New U.S. standard a positive signal for renewable fuels says head of IGPC

Wednesday, December 2, 2015

by JIM ALGIE

Final numbers for the U.S. Environmental Protection Agency’s renewable fuel standard, announced Nov. 30, raise targets above those proposed earlier this year for renewables blended with that country’s petroleum supply.

They remain short of legislated expectations, however, and have produced widely mixed reaction in the United States. But Canadian Renewable Fuels Association chairman Jim Grey described the Environmental Protection Agency (EPA) move as “very positive” for ethanol production. Grey is CEO of the seven-year-old, Integrated Grain Processors Cooperative which processes ethanol at the rate of about 170 million litres annually from a plant in Aylmer, Ont.

Fresh from his group’s annual conference in Vancouver, Grey said the numbers were well-received there. The U.S. move provides new incentive for growth of advanced fuels and coincides in Canada with a handful of environmental policy developments, he said.

“We were knee keep in discussions about Ontario’s cap and trade plan, Alberta is going to price carbon . . . and now you’ve got (Prime Minister Justin) Trudeau who clearly has a very strong climate-change agenda,” Grey said of conference sessions this week. They’re all positive (developments) for crop-based ethanol.

“We’ve always got work to do, for sure; but I think we’re at a pretty good spot right now,” Grey said of his industry’s prospects which also reflect the benefit of a relatively large corn crop and resulting low prices. This week’s EPA announcements push blending beyond the 10 per cent “blend wall” but they “do it slowly to give the market time to adjust,” Grey said.

Grain Growers of Ontario Government Relations Manager Debra Conlon described the EPA announcement as “a good confidence thing” for corn growers.

“We’re always pleased to see that the international biofuels business is being developed,” Conlon said in an interview, Thursday, referring to “a lot of discord over the last two years” over raising the renewable content of fuel beyond existing levels.

“It’s not on track for where it should be but it’s going in the right direction and it’s not going away,” Conlon said.

Canadian governments maintain ethanol blending requirements similar to those in the United States but at levels that vary by province and remain lower than those south of the border which are to grow to about 10.5 per cent by 2017. Fuel mandates played an important role in generating initial demand for corn in ethanol production both here and in the United States.

For Ontario biomass growers such as Urs Eggimann, however, the U.S. fuel policies that were once key to establishing the renewables industry are now almost beside the point. Growing crops for fuel production has become such a close-margin business that pioneering miscanthus and switchgrass growers such as Eggimann, who is Vice-President of the Ontario Biomass Producers’ Cooperative Inc., now concentrate on the potential of their crops as feedstock for other more-profitable industrial chemicals.

Biomass production with crops other than corn remains very much a pioneering venture for Ontario growers hoping for future markets with Canada’s relatively new biomass processing industry, Eggimann said in an interview from his Grey County farm, Thursday.

In addition to corn ethanol, U.S. regulations include mandates for so-called “advanced” or “cellulosic” ethanol made from a variety of plant sources, including non-food agricultural crop refuse such as lumber industry wastes and corn stover. Slower-than-expected cellulosic ethanol production is part of the reason EPA officials first proposed mandate adjustments.

“The challenge is there are all these future opportunities but these industry sectors want to be sure they can get solid supply, and the farmers obviously they have to prove they can step up to the plate,” Eggimann said. “So it’s really a chicken and egg thing.”

“If each party waits for the other to make the first move it’s got going to happen. We have to work together, obviously,” Eggimann said.

Some analysts expect the revised U.S. standard will further boost ethanol demand as Americans react to a recovering economy and cheaper petroleum prices with increased vehicular travel. Iowa State University biofuels economist Robert Wisner in a recent article for the U.S. Department of Agriculture’s on-line, Renewable Energy Newsletter cites a three-year uptrend in gasoline use he said is “slightly positive for ethanol demand” because of U.S. blending requirements.

If the recent trend continues in 2016, Wisner predicted a domestic market for ethanol of about 14.25 billion gallons. That translates to additional market demand for about 335 million bushels of corn, the report said.

U.S. National Corn Growers Association President Chip Bowling hinted in a statement that his 40,000-member group may push for higher mandates prescribed in the 2007 Energy Independence and Security Act.

“Any reduction in the statutory amount will have a negative impact on our economy, our energy security, and the environment,” Corn Growers’ Bowling said in a statement.

“We should be strengthening our commitment to renewable fuels not backing down,” Bowling said. U.S. Agriculture Secretary Tom Vilsack welcomed the EPA final rules as part of “continued growth” in what he described as “a sophisticated and growing American biofuels industry.”

However, one leading, petroleum industry spokesman argued the 2007 mandates are out of date and push ethanol blends beyond safe levels for current engine technology. Reacting to the mandate decision, American Petroleum Institute President Jack Gerard said Congress must repeal or “significantly reform” the renewable standard in order to protect consumers from unsafe, higher ethanol levels.

The rules announced this week establish renewable fuel volumes beyond historic levels at about 9.5 per cent and “grow the amount of biofuel in the market over time,” EPA acting assistant administrator Janet McCabe said in a statement. The total standard requires growth from 2014 to 2016 of more than 1.8 billion gallons of biofuel, up 11 per cent over 2014 actual volume, McCabe said. BF