Domestic Fuel

Ethanol industry leaders from Growth Energy took their story about the importance of biofuels and the Renewable Fuel Standard (RFS) to dozens of lawmakers and administration officials this week in Washington DC as part of the organization’s Advocacy Conference.

On Tuesday, some 100 of them heard from Secretary of Agriculture Tom Vilsack who repeating his support for the Renewable Fuels Standard (RFS).

“I will tell you this: that I have conveyed and will continue to convey to the EPA and to the country my support for this industry,” Vilsack said, calling USDA a partner in the renewable fuels industry. “I don’t want anybody to leave here today thinking that at USDA there is any waver on our support for this industry,” he added.

The Growth Energy representatives had over 100 meetings on Capitol Hill on Tuesday and Dan Sanders of Front Range Ethanol in Colorado says it was significant they were there on the anniversary of 9/11 “talking to leaders about how important the RFS is to America’s economy and to national security.” Sanders felt that their message was well received by lawmakers.

Jeff Lautt, CEO of POET, agreed. “This is an industry that is domestic and cannot be exported. You cannot transfer this industry out of the U.S.” he said. “The nearly half million jobs this industry has created are driving energy independence, they’re creating fuel that’s being consumed here. Once you explain that, they understand.”

A growing coalition of organizations is calling on Congress to pass a five-year, comprehensive farm bill before the current legislation expires on September 30.

A rally today on Capitol Hill will feature representatives from many of the Farm Bill Now coalition groups, and many others will be there in support, including Growth Energy. CEO Tom Buis says members of Growth Energy have been meeting with members of Congress and the administration this week to discuss maintaining the Renewable Fuel Standard (RFS) and farm policy has been a part of those discussions.

“Every meeting that I was in, the farm bill came up,” Buis said during a press conference this morning in Washington DC. “Although most of the comments from the lawmakers indicated that it probably is not going to happen before September 30.”

Buis says they are supportive of the Senate passed version of the legislation, which does contain an energy title and is adequately funded. “We would hope they would pass it,” he said, noting that not having a farm bill creates uncertainty for agriculture. “Not knowing what the programs are going to be makes it very difficult for people to operate.”

Buis formerly served as president of the National Farmers Union before taking over as CEO of Growth Energy in 2009.

Tom Buis audio comment here: Growth Energy CEO Tom Buis

As the EPA considers a waiver of the Renewable Fuels Standard (RFS) due to the impact the drought is having on corn supplies, members of the Biotechnology Industry Organization, BIO, are urging the agency to preserve the standard. During a news conference today, BIO provided a progress report on advanced biofuels to make the case in favor of the RFS, pointing out how the standard helped reduce dependence on foreign oil while growing jobs here in the U.S.

Several officials from companies involved in biotech and how it applies to renewable energy, including Christopher G. Standlee, Executive Vice President, Abengoa Bioenergy; James C. Collins, President, DuPont Industrial Biosciences; Pat Gruber, CEO, Gevo; Adam Monroe, President, Novozymes North America; Dan Cummings, Business Manager for Florida cellulosic ethanol producer INEOS New Planet Energy; and Doug Berven, Vice President of Corporate Affairs, POET-DSM Advanced Biofuels, highlighted how their companies have thrived with the RFS.

Standlee, who also serves as the Vice Chairman of the Advanced Ethanol Council, said cellulosic ethanol development is something his company has been working on for 10 years and believes the advancements Abengoa and other advanced biofuel makers have made are because of the RFS. “The overall development of this industry is driven primarily driven by the [RFS] and is the primary driver of second-generation technology and the ability to develop new sources of fuel to reduce our dependence on foreign oil.”

Berven said that the RFS gives farmers the confidence to move forward in “changing our energy landscape from one dependent on foreign oil to one based on domestic, renewable resources.” He also pointed out that for every one billion gallons of ethanol to be produced, there are an expected 10,000 to 20,000 jobs to be created. And the RFS calls for an additional 16 billion gallons of biofuels produced by 2022. “That’s a lot of jobs,” Berven said

BIO concluded saying that the country is at a vital point for advanced biofuels and is encouraged by this show of support from companies who are putting steel in the ground and Americans on their payrolls and what could be done in the future.

Listen to the full news conference here: BIO News Conference on RFS

The EPA has just started the 30-day comment period for a proposed waiver of the Renewable Fuels Standard (RFS). And just as the comments started, the National Corn Growers Association has asked for even more time for comments to come in.

But there’s no lack of viewpoints already out there. In this edition of the Domestic Fuel Cast, we’ll hear from National Turkey Federation president Joel Brandenberger, Purdue University’s Wally Tyner and Chris Hurt, former Secretary of Agriculture Clayton Yeutter, and Growth Energy CEO Tom Buis giving their thoughts about a possible RFS waiver.

You can listen to the Domestic Fuel Cast here: Domestic Fuel Cast

You can also subscribe to the DomesticFuel Cast here.

Poultry producers are getting some help from several governors in their call for the EPA to waive the Renewable Fuels Standard (RFS), but officials with the Renewable Fuels Association (RFA) say the RFS is working, and no waiver is needed. Georgia Gov. Nathan Deal has joined Arkansas Gov. Mike Beebe and North Carolina Gov. Beverly Perdue in asking for the waiver (see Deal’s letter here). The EPA has posted the notice in the Federal Register and is accepting public comments for the next 30 days. A decision would come within 90 days.

The poultry industry backs the waiver request, with the National Chicken Council saying, “it is now abundantly clear that severe economic damage has occurred, and will continue, as a result of the RFS’ strain on the corn supply that has been exacerbated by the worst drought in more than 50 years.” Their colleagues at the National Turkey Federation agree. In an interview, the group’s president Joel Brandenberger says that lawmakers created the waiver just for disastrous droughts. “If this isn’t such a situation, you would have to conclude that the waiver process as written is worthless.”

But the RFA points out there are an estimated 2.5 billion RFS credits accumulated over the past two years as a result of ethanol blending above RFS requirements. Officials point out that gives oil refiners extraordinary flexibility to meet RFS targets. “Together with ample ethanol supplies and slower than expected gasoline consumption, these credits make the RFS workable through the 2012/2013 corn marketing year.”

Brandenberger asserts that it is the standard combined with the drought creating tight supplies that is pushing up prices. “The [RFS] has been distorting the corn market from the first day it was created in 2005.” But the RFA counters that this will still be the eighth-largest corn crop in U.S. history, and globally, the second-largest ever. And the group also points to the large amount of animal feed made from ethanol production. “One-third of every bushel used by an ethanol plant is returned to the feed market as high-protein feed. Ignoring this exaggerates the impact of ethanol on corn supplies,” the RFA stated.

Listen to my interview with Brandenberger here: Interview with Joel Brandenberger, President, National Turkey Federation

The Environmental Protection Agency has officially requested a comment period to start the process toward consideration of a waiver for the Renewable Fuel Standard (RFS).

EPA issued the request for comments in response to petitions from the Governors of Arkansas and North Carolina last week seeking a waiver of the volume requirements for corn ethanol under the RFS. The request was submitted for publication in the Federal Register and the EPA will decide on the waiver request “within 90 days of receiving it, in consultation with the Departments of Agriculture and Energy.”

EPA is requesting comment on any matter that might be relevant to review of the waiver request, including -

whether compliance with the RFS would severely harm the economy of Arkansas, North Carolina, other States, a region, or the United States; whether the relief requested will remedy the harm; to what extent, if any, a waiver would change demand for ethanol and affect prices of corn, other feedstocks, feed, and food; the amount of ethanol that is likely to be consumed in the U.S. during the relevant time period, based on its value to refiners for octane and other characteristics and other market conditions in the absence of the RFS volume requirements; and if a waiver were appropriate, the amount of required renewable fuel volume appropriate to waive, the date on which any waiver should commence and end, and to which compliance years it would apply.

Dynamic Fuels, in a joint venture with Syntroleum, has garnered the EPA’s Part 79 registration for its Renewable Gasoline Blendstock 10. This Syntroleum news release says the designation allows enables Dynamic Fuels to generate 1.5 Advanced Biofuel, or D5, RINS for each gallon of its renewable gasoline blendstock when blended at 10 percent. The Dynamic Fuels’ Renewable Gasoline Blendstock can be blended directly into gasoline.

At its design basis production rate of 75 million gallons per year, Dynamic Fuels’ Geismar Plant should produce approximately 7.5 million gallons of renewable gasoline blendstock, or 11.25 million Advanced Biofuel RINS, per year. Advanced Biofuel RINS have traded for as much as $0.83 per RIN during 2012 and are currently approximately $0.46.

Dynamic Fuels also received the EPA Part 79 Registration for drop-in renewable fuels for Renewable Diesel Blendstock up to a 20 percent blend with petroleum diesel in 2009 and for Renewable Diesel for use at up to a 100 percent in 2011.

The folks from the Renewable Fuels Association are pointing to two university studies as proof any waiving of the Renewable Fuel Standard (RFS) would not significantly lower corn prices. The issue came to the forefront in the last few weeks as the drought pushed corn prices to record levels, and livestock groups look to the RFS waiver as relief from those prices. But this RFA news release points to a Purdue study (featured earlier here on Domestic Fuel in a webinar put on by Farm Foundation) and Iowa State University research that the drop in corn prices would be only about 5.6-7.4 percent. The webinar earlier today also showed the lower prices for producers and consumers at the grocery stores would not happen this year.

“The desire by livestock groups to see additional flexibility on ethanol mandates may not result in as large a drop in feed costs as they hope,” wrote Iowa State Professor Bruce Babcock. “…the flexibility built into the Renewable Fuels Standard allowing obligated parties to carry over blending credits (RINs) from previous years significantly lowers the economic impacts of a short crop, because it introduces flexibility into the mandate.”

“These economic analyses compellingly show that waiving the RFS is unnecessary and would be ineffective in meaningfully reducing corn prices,” RFA President and CEO Bob Dinneen said. “Congress and EPA built sufficient flexibilities into the RFS to ensure compliance is achievable even under the most abnormal and extreme circumstances, such as this summer’s drought. These studies recognize the impact of that built-in flexibility and show that a waiver would not significantly contribute any additional further relief from drought-induced high corn prices.”

You can hear the audio from today’s webinar here: Farm Foundation-Purdue Webinar on Drought and RFS Waiver
You can see the associated slide show here.

While a new report shows that a waiver of the Renewable Fuels Standard could drop corn prices, the impact would not be felt this year and could vary. The Purdue University report, entiled Potential Impacts of a Partial Waiver of the Ethanol Blending Rules, was authored by the school’s Wally Tyner, Farzad Taheripour and Christopher Hurt and presented today in a Farm Foundation webinar. It says corn prices could drop anywhere from 47 cents to $1.34 per bushel, depending on what level the drought impacts the final harvest, how big the waiver is, and how many unused Renewable Fuel Identification Numbers (RINs) are cashed in. But livestock producers and consumers would not see any benefit this year.

Tyner explained that technical and financial incentives could determine the impact of the waiver. “If refiners and blenders cannot change for technical reasons what they’re doing now, then a waiver has very little impact. But if they do have flexibility, then there is potential for a waiver having an impact,” Tyner said. Hurt added that there could be some unintended consequences, including what he calls demand destruction. “If we return to normal production in the next 12 months, then we have a fairly large supply, we have the possibility of looking at a 15 billion bushel corn crop with a utilization base of 11 billion bushels,” pointing out that we could see prices swing back to extremely low prices as quickly as they rose to these current high prices.

Paragon Economics’ Steve Meyer and the University of Minnesota’s Vernon Eidman were also listening in on the call and offering their perspectives. Meyer said the projected reduction in corn prices could translate into $2.60-3.50 per head on hogs. “We’re not talking about peanuts here.” But Eidman was quick to point out any RFS waiver would not impact corn use for ethanol this year. “It will take more time than that to get the rollback to occur,” Eidman said.

All on the webinar agreed that the EPA should not rush to issue any judgment until more complete information is known about the corn harvest, most likely in the next couple of months. “It’s important to get this right,” concluded Eidman.

It’s a really good conversation, and you can hear the entirety of it here: Farm Foundation-Purdue Webinar on Drought and RFS Waiver
You can see the associated slide show here.

While Govs. Bev Perdue of North Carolina and Mike Beebe of Arkansas have petitioned the EPA to waive the Renewable Fuels Standard (RFS) for ethanol in light of the drought gripping much of the corn-producing region of the country, a supplier for both sides in the argument has called for careful analysis of the situation. The National Corn Growers Association… which has alliances with the livestock producers who want to see lower feed prices and are pushing for the waiver and the ethanol industry which says the waiver is unnecessary… is asking all parties to carefully examine the facts of the case. NCGA President Garry Niemeyer acknowledges that all sides in this debate are suffering, but encourages a careful analysis before any decision is reached:

“There currently is a lot of public discussion about the role and impact of the Renewable Fuel Standard. Unfortunately most of this discussion is unencumbered by facts and reality. The facts clearly show that the RFS has been of significant net value to the entire U.S. economy.

“If indeed the analysis shows that the RFS is not causing severe economic harm, but instead ethanol production is responding to market forces rather than the RFS, then the request for a temporary partial waiver should be rejected. If however, the analysis clearly shows that the RFS is causing severe economic harm in light of the drought, then a temporary, partial waiver should be granted.

Niemeyer says an “open and free market approach is the best and most efficient solution” to getting all stakeholders through this crisis.

The Department of Energy has released a report on the expansion of wind energy in the U.S. and the U.S. manufacturing that is supporting the surge. The nation was one of the world’s largest and fastest growing wind markets in the world in 2011. Wind power represented 32-percent of all new electric capacity added in the U.S. last year. The states of Texas, Iowa, California, Illinois, Minnesota, Washington, Oregon, Oklahoma, Colorado and North Dakota were leading the way with the most installed wind capacity at the end of 2011 and account for almost 75-percent of U.S. wind capacity. Overall – the U.S. has now installed 50 gigawatts of wind energy. The turbines power the equivalent of nearly 13-million American homes. It’s estimated the wind energy industry supports 75-thousand full-time jobs at more than 400 facilities across 43 states.

The Energy Department says the percentage of wind equipment made in the United States has also expanded dramatically. In fact – nearly 70-percent of the equipment installed at U.S. wind farms last year – including wind turbines and components like towers, blades, gears and generators – was made in the U.S. That’s up from just 35-percent in 2005.

The growth in domestic wind energy deployment could dramatically slow in 2013 – according to the Department of Energy report. This is due in part to the possible expiration of federal renewable energy tax incentives. The Production Tax Credit is set to expire at the end of the year. This credit has helped drive the industry’s growth and the wind industry projects 37-thousand jobs could be lost if the credit is allowed to expire. President Obama has called on Congress to pass legislation that extends the credit.

Agriculture Secretary Tom Vilsack today announced 106 projects in 29 states, Guam and Puerto Rico have been selected for funding to make renewable energy and energy efficiency improvements. Money for the projects comes from the USDA Rural Development’s Rural Energy for America Program (REAP), authorized by the 2008 Farm Bill.

“The Obama Administration is helping agricultural producers and rural small business owners across the country reduce their energy costs and consumption,” Vilsack said. “This is part of the President’s ‘all-of-the-above’ energy strategy, which involves expanding support for traditional as well as alternative energy sources. Stable energy costs create an environment for sustainable job growth in rural America.”

The release highlighted projects such as a Washington County, Iowa wind turbine on a farm and an anaerobic digester in Wisconsin that will produce enough power for 420 homes each year. You can see the complete list of projects here.

REAP provides grants and loan guarantees for agricultural producers and rural small businesses to reduce energy consumption and costs, use renewable energy technologies in their operations and conduct feasibility studies for renewable energy projects. USDA has an active portfolio of more than $170 billion in loans and loan guarantees.

Two state governors have reportedly made an official request to the EPA to waive the RFS for corn ethanol, and the ethanol industry is wasting no time saying it should be denied. According to this Reuters article, North Carolina Gov. Bev Perdue and Arkansas Gov. Mike Beebe have asked the EPA for a waiver to the Renewable Fuels Standard (RFS), but officials at the Renewable Fuels Association (RFA) and Growth Energy have called on the government to reject those requests.

In a statement, the RFA says while the drought has stressed agricultural areas, it is not severe enough for the EPA to grant such a waiver:

“The RFS already includes a number of compliance options allowing great flexibility for oil refiners to meet their obligations under the program. The market is already taking advantage of these flexibilities as ethanol production has slowed 15% since the beginning of the year in response to market signals.

“To be clear, a waiver of the RFS will not provide the relief meat and livestock producers seek nor will it make it rain on dry corn fields and pastures. What waiving the RFS would do is send chilling signals to investors in new biofuel technologies, threaten to force gas prices higher than they already are, and dramatically lower the availability of ethanol feed products on which the livestock industry is growing to rely.”

Growth Energy responded saying the marketplace will straighten out any imbalance between corn supply and demand:

“Furthermore, the governors continue to use misinformation saying that corn ethanol uses 40 percent of the corn crop – we do not. In fact, only 16 percent of the corn acres harvested goes to ethanol production. Just one-third of the kernel is used for ethanol, with all the protein, fiber and oil being returned to the food chain in the form of a high protein animal feed, which replaces corn and soybean meal and is less expensive.

“To blame the ethanol industry due to a lack of rain does not make any sense. These governors are asking American family grain farmers who are already suffering crop loss to also take a further loss by limiting their market through a domestic grain embargo, benefiting large corporate food companies by lining their pockets at the expense of the family farmer, and our nation’s pursuit of energy independence.”
Read the rest of this post…

Officials with the Renewable Fuels Association (RFA) say if the EPA grants a waiver to the Renewable Fuels Standard (RFS), it would not bring the hoped-for reduction in feed prices for livestock producers and lower prices for consumers at the grocery stores. The calls for the waiver grew louder after last Friday’s USDA crop report showed a 13 percent reduction in this year’s expected corn crop due to the drought.

During a webinar today, the RFA’s VP of Research and Analysis Geoff Cooper looked at the impact of the drought on the corn crop and what it means for ethanol production and the RFS. He pointed out that some groups, particularly the meat lobby, are trying to turn this to their advantage. “These are the same groups that have been gunning for the RFS for a number of years and attempted to strike while the iron is hot,” Cooper explained. But he says their arguments that the RFS is too inflexible and the ethanol industry won’t reduce its demand for corn in proportion to the reduction in the crop just don’t hold water. “We’ve seen corn consumption by the ethanol industry drop significantly in recent months,” adding that the record surplus supply stocks of ethanol and RINs have helped the industry still maintain its end of the RFS. “The flexibility in the RFS and the responsiveness of the market itself make a waiver completely unnecessary.”

Cooper added that consumers won’t see any significant price drops in their grocery bills if the RFS is waived. He highlighted recent research that shows the waiver would produce only a 4.6 percent reduction in corn prices at the commodity level, which translates to even less for consumers when you consider that only 14 cents of every food dollar spent goes toward the actual commodity… transportation costs, support, marketing, etc. make up the other 86 cents. And he noted that consumers would end up paying a lot more for gasoline as ethanol is credited with lowering gas prices $.84-$1.07 per gallon. “Really what’s driving higher gas prices, as you would expect, are higher crude oil prices and some of the problems in the refining sector.”

Cooper concluded saying the bottom line is the ethanol industry and the market are responding and sharing in the tighter corn stocks, there is enough flexibility in the RFS to make it through a leaner year like this one, and an RFS waiver won’t reduce prices for anyone.

You can listen to the entire webinar here (it’s a little long at just over an hour but well worth a listen):
RFA Webinar on RFS Waiver
Follow along with the slide presentation here.

Former Nebraska governor and senator and candidate for the Senate once again, Bob Kerrey, urged the crowd at the American Coalition for Ethanol conference Friday to fight for the industry.

“The only way you beat these guys is by fighting,” Kerrey said about the opponents of ethanol. “With the RFS, you cannot win this thing by being kind and gentle.”

Kerrey also urged Congress to get a farm bill passed as soon as possible. “The House needs to take this bill up and pass it,” he said. “The idea of an ad hoc disaster bill is a mistake. It’s not going to be good for agriculture, it’s not going to be good for ethanol, it’s not going to be good for the long term future of the American economy.”

Kerrey is the Democratic candidate to replace Sen. Ben Nelson (D-NE), facing Republican Deb Fisher who was invited to the ACE conference but was unable to attend.

Listen to Kerrey’s remarks here: Bob Kerrey of Nebraska remarks at ACE

Listen to interview with Kerrey here: Bob Kerrey Interview

2012 ACE Conference Photo Album