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Corn Ethanol and Market Share

Mark Green's picture
Mark Green 2132
American Petroleum Institute

Mark Green joined API after 16 years as national editorial writer in the Washington bureau of The Oklahoman newspaper, capping a 30-year career in print journalism. At API he is responsible for...

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  • Apr 27, 2013
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corn ethanolOver the past few months we’ve talked about problems with the Renewable Fuel Standard (RFS) and the risks its mandates for higher blends of ethanol in fuel may pose to vehicle engines and fuel systems, as well as to service station pumps and storage tanks. But backers of increased ethanol use – major corn growers and the Renewable Fuels Association (RFA) – claim that the science detailing these risks is irrelevant, that the concerns of environmental groups, consumer safety advocates like AAA, food groups, state regulators and the oil industry are unfounded and are designed to protect the oil industry’s fuel market share. Yet, as we’ll discuss here, it appears that RFA’s main concern about the RFS is its market share – which may explain why the group frequently is so willing to ignore facts. [Editor’s Note: Geoff Cooper of the Renewable Fuels Association responds in the comments section below.]

Take this comment letter that RFA sent the EPA on April 7. RFA wrote:

EPA should revise its proposed 2013 cellulosic biofuel standard to better correspond with current expectations of actual 2013 cellulosic biofuel production volumes.

And:

EPA should partially reduce the 2013 advanced biofuels standard, as sugarcane ethanol imports are unlikely to be available in sufficient volume to meet the requirement.

Essentially, RFA recommended that while EPA should maintain its overall volume mandate for ethanol use in 2013, the agency should reduce both the cellulosic biofuel and advanced biofuel share within the overall mandate, to match the production expectations for those two. Of course, if EPA followed that course, the only possible result would be a greater share for corn ethanol within the overall mandate. Basically, RFA would kick cellulosic and advanced biofuels producers to the curb while protecting the interests of corn ethanol producers. And RFA wants to lecture others about market share!

Let’s be clear: If RFA’s goal is to reduce oil consumption through use of home-grown fuels, as it claims, it should support cellulosic and other advanced biofuels. But RFA’s clear intent is to increase the market share of corn ethanol. If production levels of cellulosic and other advanced biofuels are going to be below EPA’s previous estimates, the logical course would be to reduce EPA’s overall ethanol use mandate accordingly – not maintaining the same overall target so that corn ethanol can make up the difference.

In a recent post, energy blogger Robert Rapier did a good job identifying the irony in RFA President Bob Dinneen’s market-share claims:

Dinneen says this is the way Congress envisioned the mandate working: more and more ethanol over time in a gallon of fuel, and less and less petroleum.  “This is about market share,” Dinneen says. “This is about their profitability; it’s not any more complicated than that.”

Apparently, irony is lost on Dinneen … because it’s also about the ethanol industry’s market share. It’s about their profitability. Or does Dinneen want us to believe that his motives are as pure as the driven snow?

With the recent move detailed above, it’s clear RFA will attack anyone who stands in the way of a government-mandated increase in their market share. (After a series of attacks on the oil industry, we were beginning to think that RFA was trying to make it personal.)

Even without a federal mandate, the oil industry will continue to buy ethanol and blend it into gasoline in volumes that are economic and safe for marketers to store and dispense and for consumers to use in their automobiles. But the RFS requires more than that, which is why it should be repealed. While to RFA this is a fight over market share, for the oil industry it is an opportunity to protect consumers from the unintended consequences of an outdated policy.

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Rick Engebretson's picture
Rick Engebretson on Apr 27, 2013

Some truth to this. Some truth to corn claims.

But I must say, the Minnesota Agriculture Renewable Energy groups have been quite emphatic inviting me to their meetings. As a cellulosic biofuel advocate fighting too many sides for too many decades, I’m both surprised and flattered.

Still, decades are decades. When somebody can find a biophysical chemist or two, maybe we can have some interesting discussions. Glad there is now some interest, and cellulose and solar advocacy.

But my efforts have shifted to linux programming, where civilized talent is as welcome as a robin singing in springtime. Science is art, not permanent war.

John Miller's picture
John Miller on Apr 28, 2013

If the RFA were truly supportive of reducing U.S. reliance on petroleum imports and expanding ethanol demand in the best interests of the country they would be strongly advocating and supporting E-85.  Oil companies produce, refine, distribute and market petroleum gasoline.  In the U.S. there are millions of FFV’s capable of operating on E-85, but fail to do so (i.e. operate overwhelmingly on E-10 only) due to lack of availability (retail infrastructure), overall cost (efficiency-cost per gallon of E-85 vs. E-10) and in many cases the owners don’t even know their vehicles are FFV’s.  If the RFA were more than just a special interest organization and more free market oriented they would be marketing E-85 much more diligently then their current history.  This would possibly include supporting a significant advertising campaign to better sell the public on the possible advantages of E-85, better educating the public that often don’t know their vehicles actually have FFV capabilities, and perhaps investing in fueling-service stations similar to most integrated Major Oil companies.  This is how free markets are suppose to work, not based on just Lobbying and crony politics.

Geoff Cooper's picture
Geoff Cooper on Apr 30, 2013

Mark,

Either you misunderstood RFA’s comments regarding the 2013 RFS volume proposal, or you are purposely lying to your readers about our position. I don’t know you, so I’ll give you the benefit of the doubt and assume you just misunderstood our comments. Judging by your post here, it’s also quite possible that you simply don’t understand how the RFS works or aren’t aware of the flexibility EPA has in implementing the annual nested standards.

You say: “RFA recommended that while EPA should maintain its overall volume mandate for ethanol use in 2013, the agency should reduce both the cellulosic biofuel and advanced biofuel share within the overall mandate, to match the production expectations for those two.” Then you say: “If production levels of cellulosic and other advanced biofuels are going to be below EPA’s previous estimates, the logical course would be to reduce EPA’s overall ethanol use mandate accordingly – not maintaining the same overall target so that corn ethanol can make up the difference.”

I would encourage you to re-read our comments. Apparently you missed the part where we say: “…RFA agrees that a reduction of the 2013 advanced biofuel standard should be accompanied by an equivalent reduction in the overall RFS.” In other words, we are recommending exactly what you suggest–that if EPA reduces the cellulosic and advanced portions ofthe RFS, then it should also reduce the total RFS by the same amount. That would, in effect, mean the pool of the RFS for which corn ethanol qualifies would be the same size as envisioned by the statute. We are not, as you outrageously suggest, recommending that EPA “maintain its overall volume mandate”…”so that corn ethanol can make up the difference.” How you could have come to that conclusion after reading our comments is beyond me.

It is utter nonsense to suggest RFA doesn’t support advanced and cellulosic biofuels. Many of our member companies will be among the first producers of these fuels, and what is in the best interest of corn ethanol producers is also in the best interest of cellulosic ethanol producers (e.g., building a market beyond E10, producing more FFVs, deploying blender pumps, etc.). Yet, we realize cellulosic biofuel production has not progressed as rapidly as anticipated. In recognition of this, we are asking EPA to adjust the 2013 standards appropriately. Indeed, Congress explicitly gave EPA the authority to adjust the RFS progam annually for this very reason.

It is ironic and telling that API would actually scorn us for asking EPA to exercise its authority to revise the overall RFS *downward* to account for the lack of cellulosic biofuel and ethanol imports. Isn’t that what you want? The only conclusion that can be drawn from this irrational position is that API is afraid EPA will continue to implement the RFS in a way that works economically and efficiently for all regulated parties and consumers. It’s hard to “fix” something that isn’t broken, isn’t it? So, for now, we’ll chalk this up as a misunderstanding on your part. In the meantime, we’d appreciate a correction/clarification for your readers. I’m guessing you did plenty of those at The Oklahoman…

 

Geoff Cooper

RFA

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