ACE: COVID-19 Exposes Flaw in RFS Rulemaking

Cindy Zimmerman

The American Coalition for Ethanol is urging the Environmental Protection Agency (EPA) to address a shortcoming in the implementation of the Renewable Fuel Standard (RFS) which has been exposed with the recent nosedive in gasoline use as a result of COVID-19.

ACE CEO Brian Jennings explains that the world is very different today compared to the end of December. “At the time EPA set the 2020 RFS blending requirement and renewable volume obligation (RVO), the Agency projected gasoline demand would approach 143 billion this year. Today, due to the social distancing from COVID-19, as gasoline demand falls, it leads to reductions in ethanol blending, meaning the 11.56 percent RVO will not result in the use of 20.09 billion gallons in 2020 as required by statute. Without adjusting the percentage of renewable fuel volume obligated parties must use in 2020, EPA will be violating the RFS statute which amounts to an illegal waiver of blending volumes.”

Jennings says ACE is calling on EPA to use existing statutory authority to issue an interim final rule by July 1 to increase the RVO for 2020 to the percentage necessary to ensure that the full 20.09 billion gallons required by law are used. He adds that, based on the recent Tenth Circuit Court precedent regarding small refinery exemptions (SREs), EPA should deny most of the 25 SRE waivers pending for the 2019 RFS compliance year.

In this interview, Jennings also discusses how ethanol plants are faring and other actions the government could take to ease the pain.

Interview with ACE CEO Brian Jennings (11:16)

ACE, Audio, EPA, Ethanol, Ethanol News

Farm Bureau Details COVID-19 Impact on Ethanol

Cindy Zimmerman

Agricultural commodity prices are taking big hits from the COVID-19 emergency, and one of the most hard hit sectors is ethanol, according to the American Farm Bureau Federation (AFBF).

In the past month, dairy prices have dropped 26-36%, corn futures have dropped by 14%, soybean futures are down 8% and cotton futures have plummeted 31%. Hog futures are down by 31%, prices paid to cattle ranchers have fallen 25%, and ethanol prices are down 35%.

Abiding by travel restrictions, people are driving far less, pushing down demand for both oil and ethanol made from corn. A 35% drop in ethanol prices caused some plants to stop production, further depressing corn prices. The sudden change also cut off the supply of dried distillers grains — a byproduct of ethanol production and source of high-protein feed — for livestock producers, who are left scrambling to find a replacement.

AFBF Economist Veronica Nigh says another impact from the decline in ethanol production is in meat processing, which uses the byproduct CO2. “Ethanol plants are the largest producers of CO2 in the U.S.,” said Nigh.
AFBF Economist Veronica Nigh on ethanol declines (1:11)

During a telephone press call on Friday, Minnesota cattle producer Peter Bakken said he uses distillers grains for 25% of his feed and while his local ethanol plant is still operating, he is being rationed.
Comments from MN cattle farmer Peter Bakken (1:37)

AFBF, Ag group, Audio, Distillers Grains, Ethanol, Ethanol News

REG in Newton Seeds Monarch Fueling Station

Cindy Zimmerman

The Renewable Energy Group (REG) biodiesel plant near Newton, Iowa is growing a monarch fueling station.

Local Pheasants Forever representatives recently conducted a seeding of native grasses, milkweed, and other plants that attract pollinators. The mixture has a special emphasis on milkweed plants, the only plant monarchs can lay their eggs on.

Iowa Renewable Fuels Association (IRFA) Habitat Establishment Coordinator Kevin Reynolds helped REG get started with the project last year. He said while the majority of the plants will spend the first growing season developing roots, there will be some growth in the spring.

“It will take the habitat a few growing seasons to become fully established but some species will pop up as early as this coming spring,” Reynolds said. “It takes some patience in the beginning but after the first few years REG will be on their way to making an important impact for the monarch butterfly.”

REG – Newton’s Monarch Fueling Station spans one and a half acres. To prepare for seeding, plant employees previously focused on eliminating non-native grasses from the area.

The Monarch Fueling Station Project was established by the Iowa Renewable Fuels Association (IRFA) in partnership with the Iowa Monarch Conservation Consortium in December 2017.

Biodiesel, Ethanol, Ethanol News, Iowa RFA, pollinators

RFA Economist Discusses Ethanol Production Declines

Cindy Zimmerman

While the industry knew ethanol production was dropping due to coronavirus impacts on the transportation sector, the actual numbers from the Energy Information Administration for the week ending March 27 were sobering. A drop of more than 16 percent in a week to the lowest level in six and a half years.

But Renewable Fuels Association (RFA) Chief Economist Scott Richman says the consumption side shows more troubling signs. “Gasoline demand was down roughly a quarter, versus the previous week and the previous year,” said Richman. In addition, refiner/blender net inputs, which is a measure of ethanol demand, was down by a third.

In this interview, Richman also talks about how the $2 trillion economic stimulus bill will help ethanol plants, how planting intentions might change, and ethanol plants making hand sanitizer.

RFA chief economist Scott Richman analyses EIA numbers (9:26)

Audio, corn, Ethanol, Ethanol News, RFA

EIA Data Confirms Plummeting Ethanol Production

Cindy Zimmerman

The latest EIA Weekly Petroleum Status Report released today for the week ending March 27 is the first to reflect more fully the impact on the ethanol industry from the social distancing and stay-at-home restrictions associated with COVID-19.

According to EIA data analyzed by the Renewable Fuels Association, ethanol production plummeted 16.4%, or 165,000 barrels per day (b/d), to 840,000 b/d, the lowest level in six and a half years. The decline was the largest since the EIA began reporting ethanol production statistics in 2010. The four-week average ethanol production rate declined 5.8% to 981,000 b/d, equivalent to an annualized rate of 15.04 billion gallons.

Ethanol stocks rose 6.5% to a record 25.7 million barrels, eclipsing the previous high set four weeks prior. Inventories shifted higher across all regions except the Midwest (PADD 2). A majority of the stocks build took place in the Gulf Coast (PADD 3), where inventories grew by roughly one-quarter.

The volume of gasoline supplied to the U.S. market for last week sank over 24 percent compared to the previous week and 27.1% lower than a year ago to the smallest volume since the week of Jan. 28, 1994.

In addition, the amount of ethanol blended (Refiner/blender net inputs) last week was the lowest level ever reported by EIA, at 601,000 barrels/day, dropping 31 percent from the previous week and almost 34 percent from a year ago.

Ethanol, Ethanol News, RFA

SAFE Vehicles Rule Misses High Octane Opportunity

Cindy Zimmerman

Ethanol groups are calling the final Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule setting corporate average fuel economy (CAFE) and CO2 emissions standards for model years 2021-2026 passenger cars and light trucks a “missed opportunity to provide a pathway for high octane, low carbon fuel.”

American Coalition for Ethanol (ACE) CEO Brian Jennings said EPA specifically requested comments on the role 100 Research Octane Number (RON) E30 could play to help automakers meet fuel economy and emissions standards.

“There are a number of regulatory barriers restricting market access to high octane mid-level ethanol blends that we set forth in our comments in the fall of 2018 and it’s unfortunate that after requesting information from the public on the ‘ideal octane level,’ the ‘benefits of increasing fuel octane,’ and specifically how higher octane fuel will play a role in ‘engine technologies and product offerings’ and ‘improvements to fuel economy and CO2 reductions,’ EPA failed to incorporate what the Agency previously conceded: ‘higher octane fuel can provide auto manufacturers more flexibility to meet more stringent standards by enabling opportunities for use of lower CO2 emitting technologies.’”

EPA said in the final rule that “establishing a higher minimum octane for gasoline is a complex undertaking” and “the present rulemaking is not the appropriate vehicle to set octane levels.”

According to the Renewable Fuels Association (RFA), EPA also declined to adopt new incentives for flex-fueled vehicles (FFVs) because they are “outside the scope” of the vehicle fuel economy rule, despite the fact that the rule includes incentives for natural gas vehicles, electric vehicles, and other alternative fuel vehicles.

As an example, EPA’s rule assumes that electric vehicles have no “upstream” greenhouse gas emissions related to their use; in other words, the agency completely ignores emissions related to producing electricity from coal, natural gas, and other sources and distributing the electricity to the vehicle. This results in a significant fuel economy “credit” for electric vehicles that is not based on any real emissions reduction.

“Of all the stakeholders who provided input to EPA on the topic of octane, only the oil industry voiced opposition to EPA using its authority to set standards for higher-octane fuels,” said RFA President and CEO Geoff Cooper. “Once again, EPA has sided with the oil industry over automakers, biofuel producers, farmers, environmental advocates, and consumers.”

ACE, automotive, EPA, Ethanol, Ethanol News, Renewable Fuels Association, RFA

Lower Ethanol Demand Could Impact Planting Decisions

Cindy Zimmerman

USDA’s 2020 Prospective Plantings report released Tuesday estimates planted acres for corn this year at 97.0 million acres, up 8 percent or 7.29 million acres from last year. But when farmers were surveyed a month ago, coronavirus had yet to have the impact it is now having on ethanol demand and prices thanks to a drastic cut in demand for gasoline with millions of Americans staying at home.

Top ethanol producer POET last week stopped buying corn at seven of its 27 plants and Renewable Fuels Association President and CEO Geoff Cooper says there are many more. “There are probably close to three dozen ethanol plants that have completely idled their capacity, we think there’s another two or three dozen facilities that have greatly reduced their output,” said Cooper. “If we get up close to three billion gallons of capacity that is coming off line, we’re talking about a billion bushels of corn.”

Listen to Cooper’s comments here:

RFA CEO Geoff Cooper discusses drop in ethanol demand (2:24)

Audio, corn, Ethanol, Ethanol News, RFA

Higher Corn and Soybean Acres Forecast

Cindy Zimmerman

USDA’s 2020 Prospective Plantings report released Tuesday forecasts eight percent more corn acres this year compared to 2019 and ten percent more soybean acres.

Corn planted area for all purposes in 2020 is estimated at 97.0 million acres, up 8 percent or 7.29 million acres from last year. Compared with last year, planted acreage is expected to be up or unchanged in 38 of the 48 estimating States. Soybean planted area for 2020 is estimated at 83.5 million acres, up 10 percent from last year. Compared with last year, planted acreage is expected to be up or unchanged in 22 of the 29 estimating States.

The acreage estimates in the report are based on surveys conducted during the first two weeks of March, before the coronavirus impact on the economy really got serious. With ethanol plants idling and cutting back production, the question is how that will impact corn planting decisions.

Brian Basting of Advance Trading says USDA’s corn estimate was about three million acres higher than the average trade guess, and he says the impact of coronavirus on ethanol production may be offset by higher feed demand.

Listen to Basting’s analysis from the MGEX crop call on the plantings report.
Brian Basting, Advance Trading, MGEX Crop Call (3:38)

Audio, corn, Ethanol, Ethanol News, USDA

EPA COVID-19 Response Delays Waiver Changes

Cindy Zimmerman

The U.S. Environmental Protection Agency (EPA) on Friday announced several steps being taken to protect the nation’s gasoline supply in response to the COVID-19 pandemic, including making any changes in its policy of granting small refinery waivers as a result of the recent 10th Circuit Court decision.

EPA does not intend to unilaterally revisit or rescind any previously granted small refinery exemptions issued for prior compliance years. As noted in the temporary policy on COVID-19 Implications for EPA’s Enforcement and Assurance Program, issued yesterday, EPA is focused on protecting our employees and ensuring continued protection of public health and the environment from acute or imminent threats during the COVID-19 pandemic. Therefore, investigating and initiating enforcement actions against small refineries that were previously subject to an exemption is a low priority for the agency. EPA intends to develop an appropriate implementation and enforcement response to the Tenth Circuit’s decision in RFA v. EPA once appeals have been resolved and the court’s mandate has been issued.

Last week, two refiners asked the Tenth Circuit for a rehearing en banc of the RFA v. EPA decision, in which the court struck down three small refinery exemptions and determined EPA had vastly exceeded its statutory authority.

“EPA’s attempt to kick the can on nationwide application of the Tenth Circuit Court decision has nothing to do with COVID-19 and everything to do with politics,” said Renewable Fuels Association (RFA) president and CEO Geoff Cooper. “There is absolutely no reasonable justification for delaying implementation of the court’s decision. The court has already ‘issued a mandate’ and remanded three improperly granted exemptions back to the agency to resolve. EPA correctly chose not to seek a rehearing of the Tenth Circuit decision this week, signaling that it will abide by the decision and move swiftly to implement it. What are they waiting for? There is no rationale for EPA to wait for the courts to respond to the refiners’ hollow request for a rehearing before moving forward with adoption of the decision. In any event, given the unanimous and thoughtful decision by the Tenth Circuit panel that heard the case, we are confident that the ruling is going to be upheld. As ethanol plants are shutting down across the country and farmers are experiencing substantial demand losses, now is not the time for EPA to slow-walk implementation of a court order that would begin to restore integrity to the RFS program.”

The American Coalition for Ethanol (ACE) was another of the four plaintiffs in the court case. “As our plaintiff group said on Wednesday of this week, we appreciate the Trump Administration’s decision not to appeal our victory regarding SREs under the RFS in the Tenth Circuit Court,” said ACE CEO Brian Jennings. “While we urge EPA to immediately announce it will apply the Tenth Circuit’s precedent nationwide, ensuring a more legally-sensible approach to SREs going forward, it’s disappointing to learn the Agency prefers to punt this decision until the Tenth Circuit has deliberated on the appeal by HollyFrontier and CVR. We continue to believe the appeal by HollyFrontier and CVR has no merit. We fully expect EPA to comply with the law and end the mismanagement of the RFS. The economic fall-out of COVID-19 is doing substantial damage to the ethanol industry and we expect the Trump Administration to leave no stone unturned in responding instead of only benefiting oil at the expense of rural America.”

ACE, EPA, Ethanol, Ethanol News, RFA

Energy Ag News 3-26-20

Cindy Zimmerman

  • The Nebraska Ethanol Board (NEB) and Renewable Fuels Nebraska (RFN) have rescheduled the Ethanol: Emerging Issues Forum 2020 for July 15-16. The Forum will be held at the La Vista Conference Center in Greater Omaha if the threat of COVID-19 has subsided.
  • The Renewable Fuels Association is pleased to welcome two new associate members, Barchart and Bion. Based in Chicago, Barchart is a global provider of market data and intelligence to the financial, media and commodity sectors. Bion, based in Sioux Falls, S.D., is a testing company that specializes in analytical standards, reference material, and proficiency testing programs.
  • According to EIA data analyzed by the Renewable Fuels Association for the week ending Mar. 20, ethanol production scaled back by 2.9%, or 30,000 barrels per day (b/d), to 1.005 million b/d—equivalent to 42.21 million gallons daily and the lowest volume since October. The four-week average ethanol production rate declined 1.1% to 1.041 million b/d, equivalent to an annualized rate of 15.96 billion gallons. Ethanol stocks diminished by 1.9% to 24.1 million barrels for a seven-week low.
    • Uncategorized