By Sara Wyant
© Copyright Agri-Pulse Communications, Inc.
PHOENIX, Feb. 21 – While the magnitude of the challenges facing the ethanol industry may not have changed much since the Renewable Fuels Association (RFA) formed 30 years ago, the need to build bridges and unite all segments of the industry is greater than ever, according to RFA President and CEO Bob Dinneen.
The challenges are “as vexing and complicated as any we have every faced,” emphasized Dinneen during his annual “State of the Industry” speech at the RFA’s annual meeting Monday in Phoenix, Ariz.
“We need to unite. We need to focus our agenda; this is not a time for a wish list. We need to develop the technical support Congress will demand. And we need to go to Capitol Hill, speaking as one voice, educating the more than 100 new Members of Congress that are new to this debate and may only have learned about ethanol from the pages of the Wall Street Journal,” said Dinneen.
“If we do that, as we have when facing the insurmountable opportunities of the past 30 years, we will succeed again. If we don’t, we will miss a critical opportunity to move this nation further away from imported energy.”
The industry needs to remind lawmakers that, in addition to creating more than 400,000 U.S. jobs, the U.S. ethanol industry exported a record 350 million gallons of ethanol last year, with product going to Europe, Canada, and Asia as well as, surprisingly, Brazil, the United Arab Emirates and Saudi Arabia.
“American ethanol is now being used to fuel the limos of Middle East oil sheiks and South American sugar barons. Somehow, that warms my heart,” offered Dinneen as the audience applauded.
However, with renewed focus on cutting the federal budget, some members of Congress are working hard to stop further ethanol industry growth.
Ethanol critics succeeded in placing new funding limits on the implementation of E15 and new blender pumps as part of the continuing resolution that passed the in the GOP-controlled U.S. House of Representatives on Saturday. However, Democratic leaders in the U.S. Senate have already signaled that they will reject the package.
But Dinneen says the vote should serve as a “clarion call and a warning call as to the challenges we are facing today.”
Dinneen said the obstacles to meaningful market penetration for E15 are “great and not going away,” as are other challenges to the industry.
“Congress does appear ready to end the ethanol tax incentive program, however. At least, end it in its current form and cost,” he added.
“Last December, with the committed leadership of Senator Chuck Grassley and President Obama, the Congress extended, for one year, the Volumetric Ethanol Excise Tax Credit – VEETC. It is now set to expire at the end of this year. But the message from that debate was unambiguous. Our industry needs to work with Congress and the Administration to reform the tax incentive moving forward,” Dinneen emphasized.
While welcoming a dialogue about the future of the ethanol tax incentive, Dinneen says it “ought not to have a myopic focus on VEETC. We ought to be encouraging a more sophisticated conversation about all motor fuel tax policy – and all energy tax policy in general.
“We must address the permanency of tax incentives for very mature and profitable energy industries with the 'extenders game' played with renewable energy technologies. We need to determine how best to insulate consumers and producers from the wild gyrations of the world oil market. We need to encourage investments in infrastructure and flex fuel vehicles such that consumers are finally empowered to make the energy choices right for them and their vehicles. And we need to be discussing how we can finally and assuredly commercialize new technologies using new feedstocks, and continue the evolution of the biofuels industry such that it is sustainable, both environmentally and economically.”
Dinneen says that, “if the still emerging biofuels industry is doing its part to reduce government debt, then the entrenched petroleum subsidies are on the table as well. After all, it’s more than just market access that will determine our future; it is market economics first and foremost.”
Several different proposals have been floated to reform the ethanol tax incentive, including:
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A refundable producer tax incentive
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An incentive linked only to gallons above the Renewable Fuels Standard (RFS) obligations
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An incentive for only mid-level ethanol blends and E85
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A phase down of the incentive while phasing in mandates for flex fuel vehicles and blender pumps
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A carbon-based performance credit
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A variable tax incentive tied to the price of oil and/or crush margins
“Frankly, each of these has both advantages and disadvantages,” emphasized Dinneen. “But we must allow a dispassionate debate, based on fact and market analysis, and guided by political reality.
“We should avoid the pettiness of whose idea it is, and focus on what will be best for the industry and the taxpayer,” Dinneen added. “Ultimately, the arbiter will be Congress, and we will all have to live with the consequence.”
Dinneen also warned that “the food vs. fuel canard, which has been recycled for 30 years now, will likely be resurrected with new vigor again this year.
“US farmers grew about 12 ½ billion bushels of corn last year. It was the third largest corn crop in history and the fourth in a row more than 12 billion bushels. Yields exceeded 152 million bushels per acre, meaning we’re growing twice as much corn on the same amount of land as we did when the RFA was formed.”
Dinneen says this happened in large part “because the increased demand for grain created by the ethanol industry is enabling innovation and driving increased productivity on the farm and in the labs of seed companies across the country. We need to start taking credit for it. And we need to tell people that it is innovation and advanced technology that hold the key to meaningful economic development in impoverished parts of the globe. The biggest threat to food supplies isn’t biofuels, it’s underinvestment in agriculture and, more significantly, it’s skyrocketing energy costs.
“Energy touches every element of food production, marketing and distribution, from the fertilizer used to produce the crop to the plastic it’s stored in to the diesel used to get it to the grocery store, added Dinneen. “There is simply no justification for blaming ethanol for world food prices.”
To watch a 58 minute video of National Ethanol Conference speeches by RFA Chair Chuck Woodside, RFA President & CEO Bob Dinneen and Energy Secretary Dr. Steven Chu, click the video play control:
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