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Forcing Ethanol Down American Throats

December 18, 2012

Several events happened on the way to the glorious future of biofuels.

First, there has been a failure to develop cellulosic ethanol, i.e., ethanol made from non-food sources such as corn stover and switchgrass.

Next, the United States is using less gasoline, which reduces the assumed need for ethanol.

And, there has been a drought in 2012, which reduced the size of the corn crop, with corn being the primary feedstock for ethanol in the United States. The corn crop in 2012 was only 10.7 billion bushels, compared with around 12.4 billion in 2010 and 2011.

In tandem with these events, the number of gasoline stations offering E85 remains insignificant, while the number of E85 Flex Fuel vehicles is, and will continue to be, a small percentage of the automotive fleet. There are only 2,900 stations offering E85 out of some 157,000 gasoline stations in the United States, while only 5% of light vehicles are capable of using E85 ethanol. (E85 is a blend using 85% ethanol.)

This has resulted in several unfortunate outcomes.

The most complicated outcome involves Renewable Fuel Information Number (RINs) that can be used to meet the Renewable Volume Obligation (RVO) mandated by Congress.

The industry has been able to meet its RVO mandate for ethanol production of 13.6 billion gallons in 2012, by using RINs accumulated over the past few years. If there is low corn production in 2013 the RIN surplus could be eliminated, and with insufficient ethanol being produced to meet the mandate refineries could be required to pay penalties. (See below for an explanation of variables.)

By 2015, when the mandate for corn-based ethanol is capped at 15 billion gallons, the demand for corn-based ethanol will have fallen below 15 billion gallons.  If corn crops return to normal there would be a surplus of ethanol.

Cellulosic ethanol is unavailable which creates another problem.

Current legislation requires the use of 20 billion gallons of cellulosic ethanol by 2022. The product doesn’t exist and the EPA has refused to completely waive the requirement for cellulosic ethanol so refineries and importers have to pay penalties for not supplying a product that doesn’t exist.

Ethanol mandates and the resulting high corn prices have hurt American families with higher food prices, including meat.

Using food, i.e., corn, to produce ethanol has been called a “crime against humanity” by the UN.

A perverse potential outcome is the destruction of the export market for U.S. farmers as other nations, such as Brazil, step in to grow more corn at lower prices. This hurts America.

At present, the EPA, and those who support ethanol mandates, are trying to force Americans to use E15, a blend with fifteen percent ethanol. Currently, gasoline sold in the United States is E10, a blend with ten percent ethanol.

E15 would increase the amount of ethanol being used.

Automobile manufacturers have spoken out against E15. The added ethanol content can damage vehicles unless they are Flex Fuel vehicles.

We now have the EPA promoting E15 that would harm vehicles and hurt Americans.

It will be a decade or two before Flex Fuel vehicles are a majority of light vehicles, where E15 could be used without harming the vehicle.

When a substantial majority of vehicles are Flex Fuel vehicles, E85 could significantly increase the amount of ethanol being used, but this would require building 50,000 or so E85 stations, at great expense.

Congress and the environmental organizations insisting on the ethanol mandates have created an impossible situation for the United States.

  • Eliminating ethanol mandates would harm farmers who have geared up to produce corn for the ethanol market. Farmers are likely to oppose eliminating the ethanol mandates.
  • The people who produce ethanol will also oppose eliminating the ethanol mandates.
  • Eliminating the mandate for cellulosic ethanol should be done immediately, but environmentalists will oppose this.
  • A potential surplus of corn based ethanol is causing the EPA to try to force Americans to use E15.

The only option available to the average American is to refuse to use E15 gasoline. This will keep their cars from being damaged and create a dynamic that may, if there is a surplus of corn-based ethanol, put pressure on Congress to address the mess it has created.

All gasoline pumps have a sign indicating whether they dispense E10 or E15 blended gasoline. Drive to the next gasoline station when you see E15 on the pump.

Meanwhile, American consumers are being hurt, and will continue to be hurt until the ethanol mandates are eliminated.

Note: Comments on variables:

  • If corn production increases in 2013 and 2014 to over 12.5 billion bushels, it will be possible to produce 15 billion gallons of ethanol while using 1/3 of the corn crop, the same as in 2011. More RINs will also be issued.

At the same time, if gasoline usage continues at current low levels, or continues to decline, there will be less need for ethanol and there will be a surplus of ethanol. A surplus of RINs would also be created.

  • If the drought continues and corn production doesn’t increase sufficiently in 2013 to produce 15 billion gallons of ethanol, there may not be enough RINs available for refineries and importers to meet their ethanol RVO mandate and, without the EPA forgiving refineries and importers their requirement to meet the mandate, they will be required to pay a fine for not producing sufficient corn based ethanol.

Or, alternatively without RINs, much more of the corn crop will be used to produce ethanol, further driving up the price of corn and all the food products for which corn is used.

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8 Comments leave one →
  1. December 18, 2012 11:02 am

    Working inside DOE, I can say significant research is being conducted to increase the amount of cellulosic ethanol from alternative plant feedstocks. Another line of research is introducing the ability of corn and other C3 plants to grow in marginal lands that are more arid thus increasing the land suitable for cultivation.

  2. December 18, 2012 11:32 am

    Thanks for your comment.
    I realize research is ongoing to develop cellulosic ethanol, which could be fruitful. Using poor land to grow corn could be beneficial, especially for countries with inadequate corn production because of poor quality land or lack of water.
    There remains a basic question: Why is there a need for ethanol?
    That’s difficult to answer since ethanol doesn’t seem to reduce CO2 emissions, if that’s relevant, and there is less need to worry about oil imports since we now have growing supplies of domestically produced oil.

  3. sandek1 permalink
    December 20, 2012 9:59 am

    Donn, Interesting. One question. If the addtion of ethanol to gasoline is abruptly stopped what will happen to the price of gasoline. Won’t the demand spike by ten percent?

    Keith

    • December 20, 2012 12:02 pm

      Thanks for the question.
      Any elimination of ethanol wouldn’t happen overnight. There is a need to allow farmers to phase out production since they have invested in growing corn for ethanol.
      The only issue will be whether refineries can produce enough gasoline, and that seems reasonable if they have time to adjust.
      It’s interesting to note how government policy distorts the free market, and how it creates a potential problem if we stop using ethanol.

  4. December 20, 2012 10:28 am

    The RFS is very flexible, and has two other options that were omitted from your post. First, should there be a lack of product to blend, the obligated parties can defer their blending requirement until the following year. Even with the drought this year, that option is not going to be needed. Also, obligated parties can also use imported ethanol, just as they are doing this year.

    As for cellulosic ethanol, more than a dozen commercial facilities are under construction. Now would not be the time to pull the plug on the requirement for the product.

    E15 is the most tested fuel in U.S. history, more than 6 million miles over various makes and models. The thorough DOE testing found no issue with E15. The American Petroleum Institute (API) did have a counter study, but it had vehicles that failed on pure gasoline without ethanol. Where was the cry to stop using that? Some of the OEMs have started to endorse E15, GM broke rank before the product was even sold. It took 6 years for any OEM to do the same with E10, not sure why anyone is surprised at their opinion. The curious point is that no one can find a single vehicle part different from a non-E15 approved vehicle to an approved-E15 vehicle.

    • December 20, 2012 11:53 am

      Thanks for your comment.
      I don’t know where those cellulosic ethanol plants are being built, other than a few experimental or pilot plants. You say there are a dozen. Please send me an email listing where they are located. ddears@powerforusa.com
      The record so far has not been encouraging, including a few bankruptcies.
      The question of whether E15 hurts engines can be debated, however AAA has just issued a warning to not use E15 for any car older than the 2012 model year. Many companies will avoid the car warranty if E15 is used. Flex Fuel vehicles can use E15 without damage. I’m doubtful about older cars, though I could be convinced, but haven’t seen anything other than the study by the government that has a vested interest in getting people to use E15.
      Again the basic question is: why is there a need for ethanol?
      I’ll address that question next week.
      Hope you will look at the article Assessing Energy Policy.

  5. January 3, 2013 11:34 am

    Reblogged this on Standard Climate.

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