Ethanol makers await EPA decision

Popular Articles

Coming off the most turbulent year in its history, the ethanol industry will fix its attention on Washington today

Coming off the most turbulent year in its history, the ethanol industry will fix its attention on Washington today — the deadline for environmental regulators to decide whether to allow more corn-based fuel in the nation’s gasoline supply.

Growth Energy, a trade association representing more than 50 ethanol producers, asked the U.S. Environmental Protection Agency in March for permission under the Clean Air Act to allow the use of conventional gasoline that contains as much as 15 percent ethanol. The limit has been 10 percent since 1978.

The EPA is supposed to announce a decision no later than today. Spokeswoman Deb Berlin said the agency will meet the deadline despite speculation otherwise.

“EPA remains committed to making an announcement by the deadline of Dec. 1,” she said in an e-mailed statement last week.

Whatever the outcome, the decision is sure to rankle some industry lobbies that have been sharply divided over the issue of putting more corn in the nation’s gasoline tanks.

A broad coalition of interests, including automobile and engine manufacturers, food and livestock industries, oil companies and environmental advocates, have urged the EPA to deny Growth Energy’s request.

The ethanol industry, still recovering from a shakeout that left several of its largest producers scrambling for bankruptcy protection, has lobbied vigorously for the change, arguing that its near-term future rests with the EPA’s decision.

A 2007 federal law mandated the use of 36 billion gallons of ethanol by 2022, including 15 billion gallons this year. But finding a use for all of the ethanol that’s supposed to be produced hasn’t been so easy.

Most gasoline sold in the U.S. already contains 10 percent ethanol. And demand for E85, a purer ethanol blend that can be used only in so-called Flex Fuel vehicles, has been slow to develop.

Nationwide, there are 202 ethanol plants capable of making 13.4 billion gallons of fuel, according to the Washington-based Renewable Fuels Association. Missouri is home to six of them. Illinois has 13, including one in Sauget.

Another 1.4 million gallons of ethanol capacity is under construction, including a Madison plant being developed by Chesterfield-based Abengoa Bioenergy.

That means production capacity is quickly approaching volumes equal to 10 percent of the nation’s annual gasoline demand — a reason the ethanol industry sees a significant barrier to additional expansion unless the current blend limit is raised.

“In order for the industry to regain its legs and be a long-term, sustainable industry, you have to have some expansion of the market potential,” said Gene Millard, chairman of ethanol producer Golden Triangle Energy LLC in Craig, Mo.

Missouri’s plants would seem to have a guaranteed market because of a state law that requires the sale of gasoline with 10 percent ethanol. But producers are still vulnerable to big competitors in neighboring states.

“We’re not an island,” said Millard, who is past president of the Missouri Renewable Fuels Association. “We can’t isolate ourselves.”

In its application with the EPA, Growth Energy argues that increasing the ethanol content in gasoline would be good for America. It would create an additional 6 billion gallons of annual demand, thousands of new jobs and limit dependence on foreign oil, the group says.

Ethanol producers also contend it will provide a catalyst for investment in emerging companies that are developing biofuels from materials other than corn, such as grass and algae.

If the EPA won’t act immediately to approve E15, the group is seeking approval of a 12 percent or 13 percent blend while additional research is conducted.

The campaign by ethanol producers and corn growers has reignited debate over the impact of ethanol on food prices and whether the fuel delivers the environmental benefits that its supporters claim.

The American Petroleum Institute, the lobbying group for the oil and natural gas industry, said in its comments to the EPA that there isn’t “sufficient credible scientific and technical support” for allowing more ethanol in gasoline.

Opponents also argue that higher-level ethanol blends could damage millions of lawn mowers and other vehicles and equipment because of the corrosive nature of the fuel.

Grocers, meanwhile, say policies that lead to increased corn ethanol use will lead to higher corn prices and, ultimately, higher prices for meat and dairy products — an argument that the ethanol industry and corn growers dispute.

Even if the EPA approves higher concentration of ethanol in gasoline, it won’t likely mean much for fuel demand outside of the Corn Belt, said Rick Kment, an analyst at DTN, a commodities research firm based in Omaha, Neb.

“We will see a significant amount of blending in the ethanol-rich states,” Kment said. “But that’s just a small piece of the pie compared to the population dense areas of the east and west coasts. Long term, we’re going to have to have more locally produced ethanol, and that’s going to depend on alternative (feedstock) sources.”

That was the hope of the 2007 federal mandate. But wide-scale commercialization of advanced biofuels, such as cellulosic ethanol from agricultural waste and algae-based fuels, remains at least a few years away.

That puts the onus on corn-based ethanol to keep the biofuels industry growing.

Pavel Molchanov, a Raymond James analyst in Houston, is skeptical that can happen. In a Nov. 2 report, he said the economics of the corn ethanol business suggest the industry’s best days are behind it, no matter the EPA’s decision.

“Finito, Kaput. Sayonara,” he said. “However you say it, we think there is no denying the fact that America’s corn ethanol industry is finished.”

- Advertisement -

More articles

Latest articles

- Advertisement -