Things are looking up, but they are also very much up in the air when it comes to ethanol this year.
While ethanol production facilities have benefited from an improved national economy as the U.S. emerges from the economic doldrums of the COVID-19 pandemic, industry experts are anxiously awaiting word on a variety of items being considered in Washington, D.C., that could impact biofuels.
“It’s a nervous time,” says Monte Shaw, executive director of the Iowa Renewable Fuels Association.
At the plant level, 2021 has been a definite improvement over 2020, according to Mike Jerke, manager at Southwest Iowa Renewable Energy in Council Bluffs.
“It was a significant challenge,” Jerke says of 2020, when drivers suddenly began putting far fewer miles on their cars and fuel usage dropped dramatically. “There was enough pain inflicted.”
Many facilities either closed or ran at less than full capacity during that time. In 2021, demand has picked up and margins improved for most ethanol producers. There have been challenges, such as a shortage of labor and the increased cost of finding labor. In some areas the derecho storm that hit a large swath of Iowa in 2020 caused some challenges finding corn.
“It took a chunk of corn supply out of the picture,” Jerke says.
But an improving economy and better crops have thus far made 2021 better than the very difficult pandemic year.
“We’re going to have a respectable year,” Jerke says.
But Jerke and Shaw both say there are still a number of issues causing concern among farmers and the makers of ethanol. Electric cars are a huge topic of discussion (see sidebar). The Environmental Protection Agency is expected to come out with new rules and numbers for biofuel blending requirements soon, and the rumors flying around have many in the industry concerned that the Biden administration might make moves that would hurt ethanol producers.
Then there are issues related to climate change and carbon that could be good for ethanol but could also go against the industry.
The frustrating thing, Shaw says, is that it seems every new president says nice things about ethanol on the campaign trail and then proposes things that could hurt the industry once they are in office. This has been true of every president since the Renewable Fuels Standard was passed. Presidents Barack Obama, Donald Trump and Joe Biden all said supportive things about ethanol and all have generally done some things to boost the industry but also did or proposed things that hurt it, such as the increased use of waivers for refineries under the Trump administration.
Right now the industry is watching the discussions about infrastructure in Congress as well. At the end of the day it is possible they come out better than before, but some of the things being discussed and some of the rumors coming out of Washington are unsettling, Shaw says, adding that “the policy picture is bleak.”
The bleakest part of that picture is the rumor that EPA intends to reduce the RFS conventional biofuel levels for 2020, 2021 and 2022. That would be devastating, Shaw says.
“It’s not what I expected from the Biden administration,” he says. “The numbers are so horrible I hadn’t contemplated them.”
The Renewable Fuels Association in Washington, D.C., also spoke out on the issue and praised some farm-state Democrats in Congress, including Rep. Cheri Bustos of Illinois and Cindy Axne of Iowa, for their letter to the administration regarding the EPA rumors. A group of farm organizations, including the American Farm Bureau Federation and the National Farmers Union, as well as the corn and soybean associations, also sent a letter to the White House regarding the EPA rumors.
There are several other issues out there, some of which could be addressed in the bipartisan infrastructure bill or the larger budget reconciliation bill that includes a number of large investments in infrastructure and climate. Shaw says a change in language to add the words “and more” to the 10% ethanol language in present legislation would offset a recent court ruling and open the door to more E15 blends in the market. And the infrastructure bill includes some money for biofuel infrastructure that would be beneficial to the industry.
What’s more, Shaw says the California carbon rules may open the door for more biofuel sales in that state as it attempts to reduce carbon emissions. If the federal government doesn’t move to deal with the challenges to E15, the industry will likely look to state-by-state fixes, he adds.
Electric cars are another challenge, since they don’t use liquid fuel and thus don’t burn ethanol. Jerke says the country tends to “get very excited about the next new thing” and that sometimes means leaving behind other good options.
“We need an all-the-above approach,” he says. “I don’t think it is good for the country to put all its eggs in one basket.”
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