FEW panel optimistic on ethanol outlook, despite EPA rule

By Sue Retka Schill | June 02, 2015

If the ethanol industry unites behind a common goal, “we will be undefeatable,” Big River Resources CEO Ray Defenbaugh told the opening session at the International Fuel Ethanol Workshop underway in Minneapolis. The producer panel reinforced the theme of the first two speakers of the day who focused on Friday’s announcement on the U.S. EPA’s proposed renewable volume obligations for 2014, 2015 and 2016, which are considered to be “too little, too late,” as panelist Paul Koehler, vice president of Pacific Ethanol said. “It’s not what we need, it’s not legal.”

“It’s very clear when you read the law that this had to go beyond E10,” concurred Jan Koninckx, global business director for advance biofuels at DuPont Industrial Biosciences. The refiners could read the same law, he added, but they have responded with passive aggressive intransigence to prepare for increased blend rates. “They need to be given clear signals that this is the law.”

Mike Jerke, CEO of Guardian Energy Management, said the uncertainty created by the EPA’s delayed RVO determinations has been detrimental. “If I try to look for things that make me optimistic, the activities I see are at the state level, providing infrastructure to offer higher blends.”

Dan Cummings, president of Poet-DSM Advanced Biofuels, said one of the more disappointing things for the new cellulosic ethanol producers is the EPA’s allowance for obligated parties to buy waiver credits instead of actual physical gallons. “They’re undermining the D3 system,” he said, where the D3 RINs (renewable identification numbers) were to reflect a higher value for the new fuel, helping it compete in the marketplace as the developers continue to drive down costs.

Chris Standlee, executive vice president of Abengoa Bioenergy, talked about how the EPA’s rulemaking delays have dampened interest in advanced biofuels. “I can speak from experience that it has impacted investment in the U.S. Abengoa had plans to build additional facilities in the U.S., but largely as a result of this, we announced were are going to build a second generation facility in Brazil colocated with our ethanol facility there and we’ve announced plans to build a second generation facility in France colocated with our starch facility there.”

Standlee reported commissioning is continuing at Abengoa’s cellulosic ethanol facility in Hugoton, Kansas. “Starting up a new technology plant is not for the faint of heart,” he said. “We are producing, but not producing at full annualized rates by any means.”  In addition to the plants in Brazil and France, he added that Abengoa is in the process of developing a project in the U.S. using municipal solid waste as the feedstock.

Cummings echoed Standlee’s comments, pointing out that in the world of regular chemical processing, it generally takes about 20 years from when a process is isolated, to full-scale commercial production. Poet-DSM is currently working through some challenges in the pretreatment step of their process.

Koehler reported the merger between Pacific Ethanol and Aventine Renewable Fuels is expected to be completed at the end of the current quarter. “2014 was a transformative year with very strong earnings. We paid off $100 million of our debt and invested heavily in our production assets.”

The six locally-owned ethanol plants that work together under the Guardian Energy umbrella purchased their third production facility in Hankinson, North Dakota, a little over a year ago. “Our owners have the view that the industry is best serviced if it is owned by farmers and local investors,” Jerke said. The company is looking for ways to expand its collaborative model to other companies.

Defenbaugh, who received the FEW’s High Octane award earlier in the morning, stressed the strength of the ethanol industry. “One of the fallacieis is that all people should think like you think. There is not one right answer. The diversity in what we all do is what makes for good growth, it makes a strong industry.”