Jan 22, 2014
By Kirsti Marohn
When John Mages started selling corn grown on his farm near Belgrade to an ethanol plant in Atwater instead of shipping it out of state, one of the first things he noticed was the price got better.
Mages is concerned about what will happen to that price and the state’s ethanol industry in light of a proposal by the U.S. Environmental Protection Agency to reduce the amount of ethanol and other biofuels that must be blended into the U.S. gasoline supply.
“That’s drastically going to affect the whole rural area,” Mages said.
In November, the EPA proposed lowering the corn ethanol blending target this year from 14.4 billion to 13 billion gallons.
The changes would have a serious impact on Minnesota’s ethanol industry, which has ramped up production significantly over the past two decades. The state has 21 plants that produce more than a billion gallons of ethanol a year.
The state Department of Agriculture estimates that the revised standards would cost the state $610 million in economic activity and more than 1,500 jobs.
“This is a game changer, because it sets everything backwards,” said Tim Rudnicki, executive director of the Minnesota Bio-Fuels Association.
Changing industry
The Renewable Fuel Standard was first adopted in 2005 and expanded two years later as a way to boost the domestic renewable fuel industry and reduce the nation's dependence on foreign oil.
Proponents of ethanol say it’s helped cut greenhouse gas emissions from cars and trucks and also helped boost the rural economy.
“We locally grow and locally manufacture our own fuel, and there’s no more efficient model in the world than that,” said Jake Bauerly, a Benton County commissioner and farmer who was one of the founding investors in the Central Minnesota Ethanol Co-op plant near Little Falls.
Most of the nation’s fuel supply is a mixture containing 10 percent ethanol. There’s also been a push by the ethanol industry to expand the market for higher-ethanol blends, including E15 and E85.
However, there have been large-scale changes in the energy industry and U.S. consumers’ driving habits since the standards were adopted.
Americans have decreased their gasoline consumption by cutting back on the number of miles they drive and buying more fuel-efficient cars, said Doug Tiffany, extension educator with the University of Minnesota, who has researched the economics of ethanol production.
“Some would say the ethanol industry is overbuilt for the size of our appetite for fuel,” Tiffany said.
Tiffany said reducing the ethanol mandate could lead to a drop in corn prices and possibly the closure of some ethanol plants.
“There would be some pain felt across the Corn Belt,” he said.
Environmental concerns
The growth of ethanol has been controversial. Critics say too much of the nation’s food supply is being turned into fuel at a substantial cost, as corn production swallows up land, increases the amount of polluted runoff entering waterways and results in higher food prices and livestock feed.
In testimony before a U.S. Senate panel late last year, Scott Faber with the Environmental Working Group argued that the Renewable Fuel Standard is not providing a powerful-enough incentive for the development of advanced biofuels made from corn stalks, wood chips or other renewable material.
“There’s enormous opportunities for ethanol refiners to retrofit their facilities to produce second-generation biofuels,” Faber said by phone. “But those opportunities aren’t being realized, because corn ethanol is saturating the marketplace for ethanol fuel.”
One plant already making the transition away from ethanol is the Central Minnesota Ethanol Co-op, one of the first ethanol plants built in the state in 1999 but now one of the smallest. It buys 7.5 million bushels of corn annually and produces 21 million gallons of ethanol a year.
In December, the co-op’s board announced the plant is being sold to Green Biologics and will switch to making butanol, which can be used in paints, plastics, pharmaceuticals, food additives and personal care products.
The plant is expected to continue producing ethanol for at least another year, said Dana Persson, the plant’s CEO and general manager.
Taking action
Ethanol proponents argue there’s no real reason higher-ethanol fuel blends can’t be used safely. They say the additional ethanol capacity could be used up by increasing the availability of E15 and higher blends.
“The whole point is to get beyond this fictional limit of 10 percent of biofuels comprising our fuel mix,” Rudnicki said.
But Faber said automakers testified before Congress about the limited number of vehicles warrantied to use higher ethanol blends.
Faber wants to see Congress act to reduce the ethanol mandate.
“Relying on the EPA to use its discretion won’t send the right signals to the investment community to accelerate the development of truly sustainable biofuels,” he said.
Proponents of ethanol are also hoping Congress takes action. Groups like the Minnesota Corn Growers Association and the Minnesota Bio-Fuels Association have urged members to send letters to their senators and representatives asking them to leave the Renewable Fuel Standard as it is.
The EPA is accepting public comments on the proposal until Jan. 28.
Several thousand messages have already been sent to Washington, Rudnicki said.
“We’re cautiously optimistic that if enough people contact members of Congress and the EPA to ask them to reconsider their proposal, we might be able to turn this around,” he said.
Read the original story here: Shift In Ethanol Blend Mandate Fuels Fears