The Great Ethanol Debate: Status Quo Or New Paradigm?

Sometimes there is a total disconnect that takes place somewhere between an idea that I have in my head, and a reader’s interpretation of what I am saying. Whether I communicated poorly, or the reader filled in some blanks because they assumed I was saying something else, sometimes I receive responses that don’t remotely correspond to what I actually wrote.

I am happy to report that today’s column addresses a reader who understood me clearly, and who responded in a clear and informative manner.

Following my recent series of ethanol articles, the most substantive reply came from Douglas A. Durante, who is the Executive Director of the Clean Fuels Development Coalition, a pro-ethanol advocacy group.

Doug wrote and asked for an opportunity to clarify several points, and to challenge some of my arguments. I agreed, so we conducted a back and forth debate covering several topics. We were both satisfied that the conversation fairly presents our respective positions, as well as the objections to those positions.

In this first installment, we discuss the origins of the Renewable Fuel Standard (RFS), and debate whether a different approach is needed (my position). In Part 2, we will discuss Doug’s contention that EPA has engaged in an ongoing battle that has hurt the ethanol industry.

In addition to identifying Doug below, I will put his comments in block quotes so it’s clear which one of us is responding.

Doug: With respect to your recent ethanol articles, I would like to give you a different perspective.

By way of introduction, I have been working in ethanol a long time — longer than just about anyone in the business today. I was on the Clean Air Act Regulatory Negotiation team establishing the original clean fuel programs that morphed into the Renewable Fuel Standard (RFS), an adviser to the Senate committee establishing the RFS, and countless state and local air pollution commissions. I don’t work for any of the ethanol associations or the corn growers, although I do interact with some of them and I represent some ag interests and ethanol-related firms through our broader coalition.

I appreciate the fact that you have not engaged in attacks in the pieces you are writing but there are so many other moving parts that you need to consider. The RFS is a necessity until the Environmental Protection Agency (EPA) stops their 30-year vendetta against ethanol and allows ethanol to compete. Using oil company engineers to put a thumb on the scale when measuring ethanol’s emissions is not a fair fight and the revolving door of oil interests in and out of EPA has made it impossible for ethanol to compete.

Robert: Well, the core of my proposal is to get the federal government entirely out of this business and shift market control to the states where ethanol enjoys more political power. That would make EPA largely irrelevant when it comes to growing ethanol markets. Certainly, EPA will continue to regulate emissions across the country, and in some cases oil refiners may find that the only way they can meet those emissions is to blend ethanol. Or, a refiner in California might instead opt to blend methanol or build a new alkylate unit.

My proposal would involve tilting the playing field in the Midwest toward higher ethanol blends, because that would be a long-term secure market for the ethanol industry that won’t suffer from a shifting four-year cycle.

Doug: I’m all for making EPA irrelevant but it’s their sandbox. There are so many fundamentals missing from these arguments as to why we created an RFS in the first place. We passed an RFS –twice, because it was so successful the first time—to meet multiple public policy objectives. For starters although it was finalized in energy legislation, it was an amendment to the Clean Air Act to remove the oxygen requirement in reformulated gasoline used in the nation’s largest cities to control ozone.

But it did not relieve the petroleum industry from what Congress deemed was the need to diversify their slate of products by using renewables. Ethanol is a source of oxygen to facilitate complete combustion while providing non-toxic octane, diluting sulfur, and providing other benefits. Secondly, we were headed towards 60% oil imports at the time with a massive transfer of wealth out of the US and vulnerable to the slightest blip in world markets. Third was the need to increase demand for agricultural products and provide a stimulus to the rural economy.

I just don’t understand how people can suggest these are not national goals that benefit the entire country. To get national benefits you need national policies and the RFS was the solution to a lot of problems, and still is.

Your last column saying ethanol has a sense of entitlement may have some truth to it but there is plenty of justification for that.

Robert: This is the never-ending argument. Not everyone agrees that there is justification for it. So, it will always be a fight among vested interests. Sometimes, those interests that are lined up against ethanol are going to gain the edge, as they have since President Trump was elected. Whether you believe there is justification or not, this back and forth will continue unless the Midwest takes control of their own markets.

Doug: Not sure why you keep trying to make ethanol a niche, Midwest fuel.  We don’t restrict gasoline to the oil patch. Ethanol makes gasoline better. We use gasoline everywhere.  If refiners can come up with something better then they don’t have to use ethanol.

Robert: There seems to be some confusion around what I am suggesting. I am not trying to restrict ethanol. I am trying to increase ethanol consumption in places where it won’t be as susceptible to decisions by the federal government. We have niche fuels all around the country. The whole state of California has their own fuel standards. Many cities have specific standards for a fuel’s vapor pressure, and that changes throughout the year.

So, I just don’t see a problem in having a huge Midwest corridor in the middle of the country that runs primarily on E85 (or E30). It’s such a huge potential market and could have the political support of many Midwest states. Nowhere do I call for restricting ethanol. Not mandating something isn’t the same thing as restricting it.

Doug: I don’t see a problem with that either, but in the world’s largest gasoline market why would anyone be happy to be limited in their application?  The E85 idea is just one use. And again, we are sort of agreeing on the evils of the whims of government.

Robert: But you wouldn’t be restricting ethanol to the Midwest. You would just be encouraging more consumption there where the politics are in your favor. So, I don’t see a limitation, beyond the economics.

Doug: This leads us to something else we have talked about that if regulatory barriers were removed it could make the RFS irrelevant and allow ethanol to compete like any other fuel or additive.