Ethanol Industry Responds to RFS Waiver Request

Cindy Zimmerman

Ethanol Report PodcastThe Renewable Fuels Association (RFA) expects the waiver requested by livestock and poultry groups of the Renewable Fuel Standard (RFS) will be denied by the Environmental Protection Agency, despite the impact one of the worst droughts in history is having on the nation’s corn crop.

In this edition of “The Ethanol Report,” RFA president and CEO Bob Dinneen explains how a waiver will not help livestock producers and why the RFS should remain, even though corn ethanol production is likely to drop below the requirement this year.

Listen to or download the Ethanol Report here: Ethanol Report on RFS Waiver Request

Subscribe to The Ethanol Report with this link.

Audio, Ethanol, Ethanol News, Ethanol Report, RFA

Government May Be Key to Solar Success

Joanna Schroeder

According to a new report by GBI Research, “Solar Thermal Power Market to 2020,” it will take worldwide government support to have a major impact on the renewable energy industry. Government attitudes to solar thermal power, or concentrated solar power (CSP), will be a key determinant to the future success of the market, which today, has a high cost of power generation while the technology achieves economies of scale.

The report comes to the conclusion that government provisions can push forward technological advances and boost installations. These moves will then lower the expense of the technology thus lowering the amount needed for project investments and power generation.

The U.S. and Spain are currently benefiting from Feed-In Tariffs (FIT), says the report. A FIT system offers a financial incentive to producers in various forms that can take the shape of premium tariffs, per kwH, over a fixed amount of time. In America, a regulatory framework among some states establishes mandates requiring utility companies to purchase alternatively generated electricity. In Spain, renewable energy investments are rewarded with tax rebates. Today, Spain and the U.S. hold the greatest share of the global CSP market.

The global CSP market is expected to grow by 2011 installed capacity of 1,546 MW to 47,462.9 MW in 2020, climbing at a Compound Annual Interest Rate (CAGR) of 44%.

Electricity, Energy, Solar

Food, Livestock Industries Blast RFS

Joanna Schroeder

The Wall Street Journal published an article, “The Ethanol Mandate is Worse Than the Drought,” in which Smithfield Food CEO Larry Pope blasted the Renewable Fuels Standard (RFS). This is another example of the orchestrated campaign against the RFS. In the article, ethanol production is blamed for the rising cost of food.

In response to the article, Brian Jennings, Executive Vice President of the American Coalition for Ethanol (ACE) called the articles’s conclusion that the RFS is worse than the drought, “uniformed and irresponsible” and criticizes Pope for exploiting the ongoing natural disaster around the country. The U.S. is seeing the worst drought conditions is more than 50 years causing food prices to rise even before the crops are harvested.

“The U.S. Environmental Protection Agency has more than adequate flexibility to make adjustments to the RFS if there is a legitimate reason to do so. Iowa State Professor Bruce Babcock recently determined that a total waiver of the RFS would reduce corn prices less than 5% and cause less than a 5% reduction in ethanol production. While Larry Pope may hope that waiving the RFS might pad the profits of Smithfield Foods, it would have damaging consequences for our nation’s energy security and raise gasoline prices,” said Jennings. This is just one topic that will be addressed at ACE’s 25th Annual Ethanol Conference being held in Omaha, Nebraska August 8-10, 2012.

The fight continued this morning when the livestock and poultry producers held a press conference calling for a RFS waiver. Tom Buis, CEO of Growth Energy, noted that the current situation is a result of Mother Nature and not ethanol. To blame ethanol, he said, is “disingenuous and absurd. He also said we will not run out of corn, and the market will adjust to the current situation.

There has been a decrease in ethanol production; yet, there is still a billion gallon surplus of ethanol and another 3 billion RINs available. These two factors, said Buis, will allow obligated parties flexibility to meet ethanol mandates.

“If these groups desire is to pick and choose who gets first access to the available crop – as opposed to letting the market determine the best and highest use thru supply and demand, then they should look at all uses for corn, not just ethanol,” added Buis.

ACE, Agribusiness, Ethanol, Growth Energy

RFA Expects RFS Waiver to be Denied

Cindy Zimmerman

Responding to plans by livestock and poultry groups to seek a waiver of the Renewable Fuel Standard, the head of the Renewable Fuels Association (RFA) expects the request to be denied.

“Given the flexibilities inherent to the RFS, and the fact that waiving the program would not result in any meaningful impacts on corn prices, we fully expect Administrator Jackson to deny any waiver request,” said Bob Dinneen, RFA president and CEO. “A dispassionate review of the facts can lead to only one conclusion: a waiver of the RFS would simply reward oil companies that have long sought to repeal this very important and successful program. The RFS has reduced our dependence on imported oil and saved consumers at the pump.”

RFA“This summer’s hot, dry weather conditions have caused significant challenges for all users of grain,” Dinneen said. “We understand the hardships facing the agriculture industry this summer are serious. From extremely poor pasture conditions to heat stress on animals to reduced crop yield potential, this summer’s circumstances have been difficult. However, waiving the RFS won’t bring the type of relief the livestock groups are seeking, nor will it result in significantly lower feed prices. In fact, because ethanol plants also produce a high protein feed, limiting ethanol production will only further complicate drought related feed issues and costs.”

“The marketplace is the most efficient mechanism to ration demand, not the government, and that is already happening,” Dinneen continued. Dinneen pointed out that the ethanol industry has already begun to respond to sharply higher corn prices by significantly reducing production. The industry’s consumption of corn last week was the lowest in over two years and down nearly 14% in just the last six weeks.

Still, despite the downturn in production and continued demand rationing by the ethanol industry, obligated parties (petroleum refiners and blenders) should have no problem meeting the RFS. The ability of obligated parties to “bank” excess Renewable Identification Number (RIN) credits and use them for compliance in the following year provides a significant measure of flexibility that takes pressure off of the corn market in the event of a short crop. It is estimated that some 2.4 to 2.6 billion excess renewable fuel RIN credits are currently available to obligated parties, equivalent to nearly 20 percent of this year’s RFS renewable fuel requirement.

Ethanol, Ethanol News, livestock, livestock feed, RFA

Livestock and Poultry Groups Seek RFS Waiver

Cindy Zimmerman

Livestock and poultry producers are filing a petition with the Environmental Protection Agency (EPA) seeking a waiver from the Renewable Fuel Standard (RFS) in light of the current drought situation likely to cause feed shortages.

“I and NCBA support American ethanol,” said National Cattlemen’s Beef Association president J.D. Alexander of Nebraska. “I’m not asking for a handout. I’m asking for the federal government to let the market work.”

“Relief from the Renewable Fuel Standard is extremely urgent,” said Past National Chicken Council chairman Michael Welch, President & CEO of Harrison Poultry in Bethlehem, Georgia.

Alexander and Welch were joined at a morning press conference by Randy Spronk of Minnesota, National Pork Producers Council president-elect and John Burkel, Minnesota turkey grower and National Turkey Federation vice chairman.

Listen to opening comments at a press conference this morning from the four organization leaders here: Livestock and Poultry groups

Under questioning by reporters, the groups were pressed about their legal capability of being able to even request the waiver, since the Clean Air Act states that a waiver can only be filed by an EPA administration, obligated party, or a governor – as was the case with Rick Perry of Texas in 2008. Michael Formica, NPPC Chief Environmental Counsel, clarified. “We petitioning her (EPA Administrator Lisa Jackson) to use her authority to waive the rule,” he said.

Listen to questions and answers from the press conference here: Livestock and Poultry Q&A

National Corn Growers Association (NCGA) President Garry Niemeyer of Illinois says they believe it is premature to ask for a waiver of the RFS right now, but better than asking for a change in the law. “With the crop still in the field, it is too early to determine this year’s final corn supply. In addition, the ethanol industry now has a significant surplus of ethanol and RFS credits that can greatly offset ethanol’s impact on the corn supply,” he said. “However, we recognize the severe impact of the drought on our farmers and our customers, here and abroad, with livestock, poultry, ethanol and other processing facilities, and we believe the flexibility of the RFS does work, and will work. NCGA also supports the waiver process that is embodied in the current RFS, and respects the right of those that may file a waiver petition to do so.”

corn, Ethanol, Ethanol News, livestock feed, NCGA

Payments Made to Renewable Feedstocks Producers

Joanna Schroeder

Nearly $19.4 million in payments to 125 advanced biofuel producers growing non-food feedstocks for use in development for biofuels has been made by the UDSA. The funding is provided through USDA’s Bioenergy Program for Advanced Biofuels that was established in the 2008 Farm Bill. The goal of the program is to support the research, investment and infrastructure needed to build a diverse American-based biofuels industry.

“Advanced biofuels are a key component of President Obama’s ‘all-of-the-above’ energy strategy to reduce the Nation’s reliance on foreign oil and take control of America’s energy future,” said Agriculture Secretary Tom Vilsack. “These payments represent help to spur an alternative fuels industry using renewable feedstocks grown in America, broadening the range of feedstock options available to biofuels producers, helping to create an economy built to last.”

Dozens of different feedstocks can qualify for the program but no corn-based feedstocks are allowed. For example, crop residue, animal, food and yard waste material, vegetable oil, and animal fat are some of the feedstocks that producers are cultivating and biofuels producers are developing.

Representatives of the USDA say that increased biofuel production only plays a minor role in retail food price changes. Feedstock diversity leads to market flexibility and relieves market pressure.

Click here for a list of the advanced feedstock producers that received payments.

advance biofuels, Agribusiness, feedstocks

Obama Officials Voice Support for RFS

Joanna Schroeder

The Obama administration has vocalized its continued support for the Renewable Fuels Standard (RFS) by rebuffing “alarmist calls” for its end. Last week, Renewable Fuels President (RFA) and CEO Bob Dinneen wrote a letter to U.S. Agriculture Secretary Tom Vilsack and Environmental Protection Agency (EPA) Administrator Lisa Jackson thanking them for acting responsibly in the wake of calls to modify or dismantle the RFS. Dinneen has been on record multiple times saying changes to the RFS are “simply not warranted.”

Dinneen wrote, “Your comments have provided the kind of certainty and security that is necessary to ensure the renewable fuels industry continues to evolve. Further, your agencies’ recent remarks regarding the RFS serve as important signals to the investment community that the nation’s commitment to diversifying our fuel supply and creating a future market for new advanced biofuel technologies remains intact,” Dinneen wrote.

Opposers of RFS have gained some momentum of late using the record breaking drought conditions as an example of why the RFS will not work. However, Dinneen says the RFS has “tremendous flexibility built into the RFS program” by way of Renewable Identification Numbers (RINs) that allow obligated parties to “bank” credits.

According to research released last week by Iowa State University professor Bruce Babcock, there are an estimated 2.4-2.6 billion RINS available and a reduction in the RFS might only serve to lower corn prices by 4.6 percent. In addition when corn prices began to rise, says Dinneen, ethanol consumption of corn fell nearly 14 percent, a two-year low, while exports increased nearly 15 percent.

Dinneen concludes that waiving RFS mandates will not serve its intended purpose and market signals along with the flexibility of the RFS are working.

biofuels, Ethanol, RFA

Ethanol Production Declines

Joanna Schroeder

New data has been released from the Energy Information Administration (EIA) regarding ethanol production data that averaged 796,000 barrels per day (d/d) or 33.43 million gallons daily. This is down 6,000 b/d from the previous week. The four week average ethanol production is 819,000 b/d for an annualized rate of 12.55 billion gallons.

Gasoline demand for last week averaged 363.7 million gallons per day while ethanol stocks remained at 19 million barrels. Ethanol production represented 9.19 percent of daily gasoline demand. Year-to-date U.S. ethanol export data implies annualized export demand of approximately 900 million gallons.

Ethanol producers used 12.069 million bushels of corn to produce ethanol and 88,836 metric tons of livestock feed of which 79,198 metric tons were distillers grains. The rest is comprised of corn gluten feed and corn gluten meal. In addition, ethanol producers were providing 4.15 million pounds of corn oil daily.

corn, Distillers Grains, Ethanol

Biodiesel, RINs and RFS2

Joanna Schroeder

The Environmental Protection Agency (EPA) is looking into the fraudulent sale of Renewable Identification Numbers (RINs). These are generated when a gallon of biofuel is produced and most often “sold” with the gallon of biofuel. But is some cases RINs can be sold and bought without the biofuel attached.

What’s the big deal? RINs are used by the EPA to track compliance of biofuel use as part of the Renewable Fuel Standard (RFS2). The sale of fake RINs hurt the biofuel companies who are producing the fuel and if enough are sold, would keep obligated parties from legally achieving compliance.

According to OPIS who is hosting the 4th Annual RFS2, RINs & Biodiesel Forum being held October 18-19, 2012 in Chicago:

  • Obligated parties have had to pay approximately $200 million in fines so far as a result of EPA’s “buyer beware” enforcement policy.
  • A Maryland man now faces 32 years in prison for selling more than 32 million fraudulent biodiesel RINs.
  • Marketers across the country are worried that there is no good way to make sure their RINs are “clean.”

EPA regulations and RIN compliance are just a few of the topics that will be discussed during the conference. Click here to learn more and to register.

Biodiesel, conferences

CARD: Reducing RFS Would Not Achieve Goals

Joanna Schroeder

According to the Center for Agriculture and Rural Development (CARD) located at Iowa State, calls to reduce, revise or repeal the Renewable Fuel Standard (RFS) would not achieve the goals of the industries who are demanding the action.

“The desire by livestock groups to see additional flexibility in ethanol mandates may not result in as large a drop in feed costs as hoped,” said Iowa State Professor Bruce Babcock, author a new research brief, “Preliminary Assessment of the Drought’s Impacts on Crop Prices and Biofuel Production.”

As part of the research, Babcock analyzed 500 different scenarios using various levels of corn yield for the 2012 crop.  He then determined that a total waiver of the RFS would reduce corn prices less than 5 percent and cause less than a 5 percent reduction in ethanol production.

At first glance this seems like a mistake. But Babcock says the lower than expected results are due to the flexibility in complying with the RFS in 2012 and 2013. For example, during this timeframe, an estimated 2.4 billion excess Renewable Identification Numbers (RINs) can be used in place of purchasing actual gallons of a renewable fuel to demonstrate compliance. This allows obligated parties to carry over RINs and lowers the economic impact of a short crop such as what we are expecting this year due to excessive drought conditions affecting nearly 75 percent of crops across the country.

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advance biofuels, biofuels, Ethanol, RFA