Media
By Timothy J. Rudnicki, Esq
A tax credit being proposed in the Minnesota legislature to help ethanol producers improve energy efficiency could boost Minnesota’s economy by $189 million.
To qualify for the tax credit, ethanol producers in Minnesota would have to make significant capital investments to install and operate combined heat and power (CHP) and expander generators (EG) systems.
These systems improve energy efficiency because they can generate process steam and electricity with a lower carbon fuel, like natural gas, without losing electricity over many miles of transmission lines.
While this technology is relatively common in Europe, it is still in its infancy in Minnesota. A properly crafted tax credit would provide the necessary push for a diverse mix of ethanol producers and other eligible businesses to make the commitment to install these energy systems.
Some have asked why a tax credit is needed if such technology is so great? They argue against the proposed incentive because they believe the market provides all the necessary price signals. And if the price signal is negative, businesses can either heed that finding or disregard it and build the systems at their expense.
While there might be some merit to the traditional economic market argument with respect to some capital investments, it fails to recognize that economic signals from the marketplace can be inadequate or incomplete.
For the CHP and EG systems, the current price signals for electricity fail to fully incorporate the environmental externalities associated with generating electricity from fossil fuels such as lignite or coal. And almost half of the electricity generated and used in Minnesota is derived from these carbon-intensive finite fossil fuels.
Furthermore, the positive economic impact from the adoption of CHP and EG systems cannot be overlooked.
Minnesota’s 19 ethanol plants currently use 178.3 megawatts of electricity annually. To produce 50 percent of that electricity through CHP and EG systems, Minnesota’s ethanol plants would have to invest $260 million to install the aforementioned systems.
And according to an analysis by ABF Economics, those investments would add $189 million to Minnesota’s gross domestic product (GDP).
It would also support 1,458 full-time equivalent jobs in all sectors of the state economy, add $17 million in tax revenue and contribute $147 million in household income
In addition, ethanol producers and other eligible business would benefit directly with lower operating costs as energy would be used more efficiently.
Minnesota residents would benefit too.
Ethanol already emits 44 to 57 percent fewer greenhouse gas (GHG) emissions than gasoline. With CHP and EG systems, lower carbon fuels such as natural gas would replace electricity from coal and lignite in the ethanol production process, thereby making ethanol an even greener fuel.
Minnesota lawmakers should consider supporting the tax credit for CHP and EG systems because of its benefits to Minnesota’s environment and economy.
By Timothy J. Rudnicki, Esq
On July 24, the new acting administrator for the EPA, Andrew Wheeler said the agency is open to changes sought by the biofuel industry, but only if we make concessions with Big Oil.
“When everyone is complaining about the program, we need to look at ways to change the program,” he said.
Let’s be clear here. There are legitimate complaints from the biofuel industry because Wheeler’s predecessor turned over the agency to Big Oil. How else can you explain the 2.25 billion gallons of ethanol that were lost via the EPA’s RVO waivers to refineries in the last two years?
But more importantly, it’s not Wheeler’s job to set policies and promulgate laws. That responsibility lies with Congress. So with respect to the RFS, his sole job is to implement the law.
Simply put, that means increasing the RVOs to push biofuel producers to make more biofuels, including from greater amounts of cellulosic biomass, and for petroleum refiners and the entire fueling infrastructure to blend increasingly greater amounts of biofuels. That’s his job.
Perhaps he’s doing just what his boss wants: advance the use of more fossil fuels. While the President gives mixed signals as to whether he actually supports the use of ethanol, the White House Energy Plan is crystal clear - promote fossil fuels with no mention of renewable energy or biofuels.
But regardless of what the White House Energy plan states, the RFS is the law of the land.
Wheeler might, however, be challenged to get more biofuels into the marketplace. One of the simplest first steps to rectify that problem is to give E15 RVP parity with E10. While I recognize some thought leaders have already weighed in on this matter, here are a few general ideas about how the RFS actually supports the EPA in granting an RVP waiver to E15.
Starting with 42 USC § 7545, Regulation of Fuels, there is a pathway for the E15 RVP waiver. Subsection (h)(4) specifically addresses the RVP waiver for E10 and has three subparts the EPA uses to determine whether “a distributor, blender, marketer, reseller, carrier, retailer, or wholesale purchaser-consumer shall be deemed to be in full compliance.” One of those parts, (B), goes to the blend of ethanol not exceeding its waiver condition.
What is that singular waiver condition? In 2012, the EPA granted a partial waiver for E15 whereby it was approved for use in all cars 2001 and newer. Keep in mind, approval for E15 was issued seven years after the RFS became law.
Another pathway to obtain RVP parity for E15 is through a Congressional act - an amendment to only the Clean Air Act provision dealing with RVP. Although one party in Washington controls all three branches of government, the Consumer and Retailer Choice Act (Senate 517 and House Resolution 1311) appears to be stalled.
Lastly, the EPA could initiate a rulemaking process. An agency has at least nine factors it may consider to do so and here are a few factors:
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New technologies or new data on existing issues: E15 is new relative to E10 when the RFS was signed into law.
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Petitions from interest groups, corporations, and members of the public: Ethanol trade associations fall into this category. The rulemaking, however, should be narrowly tailored to specifically address RVP parity for E15. This could be the opportunity to also “fix” section (h)(4) so as to include anticipated higher blends going forward.
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Presidential directives: The President could direct the EPA to begin rulemaking. While efforts may have been made in this direction, perhaps this avenue should be reviewed and pushed more aggressively.
By failing to comply with and enforce the law, the EPA has weakened the RFS and created unnecessary confusion and uncertainty for the biofuels and agriculture industries. The agency must take immediate steps to get the RFS back on track. That means holding Big Oil accountable for compliance as well as fixing the RVP problem so greater volumes of ethanol can be used by consumers throughout the year.
Those were the central questions put to about 60 participants in a recent energy discussion hosted by the University of Minnesota Institute on the Environment. The answers to those questions, especially by and for lawmakers, have profound implications for biofuel producers and the future of biofuels in Minnesota.
As the event progressed and information was shared and discussions opened up, an extremely ludicrous notion came up several times – that to support renewable energy was akin to “locking-in certain technologies.”
What exactly does this notion mean? It means – believe or not – that by supporting renewable energy, we could be curtailing support for some yet to be discovered form of energy.
Perhaps calling this notion ludicrous is too kind.
What was more alarming is that this notion came from a Minnesota state senator. He was among the diverse group of participants which also included other Minnesota lawmakers, commissioners and stakeholders from the agriculture industry.
As luck would have it, the aforementioned senator was in my discussion group, which included an investor handling carbon credits, a representative of a non-profit organization promoting renewables, a professor from a renewable energy laboratory and a member of the Minnesota Public Utilities Commission.
It should be noted that all of us but the senator were having a fast moving, positive, proactive conversation about the role and future of three renewables (biofuels, solar, wind), distributed generation, microgrids and combined heat and power systems.
It was during this discussion when the senator floored the rest of us by suggesting that any support for renewables is akin to “locking in certain technologies.”
Naturally we were curious about this notion so we peppered him with questions:
“How do you think supporting renewables would ‘lock-in technology?’”
“And what do you mean by locking in certain technologies?”
“What problems do you have with supporting renewables, especially when they cut greenhouse gas emissions and bolster the economy?”
“Moreover, how could any future technology be locked out just because one supports renewables?”
As one would expect, he struggled to provide a logical explanation for his position. Was his judgement clouded because he was biased towards another form of energy? Was his connections to the nuclear industry the underlying reason for his opposition towards renewable energy? Or was he just misinformed?
Equally shocking, during their closing remarks, a few other lawmakers brought up this technology lock-in issue. Simply put, they said renewables are great, but we should not pick winners and losers – a mantra popular with politicians aligned with the fossil fuel industry.
Had the opportunity presented itself, one could have asked whether the lawmakers realize that finite, carbon-intensive fossil fuels have been picked as winners because they are heavily subsidized through, for instance, exploration, the depletion allowance and the failure to account for externalities such as climate change, polluted air and other related human health problems.
Make no mistake, these lawmakers would indeed hinder the growth of biofuels in Minnesota and they might attack or undermine Minnesota’s Petroleum Replacement Promotion law, which calls for the consumption of at least 30 percent biofuels in transportation fuel by 2025.
Their arguments and “concerns” over renewable energy lock-in and picking winners and losers are red herrings. As such, lawmakers who support renewable energy cannot be silent.
Minnesota’s biofuel industry already faces a multitude of barriers – be it access to E15 or regulatory bottlenecks in the air permitting process. It does not need another and this illogical “technology lock-in” idea is just that. Lawmakers who take seriously their support for renewables must lead and support the Renewable Fuel Standard and the Minnesota Petroleum Replacement laws. We must continually work together to address these and other challenges. That’s how we can keep Minnesota a biofuel leader.
With the mid-term elections finally behind us, 2019 is set to usher in a new political landscape in both St Paul and Washington, D.C. For us in the ethanol industry, it will be an opportunity to work with leaders and lawmakers who actually understand the dynamics in rural and urban communities and the role biofuels can play in solving a host of problems.
From the Governor to the state legislature to Minnesota’s two senators and members of congress in Washington, we now have fresh leadership that is more open and willing to work with us to further lower the artificial barriers to the ethanol industry. We are eager to work with these leaders and lawmakers to find pragmatic solutions to tangible problems and thereby unleash the pent-up production and demand potential for ethanol in Minnesota.
We believe Governor-elect Tim Walz will provide a fresh perspective to Minnesota’s ethanol industry. Over the last few years, we have worked with then Rep. Walz and his team to seek solutions to the challenges confronting our industry. Despite the many obstacles, Walz, along with Rep. Peterson and Rep. Emmer and other supporters of the Biofuel Caucus, have led efforts to push back on the oil industry and protect the RFS.
Walz’ experience on the RFS at the federal level also opens the possibility of an energizing approach for the ethanol industry in Minnesota. Indeed, over the years, he met many of the women and men who run our ethanol plants so he has firsthand knowledge about the barriers standing between ethanol producers and air permits and greater access to E15.
With regards to Minnesota’s Petroleum Replacement Promotion Law (which calls for at least 30 percent biofuels in transportation fuel by 2025), Walz told us, prior to the elections, that he plans to work with his commissioners of agriculture, pollution control and commerce to achieve this goal. We look forward to working with him on this, among a significant host of issues, as well as a Plan B for an RVP waiver for E15.
In the Minnesota House, there will be some new and returning representatives in leadership positions. These members, from both parties, have also expressed strong support to meeting the goals of the Minnesota Petroleum Replacement Law as well as funding for E15 storage and dispensing systems.
On the federal level, we can expect a new beginning for the Biofuels Caucus with several new members of the Minnesota Congressional Delegation. These new members went on-the-record in some depth to express their support for the RFS, finding a permanent fix for the RVP problem and funding for additional biofuel infrastructure. It is important to note that some of these new members are from largely urban districts in the Twin Cities metro. In the past, representatives from these districts have not always been supportive of our industry.
All of this points to new possibilities for Minnesota’s ethanol industry at both the state and federal level in 2019. The new alignment of leadership at the Minnesota legislature and in the Minnesota Congressional Delegation presents us with opportunities to unlock the potential of E15 and higher ethanol blends to provide even greater energy independence, economic and environmental benefits to Minnesota.
In 2019, all eyes will be on the EPA and its planned rulemaking in February to extend a Reid Vapor Pressure (RVP) waiver to E15 and thus enable E15 to be sold during the summer months. It’s no secret that the RVP ban on E15 in the summer has been a major impediment on the growth of E15 in Minnesota and the rest of the country. While the EPA’s shorter-than-usual timeframe for the rulemaking process raises some concerns, we remain cautiously optimistic that RVP parity for E15 will be achieved in 2019. As such, we have already begun planning advertising and promotional activities in the summer of 2019 to boost E15 usage in Minnesota during the traditionally high driving season.
On the legislative front, there will be several new opportunities for Minnesota’s ethanol industry in 2019. During the run-up to the recently concluded mid-term elections, we communicated with both state and federal candidates on issues concerning Minnesota’s ethanol industry. We are pleased to note that many of the incoming federal and state lawmakers, as well as Governor-elect Tim Walz, have voiced strong support for increasing the amount of ethanol in Minnesota’s transportation fuel and the need for funding for more E15 and E85 stations in the state.
It should also be noted that several new members of Minnesota’s delegation in congress that represent districts in the Twin Cities metro have gone on record , in some depth, to express their support for the RFS, finding a permanent fix for the RVP problem and biofuel infrastructure funding.
This new dynamic means the Congressional Biofuel Caucus can grow with strong support from Minnesota’s second, third and fifth congressional districts.
In the 2019 Minnesota legislative session specifically, we will work on expanding the availability of E15. Even with 315 E15 fuel retailers in Minnesota, just under 10 percent of the total fuel supply chain network in the state is equipped to offer E15 and higher ethanol blends. Our aim is to push closer to 20 percent market penetration so that at least 660 fuel retailers can offer E15 to motorists. But some fuel retailers will need some financial assistance to modify their fuel storage and dispensing systems and we intend to address this issue in the 2019 legislative session.
We will also work to make further refinements to the air permitting process to decrease the number of days it takes for the issuance of permits to ethanol producers from approximately 730 to 150 or fewer days. At the time of this writing, we are preparing for a face-to-face meeting with the commissioner of the MPCA and the outcome of this meeting will determine whether additional action needs to be taken during the 2019 legislative session.
We will also work to support efforts aimed at creating a tax stimulus for a modern distributed generation system that makes lower carbon intensive electricity available to ethanol producers. Such systems could include combined heat and power and expander generators. These systems decrease the transmission line loss and have the potential to move from coal-fired generating systems to those operated by less carbon-intensive natural gas.
In closing, for 2019, we will continue to focus on lowering tangible barriers to ethanol producers and increase ethanol consumption in Minnesota. We will also continue our efforts to learn more about two new vehicle concepts - Toyota’s hybrid flex fuel and Nissan’s solid oxide fuel cell - that have the potential to present new opportunities for the ethanol industry in the future.
With 1,125 bills introduced thus far in the 2019 Minnesota Legislative session, it can be easy for issues to get lost in the process of making laws. This is where MN Biofuels comes in to do its advocacy work by providing legislative leaders the tools to focus on issues that are important to the ethanol industry and the state.
To keep the focus on lowering barriers for biofuel producers and providing the growing number of motorists greater access to biofuels, we have opened up key discussions with the Governor and some of his cabinet members and state lawmakers. Specifically, our focus this 2019 legislative session will be on advancing four initiatives.
Our first initiative is about securing additional funding for biofuel infrastructure. We are working with legislative leaders to find a pathway to provide financial assistance to some 150 retailers who are keen on offering E15 and higher blends of ethanol.
Our second initiative recognizes the challenges that come with the EPA's approach to providing RVP relief for E15 by this summer. While we remain optimistic that the agency will promulgate some rule, given the recent government shutdown and possibly another one on the horizon, we are working on a backup plan should the EPA fail to lift the RVP ban on E15 this summer. Such a plan will require close work with the Governor and other stakeholders.
Our third initiative goes to the potential use of E15 and higher ethanol blends by state, county and municipal fleet vehicles. Our focus will be on the Department of Administration and fully using state procurement contracts to make E15 readily available for the aforementioned fleet vehicles. This would be another incremental step in the process of making E15 the new regular fuel across Minneosta.
Lastly, we are working with lawmakers and the Governor to make Minnesota a new and refreshed leader when it comes to biofuels. Toward this end, we are exploring a fleet testing program concept and how we might engage with various state agencies and the University of Minnesota to either add to existing research on 30 percent and 40 percent blends of ethanol or blaze our own trail.
It should be noted that the bedrock principles for our initiatives are found in two important Minnesota laws. One law calls for displacing petroleum with at least 30 percent volume ethanol by 2025 (Governor Walz has signaled strong interest in fulling the aims of the Petroleum Replacement Promotion law). The other law calls for cutting greenhouse gas emissions to a level at least 30 percent below 2005 levels by 2025. Given that ethanol reduces greenhouse gas emission in the transportation sector, ethanol is an ideal tool by which to satisfy this policy objective.
Given the receptivity to the concepts presented by MN Biofuels, we expect the 2019 legislative session to be fast paced and filled with potential to move the ethanol industry closer to fulfilling the Minnesota public policy objectives and more fully and effectively reducing greenhouse gas emissions.
Earlier this month the Minnesota Bio-Fuels Association, along with the American Coalition for Ethanol, the Renewable Fuels Association and 29 other stakeholders, lent its name to the white paper, “A Clean Fuels Policy for the Midwest.” For more than nine months we participated in stakeholder discussions that developed the white paper, which lays the foundation for a clean fuels policy that could expand ethanol usage in Minnesota’s transportation sector.
Simply put, a clean fuels program is a performance-based incentive program that supports the usage of fuels with a lower lifecycle carbon intensity (CI) such as ethanol. Moreover, this program is designed to contribute to existing goals at the state level such as the Minnesota Petroleum Replacement Promotion Law, which calls for ethanol to comprise 30 percent of all transportation fuel in Minnesota by 2025.
While we are unlikely to meet that target in the next five years, a Minnesota Clean Fuels Policy could set us on the right path to achieving that goal and more. This is because when there is an economic value on carbon, the right incentives are placed for more ethanol usage in Minnesota’s transportation sector.
Here’s how the policy would work: a governing body is established and a price is set for a ton of carbon (greenhouse gas emissions). As farmers and ethanol producers continue to improve their respective CI scores, so does ethanol’s CI score improve. The standards set through the policy and ethanol’s low CI then provides the necessary incentive for the petroleum industry to use more ethanol.
The policy could also lead to the usage of mid-level blends of ethanol as well as the introduction of new vehicles such as a plug-in flex fuel hybrid because auto manufacturers would also be provided an incentive.
And just like it would for the Minnesota Petroleum Replacement Promotion Law, a Minnesota Clean Fuels Policy would contribute to achieving the Walz Administration’s greenhouse gas emissions goal in the transportation sector.
Last year, the Minnesota Department of Transportation released a report that said a push for higher blends of ethanol and the necessary storage and dispensing infrastructure is a critical component in decarbonizing the state’s transportation sector.
The need for rapid GHG reductions underscores the need for more ethanol in the global transportation system. Over here in Minnesota, ethanol’s GHG savings are widely known but there hasn’t been an official policy that recognizes ethanol’s improving CI scores as a result of sustainable farming practices and increased efficiencies at ethanol plants.
Furthermore, a properly crafted Clean Fuels Policy for Minnesota holds the potential to further transform production efficiencies from the farm to ethanol plants to end-users and in turn, replace significant volumes of carbon-intensive petroleum. If we get this right, the beneficiaries will be farmers (and by extension rural communities), ethanol producers and present and future generations of Minnesotans.
The Covid-19 pandemic has upended much of life as we knew it a few weeks ago. First, and foremost, we extend our best wishes to all of you as you work to protect the safety and health of your teams and family members. And to the ethanol producers that have stepped up to the current challenge by managing multiple priorities while making renewable transportation fuel, animal feed and ingredients for sanitizers, we thank you.
In an effort to slow the spread of Covid-19, Gov. Tim Walz has issued a shelter-in-place order in Minnesota for two weeks. During this period, there will be a big decline in the sale of transportation fuel which in turn will adversely impact Minnesota’s ethanol industry.
We will continue to engage with members of Minnesota’s Congressional Delegation, the Minnesota Department of Agriculture and state lawmakers by providing updates on the present and anticipated challenges facing our ethanol industry and offering some suggestions for ways to keep our ethanol industry viable.
One suggestion is a funding package to keep ethanol plants open. Rural Minnesota needs the jobs created and provided by ethanol plants and retaining those jobs is our top priority. We are also looking at various funding mechanisms to cover some of the costs associated with the procurement of corn.
Finally, on the advocacy front, we have been working with a variety of state agencies and the Governor's office to find certain regulatory flexibility in response to the need for sanitizers and other valuable ethanol co-products.
We are also working with E15 fuel retailers in the state to shift an even greater share of their existing and foreseeable consumer demand to E15. We have also launched advertising campaigns encouraging consumers in the Twin Cities who have to travel during this period to support Minnesota’s local economy by fueling up with E15.
To all of our friends and supporters, we wish you the very best during this challenging time and extend our sincerest gratitude to all front line healthcare workers.
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Since the onset of the COVID-19 pandemic, Minnesota’s ethanol industry, like the rest of the nation, has and continues to face an unprecedented crisis. Some plants have reduced production by as much as 50 percent while others have temporarily idled production. This, in turn, has adversely affected the countless number of industries that work closely with Minnesota’s ethanol industry.
Over here at the Minnesota Bio-Fuels Association, we have been working closely with our state government and congressional delegation to find ways to keep our industry afloat and position it toward an upward trajectory when this crisis ends.
Earlier this month, as demand for sanitizing agents skyrocketed, the FDA relaxed its rules concerning the use of industrial alcohol from ethanol plants for sanitizer. Back here in Minnesota, we worked closely with the Minnesota Pollution Control Agency, the Departments of Agriculture and Public Safety - Alcohol and Gambling Division and the Department of Employment and Economic Development (DEED) to provide our ethanol producers with the necessary guidelines to produce 190 proof and 200 proof ethanol for hand sanitizer or surface sanitizer. Since then, several ethanol producers in Minnesota have diversified their operations to produce ethanol for in-demand sanitizer products.
Other opportunities for diversification for the ethanol industry include meeting the growing demand for CO2 from beverage makers and the livestock industry. We have engaged several engineering firms to explore some options for the rapid deployment of systems to capture CO2 during the ethanol production process. We hope we’ll be able to share some developments in this area with you in the very near future.
Still, it is important to note that these diversification opportunities are not nearly enough to replace the gallons of ethanol that have been lost from this crisis. As such, we have been working with our congressional delegation, the Walz Administration and state lawmakers for some aid that could keep our ethanol industry afloat.
One of our proposals includes cash payments for bushels of corn that were processed by an ethanol plant over a certain date range based on tracked and recorded data. These cash payments would help ethanol plants remain financially viable for a few months so that they will be ready to resume full production when this crisis begins to dissipate. Additionally, we have been working with DEED to provide our ethanol producers with up-to-date information about the federal Paycheck Protection Program (PPP) and other loan options that are part of the CARES Act to help them retain their teams.
For the medium and long-term viability of the ethanol industry, we have long advocated to our congressional delegation on the need for funding for fuel infrastructure that can dispense E15 and other higher blends of ethanol. We are pleased to note that on April 28, Minnesota’s Rep. Angie Craig introduced the bipartisan Clean Fuels Deployment Act of 2020 which authorizes $500 million over five years to help retailers offer higher blends of ethanol. This initiative will help increase the availability and use of E15 and other blends and provide rural Minnesota with some much needed economic relief while reducing harmful greenhouse gas emissions.
In the coming days and weeks, we hope we will be able to share with you more positive developments for our industry. There is a light at the end of the COVID-19 tunnel and it is aimed at a new and positive upward trajectory for our renewable fuels industry.
When the US Senate returns from its one-week Memorial Day break, it will begin discussions for a fifth coronavirus relief bill.
With unemployment at record highs and the economy contracting at unseen rates, there is little time for discussions. Relief is needed now and this time around, the Senate should follow the lead of its colleagues in the House and include the ethanol industry in any aid package.
More than 130 ethanol plants across the nation have partially or fully shutdown operations as a result of the COVID-19 pandemic which has led to a plunge in fuel demand. In Minnesota, the traffic volume in the Twin Cities metro area was 67.1 percent below a baseline for 2016-2019.
Since then, as the state economy has slowly reopened, the traffic volume has increased. But as of May 20, it was still 15.5 percent lower than the baseline. As such, the ethanol industry in Minnesota is still in serious distress, putting in jeopardy the 18,000 jobs it supports.
The Senate does not need to look too hard to find a way to help the ethanol industry.
Two of its members, Sen. Chuck Grassley and Sen. Amy Klobuchar, introduced the Renewable Fuel Feedstock Reimbursement Act last week.
Advocates for the ethanol industry like MN Biofuels have in the past month suggested to both Sen. Klobuchar and Sen. Tina Smith that cash payments for bushels of corn processed by an ethanol plant during a specific timeframe would help keep them financially viable for a few months.
This bill does that.
Under the act, the USDA will use the Commodity Credit Corporation to reimburse ethanol producers 75 percent of the price of feedstock purchases made from Jan 1, 2020 to March 31, 2020.
The Senate could also take a page out of the HEROES Act that was recently passed by Congress.
The HEROES Act includes the Renewable Fuel Reimbursement Program which would require the USDA to make payments to renewable fuel or advanced biofuel producers that experienced unexpected market losses due to the pandemic.
The program will pay ethanol producers 45 cents per gallon of ethanol produced from Jan 1, 2020 to May 1, 2020. Minnesota’s Rep. Collin Peterson and Rep. Angie Craig were both instrumental in including aid for the ethanol industry in the HEROES Act.
The ethanol industry, and to a larger extent the agriculture industry, cannot wait for the Senate to drag its feet during the deliberations for the upcoming relief package.
Both the Renewable Fuel Feedstock Reimbursement Act and the Renewable Fuel Reimbursement Program would significantly help the ethanol industry. Either one would provide the industry with a much-needed shot in the arm.
Members of the Senate who like talking about homegrown industries and American jobs should act fast to save America’s ethanol industry.
Unlike those senators, the industry doesn’t have the luxury of taking a one-week Memorial Day break.
The worst may be over for the ethanol industry as production in Minnesota and other parts of the country begin to approach pre-pandemic numbers. But it would be a mistake for anyone to believe the industry is back on a sound footing.
When traffic volumes plunged in April and May, ethanol production throughout the country fell to unforeseen levels with many plants idling production while others reduced output by 50 percent.
That is why it is imperative for the Senate to include the financial aid package for the ethanol industry that was introduced by Sen. Chuck Grassley and Sen. Amy Klobuchar in the next COVID-19 relief bill.
While this aid package is much needed for the short-term to stabilize the industry in this turbulent time, there are several measures that can be adopted at the state level to rebuild and regrow the ethanol industry for the medium and long-term.
Moreover, these measures would grow the economy, retain jobs in the ethanol industry and significantly cut greenhouse gas (GHG) emissions in the transportation sector.
One way is to boost the use of E15. State vehicle fleets should be able to have access to, and use, E15 and E85. As more fleets use E15 and E85, these renewable fuels will gain even greater acceptance and become the new standards.
The second measure is focused on the use mid-level blends in non-flex fuel vehicles. The Walz Administration could set up a task force to identify the next steps to obtain data required by the EPA to certify a mid-level blend fuel for use in non-flex fuel vehicles and obtain certification.
Biofuel infrastructure should also be a high priority to give Minnesotans greater access to renewable fuels. This can be done through creative funding options to help fuel retailers transition to E15 and higher blends. With 370 fuel retailers in the state already offering E15, we should focus on bringing another 290 retailers online.
With 660 fuel retailers offering E15 and higher blends, we will reach critical mass and help E15 become the new standard in Minnesota.
Another medium to longer term project would be a clean fuels policy. If such a policy were properly designed to account for the GHG value of ethanol and technology improvements made at ethanol plants, the policy would amplify the benefits of ethanol compared to petroleum. This could provide a huge catalyst for the petroleum industry in Minnesota to use E15 as the new regular fuel.
Another measure would be to use the Clean Cars Minnesota rulemaking process to stimulate automakers to offer a variety of Low Emission Vehicles (LEVs) powered with ethanol.
This vehicle rule gives us an opportunity to advocate for flex fuel, hybrid flex fuel and plug-in hybrid flex fuel as well as evolving technologies that can use E100. Success with this initiative will ensure future vehicles are compatible with E15 and higher blends.
All these measures will serve to fulfill a vision wherein Minnesota’s transportation sector is powered with increasing amounts of a homegrown renewable fuel and the energy dollars now used to import petroleum are kept in Minnesota, and the GHG emissions from the transportation sector are more rapidly reduced.
To say that 2020 has been a challenging year for the ethanol industry would be a severe understatement.
A recent analysis by the Renewable Fuels Association shows that the industry has already suffered $3.4 billion in lost revenue this year with the possibility of losing up to $9 billion next year.
Just to reiterate, this is an industry that annually supports some 350,000 jobs nationwide and contributed $43 billion to GDP last year.
But somehow, every time the Senate comes up with a coronavirus relief package, the ethanol industry gets passed over.
Their latest relief package includes $20 billion allocated for agriculture which could theoretically be used to help ethanol producers. But considering what the industry has been put through in the last few years, you’ll forgive us if we’re a bit skeptical that this would actually happen.
Even more absurd is the fact that the Senate is refusing to include a proposal by Sen. Chuck Grassley and Sen. Amy Klobuchar to provide direct financial aid to ethanol producers through the Renewable Fuel Feedstock Reimbursement Act of 2020.
The problems the renewable ethanol industry have been saddled with require immediate financial aid. The problems are real, relevant and big.
Despite their track record on inaction, the Senate can still get this right - provide direct financial aid, now, to the ethanol industry so it can fulfill the Renewable Fuel Standard.
The industry has a proven track record of building up rural communities, stimulating the economy and cutting greenhouse gas emissions in the transportation sector.
Surely, this is an industry worth helping?
Then again, considering how tone-deaf some members of the senate seem to the plight of Americans suffering from a recession, why should we expect anything different?
On a personal note, we want to express our condolences to Larry Johnson’s family.
Larry was known as the “ethanol man.” But when I met him in 2011, and throughout the intervening years, I came to know Larry as the renewable fuel visionary. He also saw a pathway to advanced biofuels and understood the role it could play in aggressively cutting greenhouse gas emissions in the transportation sector. When we get the costs and benefits properly adjusted, that vision will again take off.
We will miss Larry’s foresight in all things ethanol.
What would it take to cut petroleum use by at least 85 percent in the near term? What vehicle powertrain can use two renewable sources of energy and on one fill provide a range greater than 450 miles? It’s the plug-in flex fuel hybrid vehicle.
As California and other states, including Minnesota, explore the role of ultra low emission vehicles in cutting harmful greenhouse gas emissions, it’s time for a closer look at the plug-in flex fuel hybrid, which is built on existing powertrain technology.
This vehicle is comprised of three key components.
The plug-in component enables this vehicle to charge a traction battery and operate in electric vehicle mode. An electric vehicle range of approximately 30 miles, according to research from the University of Southern California, Davis, is sufficient for commutes in certain metro areas. To make the EV power component truly green and low emission, the electricity used for charging the battery should be generated with only renewable energy sources such as that from wind or solar photovoltaic systems.
Then there is the flex fuel component of this vehicle that can use E85. When a driver exhausts the EV mode, the flex fuel powered engine operates the powertrain. This dual energy combination (from the plug-in and ethanol) significantly extends the range of travel. The dual energy arrangement is especially well suited for those climate zones where greater amounts of energy are required to provide vehicle cabin cooling and heating.
The hybrid component mirrors that in vehicles with traditional hybrid powertrain systems. In typical braking systems, the brakes convert vehicle momentum into heat which is lost to the environment. A hybrid system, however, captures the energy from braking to charge the traction battery.
Moreover, as noted above, carmakers won’t have to make significant investments to offer plug-in flex fuel hybrid powertrains in their vehicles. Plug-in hybrids and flex fuel vehicles already exist in the market. In fact, in 2017, Toyota introduced a flex fuel hybrid vehicle in South America.
With the right signals from regulators and consumers, carmakers will be compelled to offer plug-in flex fuel hybrids to the market in the near term and improve energy security by cutting dependence on one energy source and dramatically reduce greenhouse gas emissions in the transportation sector.
The Governor’s Council on Biofuels, earlier this month, set forth some constructive recommendations for attaining at least 25 percent volume ethanol in Minnesota by 2025, stimulating enhanced production efficiency of biofuels and helping to reduce Greenhouse Gas emissions in the transportation sector. These recommendations, when taken as a package, chart a very positive future for ethanol in Minnesota.
Five key recommendations of the Council, if fully implemented, hold the potential to boost the agriculture sector, significantly increase demand for renewable ethanol over more carbon intensive petroleum and renew Minnesota’s leadership role on ethanol issues.
One of the recommendations calls for making the transition from the standard E10 fuel to E15. Most notable in these recommendations is the realization that many fuel retailers will need some type of financial assistance to properly upgrade their fuel storage and dispensing systems to offer the better emission reduction E15 to Minnesotans. Interestingly, the Council also calls for equipment standards that will enable fuel retailers to offer even E25 at some point in time.
In its wisdom and foresight, the Council also set the course for work on a Clean Fuels Program. Absent action by the Minnesota Legislature in the 2021 session, the recommendation calls for the use of a working group to chart a course of action. If properly constructed, a CFP holds the potential to stimulate further reductions in transportation sector GHG emissions while giving a boost to Minnesota agriculture. Agriculture holds tremendous potential for reducing and sequestering GHG emissions. Therein rests an important tool and economic opportunity for farmers.
While it seems straightforward, there are a number of hurdles to getting E85 and E15 into state fleet vehicles. Council recommendations call for the Governor to use an Executive Order to make biofuels a priority for use in State vehicles. This is where the Minnesota Bio-Fuels Association biofuel locator app can of service - rather than paper documents in vehicles, state employees can simply use the app to find the nearest fuel retailer that offers E15 and higher bends.
Most of us know the level of disinformation that surrounds ethanol. Given the challenges on this front, the Council calls for a coordinated communications and education program to provide Minnesotans with the facts about homegrown and produced ethanol and to provided a stable source of funding.
Lastly, the Council calls for increased funding to the bioincentive program. This is a sure path to boosting the production of advanced biofuels and further lowering their carbon intensity thereby making it an even greater value to Minnesotans.
Although the Minnesota ethanol industry is confronted with some short-term challenges due to the Covid-19 crisis, implementation of the Councils recommendations suggest a positive future and some new paths for renewable ethanol in Minnesota to boost the economy and reduce GHG emissions.
In the past few weeks, we have been working with state lawmakers to advance a bill that would provide partial funding for fuel retailers to make the necessary infrastructure upgrades to offer E15. This initiative holds the potential to strengthen market signals to speed the adoption of E15 in Minnesota.
Let’s be clear, MN Bio-Fuels has long held the position that it is the duty and obligation of the petroleum industry to provide the necessary fueling systems to offer at least E15 to Minnesotans.
But 13 years after the RFS and the Minnesota Petroleum Replacement Law (which calls for 30 percent biofuel by 2025) and the availability of E15 for eight years, only 10 percent of fuel retailers offer E15.
Rather than make the necessary infrastructure investments, big name fuel brands have divested many retail stores and shifted the costly infrastructure burden to the local retailers. So, despite the higher standards called for in the laws mentioned above, fuel retailers have not significantly increased access to renewable ethanol.
In the first Biofuel Infrastructure Partnership under the USDA, the fuel retailers that participated in the program did upgrade their storage and dispensing equipment to offer E15 and higher blends. With the better value E15 at these retailers, some competitors in a stronger financial position adapted their existing fuel systems so they could compete by offering E15.
But, there are only 384 fuel retailers, out of about 3,300, offering E15 in Minnesota. To put a finer point on this matter, based on the National Renewable Energy Laboratory’s study on E15 market penetration, Minnesota needs approximately 660 stations offering E15 to attain an adequate market presence to make E15 the new standard. By providing some infrastructure funding assistance to fuel retailers through this proposed bill, we could get closer to that number.
As for the previous EPA’s proposed rule to change underground storage tank rules, does the proposed rule actually remove the barriers to E15? We are in the process of ascertaining the potential effect of the rule given the prevalence of secondary containment systems for underground storage tanks and pipes in Minnesota.
Moreover, the underground storage tank is only one part of the fuel distribution system. The compatibility of dispensers must still be addressed. If the underground storage tank is eliminated as a barrier to E15, dispensers will still need to be brought into compliance.
As such, in light of the ambiguity in the proposed rule by the EPA and other existing barriers in the market, the aforementioned infrastructure bill is essential to expanding access to E15 in Minnesota. And this initiative can augment all efforts to make E15 the new standard in Minnesota.
The recently released Climate-Smart Agriculture Progress Report from the USDA is a good first step in compiling initial conversations and recommendations for a unified strategy to build climate resilience and cut greenhouse gas (GHG) emissions.
The report explores various “themes” that emerged from comments and stakeholder process, including the role of voluntary environmental markets and concerns about at-the-farm level policies or programs.
Moreover, it is an excellent first step in a very complex process of building on the strengths of the agricultural sector and its role in fighting climate change. That role, through voluntary incentives, could involve direct on the farm actions to increase energy efficiency as well as to green the biomass supply used to produce biofuels. Many herculean and creative efforts will indeed be needed to timely and effectively tackle climate change.
E15 and higher ethanol blends are tools which are already reducing GHG emissions in the Minnesota transportation sector. Even more can be done with those tools to further reduce GHG emissions. One action, for instance, is to give biofuels greater access to the marketplace via additional storage and dispensing infrastructure. The result will be reduced carbon intensity of liquid transportation fuel.
While ethanol producers strive to use the latest technology and processes to reduce the carbon intensity of their renewable fuel, even more can be done to reduce the carbon intensity of the biomass supply chain.
While the report covers many issues, as part of the ongoing dialogue with stakeholders, we welcome the opportunity to explore how voluntary incentives could be used to more rapidly “green” the biomass supply chain. For biofuel producers in particular, the foundational issues are whether the biomass supply chain is actually made “greener” (lower carbon intensity) and the carbon accounting method is robust and accurate.
The report and what it reflects is certainly a step in the right direction but it is missing clear goals and timelines for action and results. Now is the time to build upon the strengths in the agriculture sector so as to foster the rapid adoption of GHG reduction practices and buy-in to voluntary environmental markets. The data, information, science and evidence is crystal clear on climate change: time is of the essence when it comes to drastically cutting GHG emissions.