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Ethanol Industry Eyes on EPA’s Wheeler | Rural Radio Network

Ethanol Industry Eyes on EPA’s Wheeler

Ethanol Industry Eyes on EPA’s Wheeler
USEPA photo by Eric Vance

DES MOINES, Iowa (DTN) — Andrew Wheeler, EPA’s acting administrator, wasn’t at the Iowa Renewable Fuels on Tuesday, but he was the focus of the industry’s outlook on multiple fronts.

At the Iowa Renewable Fuels Association booth was an oversized poster-card letter to Wheeler, calling on EPA to complete the rules for year-round E15, as well as stop the small-refinery exemptions that the ethanol industry sees gouging biofuel demand.

Suffering from low margins and idle plants, the fate of the Iowa ethanol industry right now hinges on EPA getting year-round E15 — a fuel blend of 15% ethanol and 85% gasoline — done by this summer’s driving season and capturing export markets in countries such as China.

Iowa Gov. Kim Reynolds made a point to sign the card after speaking to the crowd. Noting Iowa ethanol capacity is anywhere from 10% to 20% offline, Reynolds said the ethanol industry is at the low of a commodity cycle right now. Reynolds added she received assurances from Wheeler that the E15 rule would be done on time, despite the partial federal shutdown over the past month.

Monte Shaw, executive director of the Iowa RFA, said the ethanol industry “is hurting, but it’s hopeful” after 2018. The past year was a challenging one for the biofuels industry working to defend the Renewable Fuel Standard from being gutted by the petroleum industry and its supporters who tried to cap prices on renewable identification numbers (RINs).

John Eichberger, executive director of the Fuels Institute, said right now only 1,690 fuel stations in 30 states have E15 pumps. Once year-round E15 kicks in, Eichberger expects the number to spike to tens of thousands of service stations and pumps in the next five years.

“Retailers make money on E15,” Eichberger said. “There’s no evidence it is going to be a problem. It’s going to have huge market opportunities because it makes a lot of sense.”

Industry representatives are divided on whether EPA can move quickly enough on that E15 rule, which amounts to a waiver from Reid vapor pressure (RVP) standards. President Donald Trump has pushed for the E15 goal, and Wheeler also is getting tired of the pressure of going to Capitol Hill and being pressed on the topic.

“When the president says something, he expects it to be done, and it will be done,” said Eric Branstad, who has advocated for biofuel policies at the White House.

Robert White, vice president of Industry Relations for the Renewable Fuels Association, said the jury is out on whether EPA can get the E15 rule out on time. It will require a 45-day comment period, and EPA has yet to get a proposed rule to the White House Office of Management and Budget (OMB) for review.

“All proposals have to start at the OMB, and it’s not there yet,” White said.

The plan would speed up if EPA splits the E15 rule from an expected rule to reform the RIN market. The industry also recognizes that, no matter how fast EPA works, the petroleum industry will litigate.

“The oil companies have said as soon as the ink dries on the administrator’s signature, they will be in court,” Shaw said.

SMALL-REFINERY WAIVERS

News also dripped throughout last year that at least 48 separate oil refineries, some owned by the most profitable companies in the petroleum industry, got waivers from the RFS for 2016 and 2017, accounting for nearly 2.5 billion gallons of fuel volume. That was all done under former EPA Administrator Scott Pruitt.

“It became pretty clear Mr. Pruitt wasn’t being an honest broker,” Shaw said. While Pruitt was dogged by ethics scandals, Shaw pointed out, Pruitt’s resignation came shortly after a trip to the Midwest when farmers turned on him. “I think it became clear that the American farmer could no longer trust him, that his days were numbered.”

Ethanol’s experience with Pruitt has made the industry more cautious of the power of the EPA administrator. The American Coalition of Ethanol sent a letter to U.S. senators Tuesday asking lawmakers to “secure tangible documentation on two critically important ethanol issues” before the full Senate takes a confirmation vote on Wheeler to be the permanent EPA administrator. Those documented assurances include the rule-making for year-round E15, as well as reallocating ethanol-blending obligations waived for the 2016 and 2017 through the small-refinery exemptions.

“There is no better way to guarantee the RVP rule and reallocation of refinery waivers are addressed than by insisting Mr. Wheeler provide tangible evidence of his intentions on these issues prior to voting to confirm him,” the ACE letter stated.

EPA is reviewing dozens of requests for 2018 small-refinery exemptions awaiting decisions by Wheeler, with no clear answers on the outcome. The hardship case for refiners is more difficult to make now because RINs are down from roughly 60 cents to 22-23 cents each.

“I do think we have better odds on a more judicious outcome with Wheeler,” White said.

Donnell Rehagen, CEO of the National Biodiesel Board, added that, compared to EPA under Pruitt, “I’m hoping there will be a little more scrutiny put to those (small-refinery exemptions) before there is action.”

EXPORT OUTLOOK TURNS TO CHINA

Given the challenges with domestic policy, ethanol producers are looking for more potential export markets as other countries embrace renewable fuel standards. U.S. ethanol exports hit 1.6 billion gallons in 2018, and exports are projected to grow to 1.8 billion gallons this year. The industry goal is to hit 4 billion gallons by 2022, said Mike Dwyer, chief economist for the U.S. Grains Council.

Dwyer said the Chinese government is working to create a policy similar to the U.S. and Brazil on biofuels. “China is the one market that makes us all salivate,” Dwyer said. “I would not be surprised if we put this trade war to bed to see 300 million gallons going to China in 2019, and 1 billion gallons in 2020 is not beyond the realm of possibility.”

Iowa farmer Kelly Nieuwenhuis went to China last fall with a delegation to talk about biofuel policies. China is moving to an E10 policy, but the country doesn’t have the domestic ethanol production to meet that need, Nieuwenhuis said. China’s largest ethanol producer, COFCO, also wants to do business with U.S. ethanol producers, he said.

“They’ve said there’s the potential for 1 billion gallons in U.S. ethanol exports to China,” Nieuwenhuis said.

White had earlier noted the need for an export market to return the industry to profitability.

“The ethanol industry needs some relief as well. Ethanol plants are operating at a dangerous — or lack of — margin is probably a better way to put it,” White said, adding that China looks like a market opportunity.

Dwyer also said efforts continue moving forward in Mexico to get an E10 mandate nationally, but there continues to be resistance from Mexico’s domestic petroleum industry.

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