ETHANOL PRODUCERS SAY RFS UNCERTAINTY IS DRIVING INVESTMENT OVERSEAS
Jan. 24, 2014
Biofuel producers relying on a growth market for second generation ethanol are looking to other countries for investment because of uncertainty surrounding the Renewable Fuels Standard (RFS), industry representatives said today in a conference call with reporters.
The call was part of the Renewable Fuels Association's (RFA) final push to protect the RFS from the Environmental Protection Agency's (EPA) proposed changes, which are under a 60-day comment period that ends Jan. 28.
EPA is proposing to cut total biofuel blending from 18.15 billion gallons specified for 2014 in the 2007 legislation to 15.21 billion gallons. The measure also would drop the corn ethanol requirement from 14.4 billion gallons to a little more than 13 billion gallons, an amount less than the 13.8 billion gallons required in 2013.
Christopher Standlee, executive vice president for institutional affairs at Abengoa Bioenergy, said the RFS is the most important market stimulant for his industry and the reason his company invested more than $1 billion in the U.S. over the last 10 years.
However, he said the government's "questionable" support of the RFS forced Abengoa to reform its business plan - which was to immediately start licensing technology to companies in the U.S. - and look for potential investments abroad.
"We have decided to place a hold on evaluations of further investments of bioenergy in the United States until we see the final rule and what impact it will have on the market," Standlee said.
Brian Foody, CEO of Iogen Corporation, said the cellulosic ethanol producer is building its first commercial ethanol plant in Brazil with plans to enter production later this year. He said he believes there are huge opportunities in the U.S. to convert agricultural materials into biofuels and meet the needs of the RFS, but uncertainty is quelling investment.
"The RFS is the single most important investment driver in America," Foody said. "Cellulosic biofuel has the promise to deliver tens of billions of gallons of ethanol to the U.S., but there needs to be a market for that. We need to see E85 and E15 markets grow."
Brooke Coleman, executive director of the Advanced Ethanol Council, said the Obama Administration is turning the RFS from a policy that drives the market to one that reacts to the market.
"You don't need a degree in economics to understand that if you turn a growth market into a shrinking market, investors are going to go away," he said. "I hope the administration will change its mind and change its proposal in the final rule."
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In its proposal, EPA cited information that U.S. demand for gasoline has dropped to the point that there is insufficient supply to meet the mandatory ethanol blending requirement, creating a "blend wall" that will force gas prices higher.
Livestock industry representatives, including National Chicken Council President Mike Brown, say the RFS, and its mandate for corn-based ethanol, needs to be lowered because it has increased average annual feed costs for poultry producers by $8.8 billion and was partly to blame for several poultry companies going out of business.
Bob Dinneen, the RFA's chief executive officer, said White House officials proposed the RFS changes because they believed gasoline prices were being driven higher by rising prices for Renewable Identification Numbers (RINs).
Oil companies can buy RINs as an alternative to blending liquid fuel with the required amount of ethanol. RFA insists that there is no correlation between RINs and gas prices.
"You can have a growing biofuels market or you can have low-priced RINs, but you can't have both," Dineen said on today's call.
Meanwhile, Sen. Joe Donnelly, D-Ind., a member of the Senate Agriculture Committee, sent a bipartisan letter today to EPA Administrator Gina McCarthy over the agency's proposal.
"I remain frustrated and disappointed that the EPA has proposed lowering the volume of renewable-fuels required in our fuel supply," Donnelly said. "Supporting domestic energy production like the ethanol and biodiesel coming from Hoosier farms is critical to lessening our dependence on foreign oil and boosting Indiana's economy."
The letter was signed by a bipartisan group of 31 senators, including Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich.