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Ethanol Industry Uneasy Although Output Is Setting Records

The ethanol industry topped the 15-billion-gallon mark in 2016, its largest production ever, and it could set an even higher mark this year. The Energy Department says corn ethanol plants produced an average 42 million gallons per day of the biofuel, indicating an annual output of 15.3 billion gallons in 2016, and it foresees production running at similar levels for this year and next.

“Lower corn prices, strong ethanol exports, and greater blending requirements combine to make 2017 appear to be a strong year for corn consumption in ethanol production,” says economist Todd Hubbs of the University of Illinois. He estimates that 5.37 billion bushels of corn would be used during the current marketing year if daily ethanol production continues to run at 42 million gallons daily. That would be a 3% increase from the 2015/2016 marketing year.

Nonetheless, there is uncertainty about the new administration’s intentions. President Donald Trump campaigned as an ethanol supporter, but he chose Scott Pruitt, the attorney general of Oklahoma, an oil state, to run EPA. Pruitt has called the Renewable Fuels Standard unworkable. With Trump figuratively looking over his shoulder, Pruitt assured farm-state senators that he would enforce the Renewable Fuels Standard. “I was pleased to hear President-elect Trump made it clear to Mr. Pruitt that he cares about the RFS,” said Senator Joni Ernst (R-IA) after meeting Pruitt in early January on Capitol Hill. 

In a victory for corn growers and ethanol makers, EPA effectively set the RFS for corn ethanol at 15 billion gallons this year, the first time the mandate was set at the maximum set by statute. EPA has the discretion to reduce RFS targets, which it used in the past. The agency usually proposes in May the RFS for the coming calendar year, so that may be an early marker of Pruitt’s preferences. The oil industry wants to weaken or repeal the RFS. 

Jon Doggett of the National Corn Growers Association, says ethanol backers will be watching beyond headline-grabbing actions by EPA, such as the first RFS proposal of the Trump era, to tell if it has a friend at EPA. Seven Midwestern governors said in a letter to EPA that it would be easier to sell higher blends (such as E15 and E85) with the removal of a Reid vapor pressure limit on them. Biofuel backers also say EPA should prod the retailers to install more pumps that can handle higher ethanol blends. The advent of chip technology for credit and debit cards has created the opportunity to expand fuel options as service stations update their pumps, says Doggett.

While corn ethanol use is booming, second-generation biofuels such as cellulosic ethanol, remain scarce. Three commercial-size cellulosic plants opened in 2014, but one of them, Abengoa Bioenergy’s 25-million-gallon-a-year plant in Hugoton, Kansas, was sold in bankruptcy two months ago. Newly formed Synata Bio bid $48.5 million (or 12¢ on the dollar) for the plant built for an estimated $400 million.

This article was produced in collaboration with the Food & Environment Reporting Network, an independent, nonprofit news organization producing investigative reporting on food, agriculture, and environmental health.

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