Iowa ethanol plants saw another record-breaking year in 2018, producing 4.35 billion gallons. This was up from 4.2 billion gallons in 2017. While it is a record, the 2018 production was below the 4.5 billion-gallon capacity of Iowa’s ethanol producers.
Monte Shaw, Iowa Renewable Fuels Association executive director, says the increased production is due largely to record exports, as ethanol becomes the octane additive of choice around the globe. He emphasizes that despite this success, rampant small-refinery exemptions to the Renewable Fuel Standard (RFS) and the trade dispute with China have stunted margins.
“This record production is a testament to the resilience of Iowa’s ethanol producers,” Shaw says. “This past year, they were hit with demand-destroying small-refinery exemptions issued by the EPA and a closed Chinese market. The resulting low, or in some cases negative, margins made 2018 a tough year for ethanol producers and our corn suppliers. Iowa ethanol producers have weathered the storm fairly well given the reports of idled and even shuttered plants in other states.”
Producing 27% of U.S. ethanol
Iowa’s production is estimated at 27% of total U.S. ethanol production for 2018. Shaw says despite robust production numbers, action is needed to return profitability to the industry. “Without our current export markets, the situation in rural America would be far worse today,” he says. “The fact is, ethanol producers and Iowa farmers need growing markets abroad and at home.”
Despite the current economic hardship facing rural America today, Shaw remains optimistic. “We hope that 2019 can get ethanol demand out of neutral and growing again with a properly enforced RFS, along with year-round sales of E15, and the reopening of the China market,” he says. “Much depends on the actions of the Trump administration and the EPA. It is within their power to set us on the course for not only record ethanol production, but restored prosperity in rural America.”
Year-round E15 sales
Jeff Broin, CEO of POET, a major producer of ethanol, notes that farm bankruptcies are on the rise in the Midwest due to depressed crop and livestock prices, and another year of declining farm income.
“There’s a dramatic oversupply of commodities, not just in the U.S. but worldwide. Crop yields continue to soar,” he says. “If the EPA would allow the sale of E15 ethanol in the summer, we’d have a year-round opportunity to sell that higher blend. Year-round E15 would be a permanent, domestic demand for U.S. corn. Exports, feed use, etc., haven’t changed significantly in years. It’s biofuels that have really driven the growth of value-added agriculture.”
Broin points out that EPA is on a tight timetable to get year-round E15 going before the 2019 driving season. “Retail fuel suppliers and gas stations need the certainty of EPA approval to start offering the higher blend to consumers,” he says.
Cost-share for blender pumps
Iowa Gov. Kim Reynolds recently released her 2019 Iowa budget proposal. It includes $3 million for the Iowa Renewable Fuels Infrastructure Program. RFIP provides cost-share grants to help Iowa fuel retailers add blender pumps, storage tanks and other necessary equipment to offer higher blends of biofuels.
“Our members of the Iowa Renewable Fuels Association thank the governor for prioritizing funding through the RFIP program in her budget she presented to the Iowa Legislature,” Shaw says. “RFIP was identified in the Iowa Energy Plan as one of the best ways to help Iowa become No. 1 in both the production and use of homegrown energy like ethanol and biodiesel. We must continue pressing the Trump administration to keep its commitments to renewable fuels, and we need that commitment to keep going in Iowa, too, by funding programs such as RFIP.”
Oversight of RFS waivers
In mid-January during a U.S. Senate hearing on the nomination of acting EPA Administrator Andrew Wheeler to be permanently appointed, Iowa Sen. Joni Ernst asked Wheeler if EPA will have the E15 year-round rule in place by May 31, the beginning of the summer driving season.
Ernst also asked Wheeler for assurance that EPA will examine the small-refinery exemptions closely and not give oil refiners blanket exemptions to the RFS requirements for biofuel use, as was done by his predecessor, Scott Pruitt.
Wheeler answered, “Yes, we are on schedule to approve year-round E15. But we are not able to work on it during the federal government shutdown.”
Regarding assurance that the economic hardship exemptions granted for the RFS will be examined by EPA and not give blanket RFS exemptions to petroleum refiners, Wheeler said, “Yes, we will examine each application for the hardship waivers individually to make sure each exemption that is granted is warranted.”