Good start to 2012

The ethanol industry got good news at year end, even as the blenders credit and import tariff expired. A federal judge declared California’s LCFS is unconstitutional.
By Susanne Retka Schill | December 30, 2011

The ethanol industry got good news at year end, even as the blenders credit and import tariff expired. A federal judge declared California’s LCFS is unconstitutional, ruling in favor of an argument put forth by the Renewable Fuels Association and Growth Energy that California was in violation of the Commerce Clause.

According to the joint news release from RFA and Growth Energy, the two organizations argued that the California LCFS violates the Commerce Clause by seeking to regulate farming and ethanol production practices in other states. The Commerce Clause specifically forbids state laws that discriminate against out-of-state goods and that regulate out-of-state conduct.

It isn’t settled for good, of course. The ruling allows the California Air Resources Board to appeal immediately, which no doubt will happen. The suit was originally filed just before Christmas in 2009. If it took two years to reach this point, will it take another two years for the appeals to work their way through the system?

Here’s hoping that this will be just the first in a turn of fortune for the ethanol industry. Many of the arguments put forth by corn ethanol’s opponents have been examined closely and found wanting, if not discredited. Arguments that make sense on the surface fall apart when examined closely. But it takes time to turn the ship when a faulty argument gains so much momentum.

For instance, Brazilian cane ethanol is considered superior than U.S. corn ethanol, mostly due to the high sugarcane yields and the practice of using the waste bagasse to power the process, unlike the U.S. industry where natural gas is the predominant power source. Someone recently took a closer look though, and questioned whether the practice of burning cane fields was taken into account. The report suggests that burning is more common than realized, and its environmental impact not fully accounted for.

A big area where the ship is turning is in engine performance. The increasing use of ethanol and ethanol blends in race cars has been a great PR win. If these guys running high performance engines can use ethanol successfully, then is there so much wrong with it? There’s also work underway, which we at Ethanol Producer hope to report on in the next couple of months, to truly optimize car engines to get better performance from ethanol blends and make better use of its octane.

I expect other good news to come as efforts to expand E85 infrastructure pay off. In states where more blender pumps have been installed, E85 sales have soared. E85 expansion could be hampered, though, by the loss of the blenders credit, which is likely to make E85 less of a bargain. And since E85 gets poorer gas mileage than E10 in most FFVs, that price differential is important.  What we’ve learned from the ethanol engine optimization folks, though, is that there definitely are some advantages to ethanol, one of which is that you can get equal power out of a smaller engine, reducing the overall vehicle weight and improving efficiency.

Expansion of E85 use is important to the industry, especially as the U.S. has just about maxed out the E10 blend in the gasoline pool, and E15 is a ways away from being implemented, although that could become another good news story for 2012.