The Van Trump Report

What’s Ahead for Ethanol?

The recently introduced “Next Generation Fuels Act” is drawing praise from a wide range of stakeholders, including the Renewable Fuels Association (RFA) which called it “the beginning of an exciting new era in transportation fuels policy.” Introduced by Illinois Representative Cheri Bustos, the bill would establish a high-octane, low-carbon fuel requirement that aims to boost the long term demand for biofuels while also helping efforts to lower greenhouse gas emissions. National Corn Growers Assn. President Kevin Ross said, “The Next Generation Fuels Act builds on the success of the Renewable Fuel Standard [RFS] in advancing corn growers’ commitment to providing the lowest-cost, most efficient and environmentally friendly fuel available.” 

The Next Generation Fuels Act establishes a new 98 Research Octane Number (RON) standard for gasoline and requires that sources of additional octane result in at least -30% fewer greenhouse gas (GHG) emissions than unblended gasoline. This is designed to ensure the progress already made to lower emissions through cleaner, renewable fuels continues. A new 98 RON would support mid-level blends like E25 and E30, which would generate new corn and ethanol demand.

The bill follows the lead of a 2016 Department of Energy study that showed high-octane, mid-level ethanol blends can increase vehicle efficiency while reducing emissions. The bill would also limit the use of harmful aromatics, which refiners often use to boost octane, in meeting the new high-octane standard, as well as in current-market gasoline. Ethanol has an octane rating of 113, which, combined with other properties, naturally makes ethanol a top competitor in a high-octane fuel market. According to the National Corn Growers Association, studies have shown that in order to optimize the performance of future engines, a high-octane fuel could utilize between 20%-40% ethanol compared to the 10%-15% blends standard across the U.S. today. The NCGA has compiled an extensive amount of research dedicated to this topic if you’d like to learn more. Click HERE.    

Iowa Corn Growers Association President Carl Jardon calls the Next Generation Fuels Act “welcome news not only for corn farmers but also for consumers,” as higher ethanol blended fuels allow drivers to travel further with fewer fill-ups and fewer harmful emissions. Geoff Cooper, president and CEO of the RFA, applauded the bill for establishing the roadmap for an orderly transition to high-octane, low-carbon fuels and said “the U.S. ethanol industry proudly and enthusiastically supports this legislation.”  

Obviously, not everyone has thrown 100% support behind the bill. The American Coalition for Ethanol (ACE) said that while the bill does contain key priorities, it feels the carbon accounting approach undermines many of the group’s members. According to ACE, the bill’s definition of “average” to determine the lifecycle greenhouse gas (GHG) emissions of ethanol, also known as carbon intensity (CI), shortchanges many producers. “Under this legislation, ethanol from a coal-fired ADM facility, whose fuel is similar to the CI of gasoline, would get the same access to the new octane market as the most efficient farmer-owned ethanol facility, whose carbon footprint is at least 50% cleaner than gasoline,” Jennings said. In this example, Jennings says ADM would be rewarded for doing nothing to reduce the CI of the fuel produced in its coal-fired facilities and penalize many ACE-member companies that have invested millions of dollars to install technology to reduce the CI of their fuel.

Rising demand for electric vehicles is also concerning for those of us invested in ethanol. I thought it was important to recently hear Renewable Fuels Assn. (RFA) president and CEO Geoff Cooper say, “Even with increased sales of electric vehicles, it is broadly understood and accepted that our light-duty transportation fleet will continue to rely heavily on liquid fuels and internal combustion engines for decades to come. As such, we should be pursuing policy solutions that compel improvements in the environmental performance and efficiency of those liquid fuels and internal combustion engines. That’s exactly what Congresswoman Bustos’s bill does.” Also, many of us invested in the ethanol space are hoping to see strong export demand for U.S. supply. Copper’s additional comments also help paint a brighter picture for ethanol exports, “By establishing the roadmap for an orderly transition to high-octane, low-carbon fuels, this landmark legislation begins an exciting new era in transportation fuels policy. As the world’s top supplier of clean, affordable, low-carbon octane,  the U.S. ethanol industry proudly and enthusiastically supports this legislation.”

It’s unlikely the legislation makes any real progress this year but supporters feel it charts a path forward for the industry and will serve as a sort of foundation to help the market develop beyond the Renewable Fuels Act (RFS). The bill would also all blends above 10% ethanol receive the same RVP (Reid vapor pressure) treatment as E10, and requires future vehicles and retail fuel stations to be compatible with E30, and replaces EPA’s MOVES model with DOE’s GREET Model to account for agricultural production advances. The NGA prepared an easy to digest 2-page summary of the legislation, available HERE. (Sources: ACA, NCGA, Progressive Farmer, Ethanol Producer Magazine)

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