SAN DIEGO, Feb. 21, 2017 – With farm incomes on the decline and corn stocks at a 30-year high, there is a “sense of unease spreading across rural America,” noted Renewable Fuels Association President and CEO Bob Dinneen during his keynote address today.
But he also pointed out how things could be much worse without 5.3 billion bushels of corn demand coming from the ethanol industry – producing 15.3 billion gallons of ethanol last year and supporting 74,420 jobs. And the industry is still growing, with a fifth straight year of growth in the offing.
“Imagine the state of our rural communities if we didn’t have more than 200 ethanol plants providing thousands of jobs, offering investment opportunities, and creating value-added markets for local farmers,” Dinneen added. “We’ve seen ethanol revitalize agriculture. We know it works. And we will work together to ensure ethanol continues to serve the critical role of stabilizing and strengthening the farm economy.”
During his annual industry address at the National Ethanol conference here, Dinneen analyzed where the industry has been and his organization’s focus on building new demand in the future, both at home and abroad.
“Of course, we will be doing this with a new president, new leadership throughout the government, and a political climate less than welcoming to expanded corn ethanol. Success will depend on our ability to build partnerships with new allies and a coalition reflecting today’s political reality,” Dinneen said. “Thankfully, we begin from a position of strength.”
He touted President Trump’s favorable comments about ethanol, specifically the Renewable Fuel Standard (RFS), throughout the campaign.
“It is no coincidence then that rural America voted overwhelmingly for Donald Trump on November 8th. It is the reason he won the election,” Dinneen emphasized. “Of the 218 counties switching from ‘blue’ to ‘red’ in November, 133 or more than 60 percent were counties where more than a million bushels of corn are grown. The counties switching in Pennsylvania, Ohio, Michigan, and Wisconsin were not the industrial base, but farm country.
“Indeed, 93 percent of the ethanol produced last year was produced in a county voting for Trump, and 91 percent of the corn grown last year was from Trump country,” Dinneen noted.
As further evidence of Trump’s support, Dinneen read a letter from the president to conference attendees, which noted: “Rest assured that your president and this administration value the importance of renewable fuels to America’s economy and to our energy independence. As I emphasized throughout my campaign, renewable fuels are essential to America’s energy strategy.”
In addition, President Trump’s letter noted that “your industry has suffered from overzealous, job-killing regulations” and he is “committed to reducing the regulatory burden on all businesses.”
Dinneen highlighted several regulations that he’d like to see the Trump Administration address, but one of the top ones is Reid vapor pressure (RVP) parity for E10 and higher ethanol blends.
There are only about 400-500 stations offering E15 today, and Dinneen said one big reason is related to EPA’s “nonsensical disparate treatment of E10 and E15 with regard to volatility regulations.” He said RFA has provided EPA with reams of data from DOE and other independent labs proving that extending the RVP tolerance currently provided only to E10 would have no detrimental impact on ozone or other air quality standards.
“In fact, until EPA provides volatility parity for E10 and higher ethanol blends, growth in these fuel options will continue to be incremental. That’s why the top priority of the RFA is to secure RVP parity for all ethanol blends.”
On the international front, Dinneen noted that there is “understandable angst around the president’s disdain for multilateral trade pacts.” Last year, the industry exported 1.05 billion gallons to nearly 60 countries across the globe. Top markets for U.S. ethanol were Brazil (26 percent), Canada (25 percent), and China (17 percent).
But Trump’s antipathy is toward trade deals he believes have put U.S. companies at a disadvantage, not toward trade itself, Dinneen explained.
“Frankly, it will be refreshing to have a leader willing to stand up for American business in trade disputes,” Dinneen added “Over the past several years, when the U.S. ethanol industry has faced unfair and ultimately illegal trade barriers limiting our ability to build export demand, the government was frustratingly tepid in its assistance, refusing, for example, to file a WTO complaint when the Europeans imposed blatantly illegal anti-dumping duties in contravention of 100 years of international trade law. The failure to act against the EU certainly did little to discourage others, like China, from taking equally unjustified steps to thwart U.S. exports.”
On the domestic front, Dinneen sees demand growth through “building new partnerships and strengthening old ones.”
For example, there is potential for ethanol demand to grow as the demand for higher octane fuels intensifies. “Demand for higher octane gasoline is already growing as automakers introduce more vehicles that require or recommend the use of premium…. But while many automakers today acknowledge the potential benefit of pairing higher ethanol blends with higher compression ratio engines, they have been far less willing to engage in a meaningful dialogue about how to create the regulatory and marketplace environment to make it happen. We need to build upon the partnership we already have with the autos, and get this dialogue moving.”
Dinneen acknowledged that “friends” in the oil industry will continue to attack the RFS – even though many oil companies also produce ethanol and “all of them have recognized ethanol has benefits and is here to stay.”
“We will continue to fight those attacks, and defend both the molecule and the policy with passion and prejudice. But we should recognize that the oil industry is no longer monolithic with regard to renewable fuels, and we can best succeed by building new partnerships with those refiners who share our vision of a growing ethanol market.”
The debate on Capitol Hill is shifting, Dinneen said, away from repealing the RFS to reforming it after 2022, when the congressionally mandated volumes prescribed in the law are removed and replaced with largely unfettered discretion by EPA to set future standards for all renewable fuels.
“New alliances are forming as some refiners realize their interests may no longer align with oil producers, as automakers face the daunting challenge of meeting increasingly stringent fuel economy standards with vehicles consumers actually want to buy, as farmers run up against the RFS cap on how much corn ethanol can qualify for the program, and as biofuel producers look to grow demand and stimulate investment in new technologies in the face of an increasingly hostile political environment.”
To that end, Dinneen advised conference participants that there should be “no ambiguity as to where the entire ethanol industry stands on key issues. “The surest path to failure is with a house divided.”
After his keynote, Dinneen hosted a panel discussion with Chet Thompson, who is President of the American Fuel & Petrochemical Manufacturers, and Marty Durbin, Executive Vice President and Chief Strategy Officer for the American Petroleum Institute.
All three agreed that they shared an interest in removing duplicative and unnecessary regulations, promoting exports and ultimately growth in their respective industries.
But Durbin confirmed that API is still looking for changes in the RFS and pointed to legislation offered in the last Congress by Rep. Bill Flores, R-Texas, that the congressman aims to reintroduce. The measure would require the EPA to cap overall ethanol blends in the U.S. transportation fuel supply at 9.7 percent.
The House Energy and Commerce Committee also has a new chairman, Greg Walden, R-Ore., who has said that reforming the RFS is a priority.
Thompson said there is a real sense that things are different right now and that some reform is needed and going to happen.
“That’s why it’s really imperative upon us to get together and share ideas. We are not coming to the table with the position that it has to be full repeal (of the RFS),” he said. “We are coming forward with a proposal that largely respects the volumes that the RFS mandated for at least conventional. It also recognizes that there are some real infrastructure concerns of going beyond the 10 percent mandate.
“It’s really important that people understand we are not anti-ethanol, we are not anti-farming. Our concern is always about the mandate,” Thompson said. “If the (RFS) mandate went away today, ethanol would remain strong and E10 is not going away. This isn’t about capping demand or allowing exports to continue to grow. It’s about mandates.”
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