Outlook 2012: VEETC is Old News

Matt Horton, CEO, Propel Fuels
By Holly Jessen | November 15, 2011

From the standpoint of Matt Horton, CEO of Propel Fuels, efforts in 2011 to extend the Volumetric Ethanol Excise Tax Credit imperiled the future of the industry. “For so long, the industry has been focused on preserving that credit for the entire ethanol industry that I think we’ve backed ourselves into a bit of a corner,” he says.

The Redwood City, Calif.-based company firmly believes the future is high-level blends and advanced ethanol. The company owns and operates a network of self-serve filling stations in California and Washington state, with plans to add more than 200 additional sites in the next two years.

First-generation ethanol has done a fantastic job of filling the need for E10, Horton says. As the industry moves forward into 2012, however, there needs to be an aggressive and massive build out of infrastructure to handle higher blends of ethanol. Secondly, cellulosic and other advanced ethanol products need to begin entering the marketplace. “We’re at a critical transition point in the industry. We need to recognize that what got us to this point is not going to be able to carry us forward in a fast-growth kind of way that I think we want to see,” he tells EPM. “The industry is beginning to shift but we’ve got to come together and focus on the future of our industry. I believe that if we do that, the future for the ethanol industry is unlimited. We will become a true substitute for gasoline, and we will be the leading fuel in this country to offset imported petroleum.”

Horton feels the single most critical issue for the industry is a tax credit for E85. That’s why the company is a part of the Coalition for E85, which is lobbying for the fuel to receive a 50-cent-per-gallon tax credit as part of the Alternative Fuel Credit. Currently, compressed natural gas, propane and hydrogen are eligible for the tax credit. “If we are going to continue to grow, we’ve got to be able to competitively price E85,” he says.

As for E15, although Propel focuses on getting the highest ethanol blends to market, it does also offer its customers midlevel blends where there is demand. The reality is, however, most of the gasoline retailers Propel has talked to just aren’t interested in making the move to E15, he says. Again, infrastructure investments are needed and Propel is committed to making those kinds of investments and doing what it takes to push the market forward until it gains traction. “In general, our mission is to increase the amount of renewable fuels in the market and that’s easiest to do with high-level blends,” he says. “We want to see oil replaced by ethanol.”

For 2012, Propel saw record sales of ethanol thanks to strong support from the state of California as well as the public. “Individual consumers driving flex-fuel vehicles have shown their enthusiasm for this product and they have been coming out in droves to buy the product,” he says. “[That] sends that strong market signal that when we have ethanol products that are competitively priced with gasoline, consumers will prefer them and will buy them.”

Although there are negatives, Horton says it’s the opportunities that keep him awake at night. “We think that there’s just a huge untapped market out there for high-blend ethanol,” he says. “There are still huge pockets of the nation that really don’t have much access to high-level blends of ethanol, so we think there’s a tremendous opportunity to effectively market the product in new markets.”

The other exciting thing is the potential for movement in advanced ethanol production. “We’ve also seen a number of the better-funded, cellulosic ethanol startup companies continue to make great progress on their production facilities and getting their financing lined up,” he says. “We think 2011 was a great year of preparation for those companies and we’ll look for 2012 to hopefully be a breakout year for the advanced ethanol industry.”

Author: Holly Jessen
Associate Editor, Ethanol Producer Magazine
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