Confronting ethanol critics

Feb 21, 2014

—Ethanol, ag industries take on oil, European Union

If U.S. ethanol and agriculture industry officials have been holding back at all on their frustrations about restricted market access to Europe and an oil industry full-court press to scale back the Renewable Fuel Standard (RFS), they let it all loose last Tuesday. The ethanol and agriculture industries unleashed their frustration during the National Ethanol Conference, attacking ethanol critics head-on.

For weeks leading up to the closing of a public comment period for the U.S.

Environmental Protection Agency (EPA) proposal to cut the RFS, a grassroots public-relations campaign was lodged by the oil industry. That included so-called ‘robocalls’ that made claims about rising food prices and damage to automobiles to come if a planned RFS expansion were to go forward—calls received even in the heart of ethanol country in the Corn Belt.

What’s more, U.S. ethanol exports essentially have been cut off by high duties levied against those exports by the European Union in response to allegations that U.S. producers dumped lowpriced ethanol on the European market.

In two separate panels, U.S. ethanol and agriculture industry officials challenged the oil industry and the EU head-on.

In one exchange, Renewable Fuels Association President and Chief Executive Officer Bob Dinneen questioned Bob Greco, group director of downstream and industry operations for the American Petroleum Institute (API), about API’s use of robocalls on the RFS.

“I’ve got to hand it to you, a heck of a strategy,” Dinneen said during a Washington insiders’ panel. “How many calls did you make?” Greco responded, “We have a very large grassroots effort going on and not just on this issue. We’ll continue to do that. This is something that allows the American consumer to have a voice.”

Ethanol, he said, will be “continued to be used with or without a mandate. We support the use of ethanol.”

Dinneen responded, “I guess we’ll agree to disagree.”

Jon Doggett, Vice President of Public Policy for the National Corn Growers Association, said API’s calls to farmers may have backfired.

“They’re as mad as hell— really mad,” he said. “This has been an economic engine in rural America. Folks are really afraid. We’ve had complacency in recent years, but they’re not complacent now.”

No excuses

Doggett said the oil industry has no excuse for its opposition to the RFS, based on the concern that gasoline retailers would not be able to handle more ethanol in the fuel pool.

“They’ve known since 2001 that they’re obligated parties,” —required to blend ethanol, he said. “They could have solved this problem.”

The oil industry originally supported the RFS when it first became law in 2005 and less so in 2007 when an update to the law called for 36.5 billion gallons of biofuels production by 2022.

“In 2007, gasoline demand was projected to grow,” Greco said. “Now demand is dropping and plateauing at best.”

Dinneen said the oil industry had plenty of time to plan for investments in new fuel pumps and other infrastructure to prepare for ethanol expansion in the RFS. He said automobile companies responded by building more flexiblefuel vehicles to accommodate the rise of an E85 market.

RFS reform

There has been talk about RFS reform coming in the form of federal legislation. Considering that 2014 is an election year, however, Greco said chances of getting it done this year are dwindling.

“We have a narrow window for legislation,” he said. “We’ll continue to push next year. We’re up to 200 members of Congress who say the RFS should be lowered. It continues to grow and it will continue to do so.”

Doggett said the ethanol industry can no longer take things for granted.

“If there’s anyone in this room who thinks they won’t leap at a chance to do away with the RFS, don’t buy it,” he said. “Don’t get complacent. I think everyone should embrace a little paranoia on this one.”

European markets

On Nov. 25, 2011, the EU commission launched an investigation following a complaint by the European Producers Union of Renewable Ethanol Association.

The group represents some 25 percent of the EU’s total ethanol production.

The commission identified more than 60 U.S. producers who had exported ethanol to the EU between Oct. 1, 2010, and Sept. 30, 2011, when the volumetric ethanol excise tax credit, or blender’s credit, was still in play.

Last year the European Union levied a 9.6 percent anti-dumping duty on U.S. ethanol imports, in response to claims that U.S. ethanol producers were undercutting EU producers. The duty essentially cut off U.S. exports to the EU.

In May 2013, Growth Energy and the RFA filed a legal complaint against the EU’s action.

Robert Vierhout, Secretary General of ePure, the association representing European ethanol producers, said U.S. exports to the EU would not benefit consumers.

“If you would export ethanol to the EU, who would gain, the consumer?” he said. “No, it would be the oil industry. We asked the commission to look at it because we have clear evidence of dumping. It’s about fair trade. If you start dumping your product, we have measures to take. We’ll see what happens in court.”

Dinneen said an independent audit of seven U.S. ethanol plants already cleared the U.S. industry of dumping.

“You have not been able to meet your own demand, so there was a market that was created,” he said.

Vierhout said the EU ethanol industry faces dwindling support from government leaders and a shrinking market. The industry is producing far below its production capacity, he said.

“What you tried to do was increase the price of imports,” Dinneen said. “The only ones it benefits are the lawyers. I don’t know how the EU justifies it.

“What’s most important is working together to build markets. I’m sick and tired of us cannibalizing markets.”

Joel Velasco, Senior Advisor to the board of UNICA, the Brazilian Sugarcane Industry Association, said the EU is “killing” its own market in setting the duty.

Despite disagreements about trade policy, Vierhout said he believes EPA needs to reconsider its proposed 2014 RFS volumes.

“I hope EPA will get its act together,” he said. — Todd Neeley, DTN