Ethanol producers, farmers detail negative impacts of SREs

By Erin Voegele | October 03, 2019

The Renewable Fuels Association hosted a conference call Oct. 3 to discuss how small refinery exemptions (SREs) are impacting ethanol plants and corn farmers and the urgent need for the White House release its biofuel relief package.

Geoff Cooper, president and CEO of the RFA, opened the call by noting there has been a lot chatter this week that an announcement from the White House may be coming soon regarding the biofuel relief package promised by President Trump on Aug. 29

“This package, as we understand it, is meant to begin to repair or offset…some of the damage that was down by the 85 exemptions that this EPA has given out to refiners,” Cooper said. “Obviously, those waivers let refiners out of their renewable fuel blending obligations that that has absolutely had an impact on our markets.”

While several news reports have indicated the package is coming soon, Cooper said it can’t come soon enough. “Each day that passes without a resolution is one step closer to the abyss for ethanol plants and farmers across the country,” he said.

Cooper said the RFA is currently aware of 18 ethanol plants with a combined capacity of nearly 1 billion gallons per year that have idled or closed over the past 12 months. “We’ve seen weekly ethanol production rates fall to their lowest level in three and a half years,” he said. ”We’ve seen record inventories of ethanol that have created a supply-demand imbalance and pressured margins, and we’ve seen domestic ethanol consumption step backward in 2018 for the first time in 22 years.”

With the corn harvest just beginning, Cooper said many farmers don’t know where they are going to market their corn this year, as their local ethanol plant has been shut down. He cited data recently released by RFA that shows local corn prices can fall by 12 to 25 cents per bushel—sometimes even more—when an ethanol plant shuts down. The average U.S. ethanol plant employs 40 to 50 employees. Most of those workers lose their jobs when a plant idles. Cooper also said it conservatively estimated that for every direct job at an ethanol plant, the facility’s operation also supports four to six additional local jobs. Area livestock producers who count on a local supply of distillers grains are also impacted when a plant idles. 

“We have said and continue to say that anything short of reallocating prospectively the small refinery exemptions in the 2020 final rule for the RFS will not sit well with farmers and ethanol producers who are suffering from the previous exemptions,” Cooper said. “We’ve simply been asking that EPA follow the law and implement the RFS as intended by Congress. It’s a fairly simple request.”

Neil Koehler, chairman of the RFA and CEO of Pacific Ethanol, discussed the impact of SREs on ethanol producers. Pacific Ethanol has nine ethanol plants and is currently the nation’s sixth largest ethanol producer, he said. The company has had to shut down its facility in Aurora, Nebraska, resulting in 45 job losses. Koehler also said Pacific Ethanol has laid off people at its corporate office.

“The industry is bleeding red ink right now,” he said. “I’ve been in the business for 35 years. This is the worst year we have ever experienced,” he continued, noting it is absolutely the direct result of U.S. EPA’s illegal abuse of its discretion to grant SREs without redistributing those gallons.

“It’s a very dire situation,” Koehler said. We has a company will have to look at other actions that we would need to take if these wrongs are not righted.” He said he implores the White House and EPA to implement the law as it was written. “We are not asking for anything more than that,” he said

Randy Doyal, CEO of Al-Corn Clean Fuel, also participated in the call. Al-Corn is an ethanol plant formed by a group of areas farmers. He said the plant’s farmer members are not pleased with the actions of the EPA and are wondering if the Administration is going to stand firm on its word to support the RFS.

Kevin Ross, president of the National Corn Growers Association, said the issue of SREs is adding another layer for farmers to an already difficult year when it comes to the significant weather issues and flooding that have impacted farmers. He said the topic of SREs is forefront in a lot of farmers minds because the RFS is a policy that is paramount to margins for corn farmers and creates a market for corn.

Brian Thalmann, president of Minnesota Corn Growers Association, stressed that farmers are risk takers by nature. “We’re used to dealing with challenges,” he said, but noted current challenges caused by weather, trade disruptions and SREs are having a significant negative impact on the agriculture community.