30 coming in second place. They did not expect the demand for the higher blends to be so solid. The Corn Marketing Council has plans to fund 16 more flex-fuel stations around the state.

If the EPA approves the use of E30 and higher blends for nearly all cars, the country will probably be able to absorb the industry’s higher output. If not, exports may still pick up the slack. Either way, the ethanol industry is in much better shape than is commonly credited.

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