A federal appeals court ruled last week that the Environmental Protection Agency overestimated the amount of fuel that can be produced from grasses, wood and other plants in an effort to promote the renewable fuels industry.
Federal law requires that a small portion of cellulosic biofuels, be mixed with gasoline each year. Despite annual EPA projections that the industry would produce the innovative biofuel, none of that production materialized.
The court threw out the EPA estimates in response to a challenge filed by the oil industry. But the court also rejected the oil industry's arguments that EPA should have lowered production mandates for other renewable fuels.
And so it goes in the ongoing battle between the renewable fuels industry and Big Oil. But at meetings in Iowa this week, ethanol proponents announced they’re taking off the gloves.
U.S. agriculture is still reeling from the worst drought in half a century. While farmers produced the 8th largest corn crop in history, the 2012 harvest was still well below expectations.
And as prices soared to record levels last summer, livestock producers experienced shrinking profit margins.
Nathan Kauffmann, Federal Reserve Bank Kansas City, Omaha Branch: “The reality is, given where corn stocks are now, we’re going to face some significant volatility, I’ve been telling this to livestock operators, it’s to shore up on your working capital, because ultimately, we’re going to be facing volatility and you’re going to want to enjoy the good years when they’re there, but be prepared for the bad years.”
Nathan Kauffmann, an economist with the Federal Reserve Bank of Kansas City says corn prices could range from four to eight dollars per bushel this year. 2014 though, may be an entirely story.
Nathan Kauffmann, Federal Reserve Bank Kansas City: “As corn prices stay low, in 2014 the February futures price may not be $5.50, and it may incentivize farm operators to plant record acres to corn. We typically say within agriculture the best cure for high prices is high prices.”
This would be welcome news for sectors relying on corn as their dominant feedstock. The renewable fuel industry also struggled in 2012, as the cost of its key ingredient soared.
2013 is starting dry, raising some concerns that another short crop will push corn prices even higher.
At the Iowa Renewable Fuels Summit this week near Des Moines, industry insiders shared projections and goals for the future. Iowa is the nation’s top producer of ethanol and biodiesel. The renewable energy industry claims 60,000 jobs are tied either directly or indirectly to its operations, and it contributes $5.5 billion to the Iowa economy annually.
Nevertheless, proponents say there’s still plenty of room for growth.
Tom Buis, CEO, Growth Energy: “Buying is voluntary. E15 or any higher blend is not mandatory which some people seem to get wrong and perpetually push it out there, for misinformation. It is voluntary. We have to convince the consumer to want to buy it. And when the consumer demand is there, it entices the retailer to want to offer it.”
Tom Buis of Growth Energy says oil companies and others with vested interests are stoking the “food verses fuel” debate.
Buis indicates he’s using former U.S. General George Patton as inspiration for biofuels in 2013.
Tom Buis, CEO, Growth Energy: “You don’t win a fight being on the defensive. Oil has pulled out, and their allies, all the stops against Ethanol production because it is a threat to their vested interests. If we don’t push back, they get a free pass and people, people start to believe it.”
Part of the ethanol industry’s plan includes noting a milestone for the petroleum industry.
Monte Shaw, Iowa Renewable Fuel Association: “The oldest oil subsidies go back to 1913. We are literally in 2013 celebrating a century of subsidies of big oil. And if you’re not going to get rid of theirs, that’s fine with us, but if you’re not going to, then we need to some things for the younger parts of our industry, to level the playing field because right now, they’re swimming upstream. Whenever someone asks me why does ethanol or biodiesel you need this or that, I ask why does oil after 100 years need it?”
Monte Shaw leads the Iowa Renewable Fuels Association and has made his goal in 2013 is to make sure the Renewable Fuel Standard, the federal mandate to produce 36 billion gallons by 2022, stays in place.
Monte Shaw, Iowa Renewable Fuel Association: “I think our biggest focus and hurdle this year is the political battle over the future of the industry. The Big Oil is coming after us like gangbusters, they want to repeal the federal renewable fuel standard. We really need that. So we need to keep the RFS to crack through that monopoly, to crack through that mandate to level the playing field for subsidies. We’re cheaper, we’re cleaner, we’re better, ethanol and biodiesel, we’d be fine. But right now the federal policy is tilted decidedly in favor of Big Oil.”
Shaw says the RFS is his industry’s way to gain access to pumps, giving consumers a choice.
Monte Shaw, Iowa Renewable Fuels Association: “In a way, that is why we’re pushing so hard to put E15 out in front of consumers. Its only five percent on your engine’s perspective, But going from 10-15 is a 50% increase in market demand. We really feel those higher ethanol blends can be what sucks in the corn, and keeps the market firm on the years we have a good harvest, and hey, if we have another 2012, you can always take that blend back to the E10 level.”
Tom Buis, CEO Growth Energy: “I’ll gladly compare our industry to oil. You want to compare us on the environment, we’re a lot less, we’re more environmentally friendly than oil. You want to compare us on price? We’re the lowest cost fuel in the world. You want to compare us on what’s best for our national security? There are no wars fought over ethanol.”