BioFuels Journal

by Jerry Perkins, Editor, BioFuels Journal

Des Moines, IA—A full slate of issues is on tap for the annual membership meeting of the Renewable Fuels Association (RFA), which is being held Oct. 1-2 at the Renaissance Des Moines Savery Hotel.

In an interview with BioFuels Journal before the meeting commenced Wednesday morning, RFA President and CEO Bob Dinneen outlined the issues facing the Washington, DC-based ethanol advocacy organization which has 172 members, including 50 producer members, 79 associate members, 31 supporting members, and 12 members of the allied Advanced Ethanol Council.

The state of the ethanol industry is good, Dinneen said, although political uncertainty and the potential for future growth of the industry has been stifled by the proposal by the Environmental Protection Agency (EPA) to lower the 2014 Renewable Fuel Standard Renewable Volume Obligation (RVO) for ethanol.

In August, the EPA sent its final rule on the RVO to the Office of Management and Budget (OMB) for review.

Several cabinet members of the Obama Administration have said that the EPA’s final proposal will increase the RVO from the reductions it proposed last year when it first announced the rule for 2014.

The ethanol industry is looking at a potentially record corn harvest in 2014, according to the U.S. Department of Agriculture, Dinneen said, which will lower production costs.

Gasoline prices and ethanol prices both have been falling as demand drops with the end of the summer driving season, he added. Increasing the availability of higher blends of ethanol, such as E15 and E85, needs to be addressed in the marketplace, he stated, by adding more dispensers for the higher blends at retail gasoline outlets.

Export Markets

Exports of ethanol also need to be promoted. “If the ethanol industry is going to grow, the ethanol export market needs to grow,” Dinneen noted.

The RFA, Growth Energy, and the U.S. Grains Council have formed a collaborative effort to boost the amount of U.S. ethanol that is exported.

U.S. exports of denatured and undenatured ethanol in July totaled 62.8 million gallons (MG), according to an RFA analysis of government data, which is a 5% increase from June.

Year-to-date exports in 2014 have totaled 479.3 MG, which is 50% higher than exports during the same period a year ago.

That implies that ethanol exports during 2014 will total 822 MG, according to the RFA analysis. In 2013, U.S. ethanol exports totaled a little more than 600 MG.

Dinneen said U.S. ethanol exports have been hurt by illegal and unwarranted anti-dumping restrictions imposed on U.S. ethanol by the European Union (EU).

The RFA and Growth Energy have sued the EU over the restrictions in Brussels, Belgium, and the USDA and the U.S. Trade Representative are considering filing a complaint over the anti-dumping restrictions with the World Trade Organization.

Exports of dried distillers grains with soluble (DDGS) also need to be promoted, Dinneen said.

“One-third of the DDGS produced in the United States is exported,” he explained, “and one quarter of those exports go to China.”

Unfortunately, he added, the Chinese have curtailed their purchases of U.S. DDGS by imposing trade restrictions.

Although China maintained its status as the leading importer of U.S. DDGS in July, sales to China dropped 4% compared to June and the RFA analysis expects a sharp cut in DDGS sales to China to show up in the August export statistics published in early October.

In July, the U.S. recorded its largest single monthly exports of DDGS, with a total of more than 1.17 million metric tons (MT).

Rail Woes

In the United States, the ethanol industry faces rail transportation problems because of the congestion on U.S. rail lines caused by a large increase in shipments of crude oil from the Bakken shale oil fields in North Dakota, Montana, and southern Canada.

Railroads are favoring crude oil shipments over ethanol, Dinneen said, which is hurting the ability of ethanol plants to ship ethanol to their customers.

About 70% of the ethanol produced in the United States goes to market by rail.

“I’m really concerned that this winter’s rail shipping problems might be worse than last winter,” he said, “all because the railroads want to dance with the new girl on dance floor.”

Rail safety is another issue concerning Dinneen. He noted that that 99.997 percent of all hazardous materials have reached its destinations successfully.

“Unfortunately,” he stated, “there have been several tragic incidents where crude oil has exploded when railcars have derailed.

The government has focused on the wrong issue, Dinneen said, by looking at the safety of the railcars used to haul crude oil and ethanol instead of improving the tracks that the railcars use.

Dinneen said it is important that improvements be made in rail infrastructure and maintenance to prevent derailments.

Unless rail regulators focus on preventing derailments, requiring new or retrofitted tank cars will take years to fix and cost billions of dollars and won’t solve the root cause of the problem, which is keeping railcars on the tracks.

“Don’t impose a billion dollar fee on the ethanol industry because the oil companies haven’t done their due diligence in safely moving their product,” Dinneen said.

On Sept. 30, the RFA submitted its comments to the U.S. Department of Transportation in response to the proposed rulemaking on rail tank car standards.

The RFA’s full comments can be found here: http://www.ethanolrfa.org/page/-/rfa-association-site/Regulatory%20Comments/RFA%20Comments%20NPRM%20Enhanced%20Tank%20Car%20in%20HHFT_093014.pdf?nocdn=1

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