This year marked a time of pinched pockets for many Americans during the slow economic recovery, and the U.S. ethanol industry, too, pressed onward from the punishing financial conditions endured in 2008. Together with the tireless hands of U.S. farmers, America’s ethanol community showed unwavering resolve to take stock of its challenges and meet them head-on.

New President, Congress shape ethanol’s policy direction for 2009

In January, President Barack Obama took the oath of office and the 111^th Congress began its work, shaping ethanol’s legislative direction for 2009. Ethanol advocates were hopeful that Obama’s experience as a U.S. Senator from Illinois and his stated support for biofuels would be beneficial to the overall tone and direction in Washington. The industry was in need of some positives after the economic and public relations battle scars of the previous year.

Conversation between the White House and ethanol interests began early in the year. The Governors’ Biofuels Coalition wrote to President Obama asking him to take specific action to sort out lifecycle greenhouse gas (GHG) emissions, the E10 blend wall, the sustainability of biofuels feedstocks, and a comprehensive biofuels market development program.

The President’s response to the Governors publicly outlined his support for biofuels, specifically mentioning the importance of first generation corn-based ethanol.

"Combined with improved energy efficiency, biofuels are the primary near-term option for insulating consumers against future oil price shocks and for lowering the transportation sector's carbon footprint," the President wrote in his May 27 letter. "The direct consumer benefit has been well documented and producing and using more biofuels today means an immediate reduction in oil imports in addition to an immediate increase in domestic employment."

He wrote that his Administration is committed to commercializing emerging cellulosic technologies, but that cellulosic ethanol will only become reality if today's corn-based ethanol remains viable.

"But this transition will be successful only if the first-generation biofuels industry remains viable in the near-term, and if we remove long-standing artificial barriers to market expansion necessary for large volumes of advanced renewable fuels to find a place in America's transportation fuels system," the letter stated.

In addition, on May 5, President Obama issued a biofuels directive, creating a first-ever Biofuels Interagency Working Group to be chaired by the Secretaries of the Departments of Agriculture and Energy, and by the Administration of the Environmental Protection Agency. In the announcement, he noted the hundreds of thousands of jobs created by renewable fuels production and the hundreds of millions of dollars in new tax revenues for local, state, and federal governments, calling the production of American-made renewable fuels a “powerful engine of economic growth.”

The Working Group was tasked with developing a comprehensive national biofuels market development program, including policies to increase flexible fuel vehicle (FFV) production and assist marketing efforts, and identifying new policy options to ensure biofuels remain sustainable, including updated and science-driven lifecycle GHG assessments for fuels. USDA Secretary Vilsack was also to immediately identify how existing programs could assist corn ethanol producers and to issue rules for how Farm Bill programs could provide financial support to ethanol facilities for reducing energy use and producing advanced biofuels.

“President Obama’s directive ensures that biofuels will be part of America’s clean energy economy in the future,” said Brian Jennings, Executive Vice President of ACE. “The President and his able Cabinet will launch an aggressive timetable which recognizes that agriculture will continue to play an integral role in providing income opportunities and energy security for all Americans.”

Mid-range ethanol blends, E15 take center stage

This spring, E15 became the national focus as the American Coalition for Ethanol joined with a broad coalition of groups to formally petition the U.S. Environmental Protection Agency (EPA) to allow the use of up to 15 percent ethanol in gasoline. ACE joined Growth Energy, the Renewable Fuels Association, and the National Ethanol Vehicle Coalition, along with several 'next-generation' cellulosic ethanol companies, in making the formal waiver application.

“The American Coalition for Ethanol is pleased to be part of this unified effort to submit scientific data to EPA so they may approve the use of mid-level blends of ethanol, such as E15, in motor vehicles nationwide,” Jennings said. “Allowing the use of mid-level blends of ethanol in America’s existing fleet of vehicles would bring an array of benefits, including the creation of good jobs, ensuring a market for next-generation biofuels, and providing more cost-effective choices at the pump for consumers. The current arbitrary cap of 10 percent ethanol per gallon of gasoline is stalling growth in America’s green energy sector and unnecessarily limiting progress toward energy independence.”

Since the 1970s, the federal government has limited the ethanol content per gallon of gasoline to just 10 percent, but the ethanol industry waiver request asks the EPA to approve the use of up to 15 percent ethanol per gallon. If approved, this E15 allowance would not constitute an E15 mandate – just the ability to blend 5 percent more ethanol per gallon where desired.

Before the waiver was officially filed on March 6, ACE and 30 of its grassroots members traveled to Washington, DC to spend some time on Capitol Hill sharing ethanol’s story with Members of Congress and Administration officials. The “Biofuels Beltway March,” held March 2-3, included a varied group of ethanol advocates – ethanol producers, farmers, investors, lenders, engineering and technology firms, agriculture groups, and rural electric cooperatives. The group met with more than 70 Members and with EPA Administrator Lisa Jackson to discuss E15 and other issues.

According to Jennings, the purpose of the grassroots event was three-fold: to encourage EPA Administrator Jackson and Members of Congress to support the effort to move beyond the E10 blend wall; to share data about how technology innovations make corn ethanol more sustainable and efficient at the same time as oil is getting dirtier and more costly; and to impress that ethanol will be a part of the solution to a low-carbon, clean-energy future as long as the metrics used to determine the lifecycle carbon footprint as the same as those applied to petroleum.

“The ACE members participating in this Capitol Hill effort made a compelling case in support of ethanol and the need to move beyond the E10 blend wall,” Jennings said. “We conveyed personally to EPA Administrator Jackson that unless blends beyond E10 are permitted, there will be no market for next-generation biofuels, which brings investment and development of these promising new technologies to a standstill. Having next-generation cellulosic ethanol companies join on the E15 waiver illustrates how critical this issue is for their long-term viability, this lends enormous momentum in support of the waiver application.”

Soon after the waiver was submitted, ACE launched a nationwide effort to gather signatures on a petition in support of a move to an E15 blend. By May, the petition had garnered 5,000 signatures, and in July the total reached over the 7,000 mark, representing individuals from across all 50 states.

The petition declares: “I believe we should be allowed to choose more clean, American-made renewable fuel for our cars. The federal government arbitrarily limits the use of ethanol in a gallon of gasoline to just 10 percent, a regulation that is standing in the way of new green jobs, jeopardizing progress toward advanced biofuels, and putting energy security at risk... By signing this petition, I join thousands of other voices to express my strong support for EPA approval of up to 15 percent ethanol in gasoline.”

“It’s significant that the people who have signed the E15 petition come from all 50 states, because this shows that ethanol is not just a Midwestern issue,” Jennings said. “People all across the country recognize that big oil’s monopoly at the pump must be broken and that more ethanol represents meaningful consumer choice.”

As the EPA public comment period closed on July 20, ACE sent in the signatures from all those who signed the petition, plus its official organizational comments.

“The science behind using more than E10 in standard vehicles in overwhelmingly positive, and the issue has been studied by many independent sources. This waiver request has been politicized by ethanol’s opponents, but the facts remain – there is nothing to show that using E15 would increase auto emissions or harm the vehicle’s emissions control system, the factors EPA is obligated to consider. The science is sound, and EPA must give its approval for this modest increase in the ethanol blend,” ACE stated to the EPA.

The rules state that the Agency has 270 days, or until December 1, to make a decision on the E15 waiver application. At press time in late November no decisions have been made, and rumors are circulating that the EPA may not meet the deadline and might instead call for further study.

California pushes forward with a Low Carbon Fuel Standard

Continuing in its role as a trendsetter – good or bad – of environmental issues, the state of California adopted the nation’s first Low Carbon Fuel Standard (LCFS) on April 23 of this year, calling for the reduction of GHG emissions from the state’s transportation fuels by 10 percent by 2020.

“The new standard means we can begin to break our century-old dependence on petroleum and provide California with greater energy security” said Mary D. Nichols, Chair of the California Air Resources Board (CARB). “The drive to force the market toward greater use of alternative fuels will be a boon to the state’s economy and public health – it reduces air pollution, creates new jobs and continues California’s leadership in the fight against global warming.”

Despite California’s celebration of its new standard, the U.S. ethanol industry and some in the scientific community took a strong stance against the methodology used to calculate and score the lifecycle GHG emissions of biofuels. ACE responded to the LCFS, calling for a fair and scientific basis for the way biofuels are treated.

“California is about to set a precedent for how biofuels are treated under climate change policies, and ACE is deeply disappointed with what we can only describe as bizarre and scientifically indefensible lifecycle greenhouse gas estimates that are clearly designed to penalize biofuels unfairly vis-à-vis petroleum,” ACE stated in its official comments. “As others have already pointed out, including a group of more than 100 scientists and academics in a letter last month to Governor Schwarzenegger, CARB is making extreme assumptions about the carbon intensity of biofuels, relying on an untested ideology called ‘indirect land use change,’ and remarkably assuming there are no such ‘indirect effects’ from fossil fuels. As a result of the use of a number of indefensible assumptions in the LCA (lifecycle analysis) modeling, CARB will penalize biofuels, particularly corn ethanol, for so-called indirect land use changes, while petroleum will be given a free pass, as CARB has chosen to largely ignore indirect emissions from those fuels. This selective enforcement will place biofuels at an unfair competitive disadvantage in the California fuels market.”

Ethanol industry concerned by indirect land use change theory

What started in California continued within the U.S. EPA, with the theory of indirect land use change being included in the proposed rulemaking for the Renewable Fuels Standard (RFS2) contained in the Energy Independence and Security Act of 2007 (EISA). Not only was international indirect land use change included in the proposed rulemaking, Tim Searchinger, the architect of the theory, was included by EPA on its scientific peer review panel. Searchinger is not a scientist or economist, but rather a lawyer who spent much of his career working for the organization Environmental Defense, where he consistently attacked American farmers and ranchers and the policies that ensure a stable supply of food, fiber, and fuel.

This national emphasis on protecting the environment meant climate change policy would take top billing on Capitol Hill in 2009. The House took up climate change legislation this summer, which included provisions relating to the lifecycle GHG emissions of biofuels and the issue of ILUC.

Ethanol’s calls for fair treatment were finally heard when U.S. House leaders reached a deal in June ensuring there would be solid scientific evidence before the emissions from land use change in foreign countries can be attributed to the carbon footprint of U.S. biofuels.

Congressman Collin Peterson (D-MN) worked with House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Speaker of the House Nancy Pelosi (D-CA) to ensure that biofuels were treated fairly in the bill, an agreement of monumental proportion considering the extremely varied geographies and backgrounds of the leaders involved.

According to the agreement, an entity such as the National Academy of Sciences will conduct a study on whether there is a link between biofuels use in the U.S. and tropical deforestation. In the mean time, EPA would be prevented for at least five years from imposing such a greenhouse gas penalty on biofuels. At the end of five years, EPA, the Department of Energy and USDA will all need to agree that such links occur and can be effectively predicted using computer models, and Congress will have one year after such a determination to review the issue before EPA could move forward.

In May, ACE Executive Vice President Brian Jennings had been asked to testify before the U.S. House Agriculture Committee, and in his testimony he pointed out that the predictions of international land use change due to biofuels are not corroborated by on-the-ground data. In addition to the lack of scientific consensus on the modeling, the act of singling out biofuels for selective enforcement of these “indirect effects” while holding petroleum harmless is scientifically indefensible and just bad public policy, he stated.

While ACE praised the efforts of Rep. Peterson and the House of Representatives, Jennings also cautioned that work is still left to be done.

“While we’re pleased with the House’s passage of this bill, we recognize that at this stage the EPA still proposes to ascribe a carbon penalty to biofuels based on unsubstantiated predictions of international land use changes,” Jennings said. “ACE is calling on the Senate to adopt language similar to how the House corrected this unfair carbon penalty, and we ask EPA to reconsider its approach.”

At press time, the Senate’s version of the bill has passed through committee, but the actual contents of the Senate’s bill are still being negotiated. Senate Majority Leader Harry Reid issued a statement regarding the bill, offering that it is “doubtful” that the Senate will take on the legislation by the end of the year.

“Blend Your Own Ethanol” campaign brings powerhouse team to promoting ethanol blends, blender pumps

At the 22^nd Annual ACE conference & trade show in August, ACE was pleased to announce a partnership with the Renewable Fuels Association (RFA) and leading corn-producing states for an unprecedented new blender pump campaign called “Blend Your Own Ethanol.” Consumers can enjoy more choices at the pump and gas station owners benefit from product flexibility – all thanks to the blender pump and the wider distribution of E85 and mid-range ethanol blends. The campaign’s goal is to install 5,000 blender pumps nationwide over the next three years.

“I’m proud that my fellow growers from so many states have seen the need to support renewable fuel infrastructure and are partnering on this national campaign to increase the availability of ethanol to consumers,” said Darrin Ihnen, President of the National Corn Growers Association and a farmer from Hurley, South Dakota, who was on hand in Milwaukee to help make the announcement to the media and to ACE conference attendees. “Just like ethanol plants give us more choices for where to sell our crops, blender pumps give drivers more choices at the pump. When given the choice, we believe American motorists will choose ethanol.”

The “Blend Your Own Ethanol” campaign – or BYOethanol (pronounced “bio”) – offers a single source of ethanol information and technical expertise for petroleum marketers looking to upgrade equipment or begin offering more choices to their customers. By serving as a central clearinghouse for renewable fuels infrastructure incentives, the “BYOethanol” campaign brings blender pumps to key areas of the country, and from there they will spread as neighboring gas stations see the benefit and want to remain competitive.

Blender pumps are not new to the fuel industry, but are now finding new use with ethanol and E85. A blender pump features two underground tanks, typically one with unleaded and one with E85, and the dispenser blends the appropriate percentages of the two fuels to create any blend of ethanol from zero to 85 percent. Gas station owners benefit from product flexibility and by being ready for future renewable fuel blend levels, and consumers benefit by having new choices at the pump like E20 or E30 for their flexible fuel vehicles.

“This campaign will be successful because it works directly with petroleum marketers, not paying them to put in a blender pump, but explaining to them why it’s a good business decision, how it will benefit the station, and helping them access the state and federal incentives that exist,” said Ron Lamberty, ACE’s Vice President / Market Development. “If we present petroleum marketers with the facts about why this is a good business decision – and it is a good business decision – they will consider adding blender pumps to their stations. Now our job is to get this information out to as many of them as possible, and we’ve already begun doing that.”

Along with the National Corn Growers Association, several leading corn-producing states are participating in this program, including the Kansas Corn Commission, the Kentucky Corn Promotion Council, the Missouri Corn Merchandising Council, the Nebraska Corn Board, and the South Dakota Corn Utilization Council.

The “BYOethanol” campaign functions as an expanded market development program of the two ethanol groups and will serve as the only one-stop source for all the technical, regulatory, safety, and environmental information petroleum marketers need about retailing ethanol blends. The program will feature extensive work at petroleum marketer events and a Web presence, now live at www.byoethanol.com, designed specifically for station owners to easily get the information they want. A new magazine, Blending Fuels, was published and distributed in September to 39,000 petroleum marketers representing 100,000 retail fuel stations across the U.S.

The “BYOethanol” campaign was formally launched this fall at the National Association of Convenience Stores (NACS) trade show in Las Vegas, where ACE and RFA staff were on hand with more than 22,500 petroleum marketers at the world’s largest gathering of that industry.

State of the industry: cautious optimism

After the punishing market conditions of 2008, with its “perfect storm” of unprecedented volatility in the commodity markets plus frozen credit and overall economic downturn, the marketplace for U.S. ethanol producers became slightly more favorable in 2009. High-profile bankruptcies made the headlines, but many producers quietly came back to, or at least toward, operating in the black. Commodity prices have leveled and ethanol prices have rebounded some, giving breathing room to ethanol plants that had been operating at or below break-even levels. Cautious optimism seems to be the industry’s sentiment.

Monthly production levels remained consistent throughout 2009, as shown in data from the U.S. Department of Energy’s Energy Information Administration (EIA). Last year’s total ethanol production tallied 9.2 billion gallons, and through August 2009, the most current data available from EIA, production totaled 6.9 billion gallons for this year. If the monthly production pace of August – 947.2 million gallons – continues through year’s end, 2009 ethanol production could reach 10.7 billion gallons.

The United States continues to be the world’s top ethanol-producing country, with Brazil in second position at an estimated 6.5 billion gallons of production in 2008. The U.S. has 176 ethanol plants currently operating, with 14 beginning or continuing construction efforts.

While more than 40 cellulosic ethanol projects are in the planning stages or have begun construction, five cellulosic ethanol plants are now online and are producing demonstration amounts of next-generation ethanol.

With annual ethanol production now at nearly 3 billion gallons, Iowa remains at the top of the list. Nebraska and Illinois follow as second and third, with Minnesota and South Dakota rounding out the top five. Indiana, Wisconsin, Kansas, Ohio, and North Dakota are also top ethanol-producing states.

Like most years, 2009 brought challenges as well as opportunities, with both being thrown into sharper relief after the hardships of 2008. Together with a growing army of grassroots supporters, the U.S. ethanol industry looks forward to 2010 and to the promise of progress in another new year.