Iowa biofuel plants ‘gutted’ by small refinery exemptions

Iowa biofuel plants ‘gutted’ by small refinery exemptions

The Siouxland Energy Cooperative in Sioux Center, Iowa

The Siouxland Energy Cooperative in Sioux Center, Iowa, halted ethanol production Sept. 16. The halt was a result of small refinery exemptions granted by the EPA within the Renewable Fuel Standard, the company stated in a release.

Times have been difficult for Iowa biofuel plants, with multiple businesses closing their doors in the past month.

Kelly Nieuwenhuis, president of the board at Siouxland Energy Cooperative, a northwest Iowa plant that announced it would be going idle on Sept. 16, cited small refinery exemptions which have “undermined the Renewable Fuel Standard” in a press release. The release stated these exemptions have reduced ethanol demand by 4 billion gallons.

“We were pretty disgusted with the small refinery exemptions that had been handed out to refineries that were not suffering any hardships at all,” Nieuwenhuis said. “We’ve been working pretty hard to get the Trump administration’s attention to let them know that it is not acceptable.”

Under the Renewable Fuel Standard, refineries are required to utilize renewable fuels in their gasoline or diesel fuel products.

Starting in 2013, small refineries (those with a crude oil input of no greater than 75,000 barrels per day) that were able to demonstrate economic hardship could receive a waiver. According to the EPA, a total of 23 exemptions were granted between 2013 and 2015. Under President Donald Trump, these exemptions have increased to 85 over the past three years, including 35 in 2017 and 31 in 2018.

However, petitions for exemptions have also increased dramatically over that span. While 43 petitions were received from 2013-15, the past three years of data from the EPA annual compliance reports shows 99 requests.

Monte Shaw, executive producer at the Iowa Renewable Fuels Association, said the recent overuse of these exemptions “gutted the RFS,” and took away market access for biofuels such as biodiesel and ethanol.

With refineries objecting to RFS requirements and biofuel producers and farmers watching exemptions drive down demand, on Oct. 4, the Trump Administration announced a proposal that would review the RFS beginning in 2020.

Shaw said the plan, if followed, would help put the RFS back on track.

“It wouldn’t necessarily stop giving out refinery exemptions, but would do what the law said they should have been doing all along,” Shaw said.

While this would be a step in the right direction, Shaw said it has taken a long time to reach this point in the biofuel industry. He said there is no “magic bullet” that will automatically solve the issue for Iowa refineries.

The latest proposal will take time to be approved, and he is aware there will be resistance from the oil industry, which may cause potential roadblocks.

“That won’t kick in until 2020 or 2021, where we’ll see the market-based impacts of this,” Shaw said. “It won’t drive demand overnight.”

That has led Nieuwenhuis and other Iowa biofuel organizations to start work getting more Iowa retailers and consumers on board with higher blends of ethanol, including now year-round sales of E15.

The Iowa Corn Growers Association partnered with the American Lung Association to research how ethanol blends affect lung cancer rates. Nieuwenhuis also said the blends reduce greenhouse gas emissions.

“Why wouldn’t you want cleaner air when you have a product that can do that?” Nieuwenhuis said.

Shaw echoed the need for an increase in demand, as trade disputes have thrown a wrench into what was expected to be a growing industry.

He noted a recent capacity increase seen across Iowa over the past several years in anticipation of uninterrupted trade and China moving to use more E10 blends. Manufacturers built with the intention of needing more product, he said.

When global markets closed, balance became “out of whack,” Shaw said. There was too much supply with nowhere for the product to go.

“It’s not like we just built a bunch of new plants willy-nilly,” Shaw said. “There were reasons for it. (Demand) had been artificially cut off. It wasn’t an over-supply situation, as much as there was an under-demand situation.”

With continued year-over-year yield increases from farmers, Shaw said continuing to have these biofuel markets is going be important for both farmers and manufacturers in Iowa.

“The trends are clear,” he said. “We need markets to suck up those commodities.”


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