What’s needed to make biofuels the next American success story? Panelists at the Renewable Fuels Association‘s National Ethanol Conference in Las Vegas on Wednesday had some differing ideas, but most agreed that the policies in place can be enhanced.
Despite what critics have said in recent months, the Renewable Fuel Standard, or RFS — which, among other things, established that a certain number of gallons of ethanol must be blended into the nation’s gasoline supply — is being met, thanks to flexibility built into the program, some panelists said.
Mark McMinimy, director of Guggenheim Securities, said investors rely on the RFS because so many industries depend on the stability of biofuels. Farm-equipment manufacturers, seed-development companies, enzyme marketers, fuel blenders, food manufacturers and the livestock industry are interconnected through biofuels, he said. Investors worry about crops from year to year, and policy instability would only worsen that.
Last year, the U.S. corn crop was hit hard by a nationwide drought, and the ethanol industry was hurt, too.
“The reality is the drought we had last year had a higher impact because it was off of a higher base,” said National Corn Growers Association CEO Rick Tolman, comparing the impact with droughts in the late 20th century.
However, early reports for this year are calling for a record year, which would greatly benefit the RFS, he said. The U.S. should have a corn surplus by next year, but the sooner that level is reached, the better it will be for everyone involved, Tolman said.
Shell Oil Products’ Downstream Policy and Advocacy Manager John Reese said his company is a big supporter of biofuels, but the RFS needs to be adjusted to avoid problems down the road. He said ethanol blends known as E15 and E85 were allowed in the U.S. market too early by the Environmental Protection Agency, causing their slow growth. Had additional testing been done, the market would have been more open to the new blends. He also pointed to cellulosic ethanol’s slow growth as cause for reworking the program.
Reese said that if the federal requirements for corn and cellulosic ethanol production were revised to reflect demand, the market could grow.
Brooke Coleman, executive director of the Advanced Ethanol Council, said it is not the laws governing ethanol that are of concern, it’s the oil industry’s tax incentives. There is a lack of competition in the fuel market because biofuels aren’t on equal footing with fossil fuels.
From an investment standpoint, the tax code de-risks investment in fossil fuels, because their rules are permanently on the books; tax incentives for biofuels, however, must be renewed by Congress every year. Despite this, commercial-scale cellulosic ethanol facilities are beginning operations in the U.S. If the federal government made such facilities a safer investment, the industry would certainly grow, Coleman said.