New Year Challenges

By Brian Jennings | December 06, 2012

The new year rings in a number of daunting challenges for U.S. ethanol producers. Gasoline use continues to fall off and the blend wall remains at a standstill, so producers are selling into a market that is on the decline and artificially limits ethanol use. Otherwise, uneconomical imports from Brazil are flooding the U.S. due to biased trade policy and bizarre indirect land use change scoring by the U.S. EPA, adding to ethanol’s supply/demand imbalance. Corn supplies are tight and margins are even tighter. If that weren’t enough, the battle over the renewable fuel standard (RFS) continues.

Against this backdrop, producer-members of the American Coalition for Ethanol recently met to help determine the action plan that our grassroots advocacy needs to pursue in 2013. Among the many priorities identified by these members, a few rise to the top.

Market access is clearly our industry’s top priority. ACE provides unmatched expertise in helping petroleum marketers understand the benefits of ethanol blends and blender pumps, so we will focus on expanding ethanol use by continuing to collaborate with petroleum marketers and automakers this year. E15 is the most important opportunity to expand ethanol use in the short-term. ACE will prioritize educating retailers about the benefits and availability of E15 and launch some new and creative ways to overcome the hurdles standing in the way of more E15 use. We are also working with automakers to identify the higher ethanol blends that will provide the valuable octane needed for future engine technologies.

Developing the market for E15 in the short-term and higher ethanol and octane opportunities in the long-run depend upon the market access created by the RFS. That’s why another priority for ACE in 2013 will be to win the RFS battle to secure a place in the market for higher ethanol blends.

It would be nice if free market principles cleared the path to more ethanol use. Let’s recall, however, what a truly free market does: it rewards low-cost alternatives, it promotes innovation, and a free market fosters competition. Despite the fact that ethanol is the low-cost alternative and ethanol producers are innovating and becoming more efficient, left to their own devices, oil companies—our customers—wouldn’t use as much ethanol as called for under the RFS because they control the market.

An old saying about Capitol Hill applies to our industry’s relationship with oil companies: there’s no such thing as a permanent victory or permanent defeat, just permanent battles. Yes, oil companies are our customers. But make no mistake, in D.C., they are our fierce competitors. Winning the EPA decision over whether the RFS should be waived was anticlimactic because we knew the facts and law were on our side. But the battle continues as Big Oil and other opponents simply turn the page in their game plan to now seek repeal of the RFS in Congress. Given all the tax benefits and artificial market advantages enjoyed by oil companies, the RFS is the only tool we have to try and level the playing field.

As the first group to advocate for an RFS, ACE will be aggressive in drawing attention to its success. Our opponents will claim to Congress the RFS is broken and in need of “repair” (i.e. repeal). Our job will be to explain that the RFS is working and delivering important benefits to America.

ACE will also continue to be active in mobilizing strong grassroots support for ethanol, taking steps to activate members to stand up and promote the benefits of ethanol in their communities, states and with federal policymakers. Several years ago we initiated the first ethanol industry fly-in to the nation’s capital; this grassroots event will be held again March 13 and 14. The facts are on our side, but if our opponents are louder and more visible in the halls of Congress, the alternative reality they are trying to create about ethanol becomes fact. We are also supporting the Fuels America campaign designed to go on offense and reframe the public conversation about ethanol, an effort that is long overdue.

Our forward-looking action plan to expand market access alongside automakers, retailers and policymakers will only succeed with your support and involvement. That’s why it is critical to remain engaged. Join us in D.C. for the ACE fly-in. Take action in your communities. Be part of our grassroots team and take an active role in ACE’s mission of making American ethanol the consumer fuel of choice.

Author: Brian Jennings
Executive Vice President,
American Coalition for Ethanol