Ethanol on Offense

RFA Leader Dinneen Goes After EPA, Oil Industry

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Renewable Fuels Association President and Chief Executive Officer Bob Dinneen delivered his state-of-the-ethanol-industry speech Thursday during the start of the national ethanol conference. (DTN file photo)

GRAPEVINE, Texas (DTN) -- Renewable Fuels Association President and Chief Executive Officer Bob Dinneen went on the offensive in his state-of-the-ethanol-industry speech Thursday during the start of the national ethanol conference.

Dinneen went after the U.S. Environmental Protection Agency for being years behind on the Renewable Fuels Standard and pointed to recent job losses in the oil industry to contrast it with ethanol's staying power in rural America. Just last week, the U.S. Department of Labor reported the loss of 1,900 oil jobs in January alone.

Unlike 2005 when the ethanol industry was getting a jumpstart from a combination of tax credits and the first RFS signed into law by then-President George W. Bush, today's industry is coming off its most profitable year even though EPA has yet to release RFS volumes for 2014, 2015 or 2016.

Dinneen said the industry is likely going to face a tougher 2015, but will continue to thrive because it has matured. All indications are U.S. farm income will drop off in 2015 as a result of falling commodity prices, including corn that has dipped below $4 a bushel. Dinneen said it is no coincidence the success of the ethanol and agriculture industries go hand in hand.

"The U.S. ethanol industry has revitalized rural America," Dinneen said. "It is no coincidence that the past five years have been the most profitable in the history of U.S. agriculture. From 1997 to 2006, corn prices were below the cost of production, and farmers were reliant on government payments to offset losses. From 2007-2013, however, corn prices were above the cost of production, meaning farmers earned their income from the market -- not the taxpayer..."

PRESSING EPA

Dinneen continued to call on the EPA to restore the RFS and to clear the way for higher ethanol blends. However, he said the lack of a solid RFS policy gave the ethanol industry a chance to display its maturity. In fall 2013, EPA proposed to cut the Renewable Volume Obligation for blenders from 14.4 billion gallons to 13 billion. The ethanol industry pushed back, arguing refiners could use Renewable Identification Numbers to trade and meet their volume obligations for cellulosic and advanced biofuels.

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"What might have been possible had EPA not adopted the oil company narrative about the 'blend wall' and allowed the RFS program to work as designed, with RINs providing the market-based incentive to promote investments in infrastructure that will tear down the blend wall?" Dinneen asked.

EPA has raised concerns that rising renewable identification numbers, or RINS, will lead to higher gasoline prices. Dinneen said the real-world data disproves that claim.

"EPA must allow the RIN system to work," he said.

As the blend wall began to limit the U.S. ethanol market, Dinneen said the industry responded by continuing to open up export markets. The industry exported 836 million gallons of ethanol in 2014, approximately 6% of production, to 51 different countries. That translated into about $2.1 billion in sales, Dinneen said.

In addition, Dinneen said cellulosic ethanol's commercial launch took place in the absence of RFS influence. Companies including POET-DSM, Quad County Corn Processors and Abengoa Bioenergy already have launched cost-competitive production plants.

ADMINISTRATION SUPPORT

Despite EPA's delay in finalizing RFS volumes, Dinneen said he believes the Obama administration remains firmly behind the industry.

"I remain convinced the administration's stated support for ethanol generally and the RFS specifically is sincere. Their task is not an easy one, and it has been made significantly more challenging by an oil industry that is intent upon undermining the program at every opportunity," Dinneen said.

Dinneen said the Renewable Fuels Association has a 10-point plan it will follow in the upcoming year. That includes working with EPA to put the RFS back on track; continue to build market opportunities for E15 and E85; to continue to expand E15 infrastructure; to look for more export opportunities; to push for a long-term tax benefit for cellulosic biofuels; to work to make ethanol blends of 20% to 40% a reality; continue to push the administration on the climate benefits of ethanol; to improve transportation issues that slow ethanol shipments; to promote the safe transportation of ethanol; and to continue to embark on useful research to benefit the development of new markets.

"Thus, as I contemplate the state of the U.S. ethanol industry today, it is without hesitation or hyperbole that I conclude it is brimming with the confidence of an industry that has seen tough times and thrived, good times and prepared, and turbulent times and never wavered," Dinneen said. "The state of the ethanol industry is strong. The market today may be challenging, but we have weathered worse than this. Critics may be legion, but we know the facts support us and we will prevail."

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley

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