Capturing a Larger Share in a Shrinking Pool: The Ethanol Survival Guide

By Jim Seurer, CEO,  Glacial Lakes Energy & Doug Sombke, South Dakota Farmers Union

The ethanol and entire biofuel industry is pacing the floor like an expecting parent waiting for the baby to be born as the new EPA “set” rule is going to be unveiled soon establishing renewable volumes for the next three years.

For the first time since the enactment of the Renewable Fuel Standard, the statutory volumes established in the authorizing legislation now give way to EPA discretion. The 36 billion gallons we were supposed to reach—and have failed miserably—was assumed to be the new baseline and EPA would either build from there or hold the line. As the reality of this 2022 change begins to sink in, the thought of EPA holding that much power unnerves many of us.

But let’s see the glass as full.  What if EPA sets the conventional biofuel category, sometimes referred to as the implied corn ethanol demand, at the full statutory level of 15 billion gallons annually.  All is well, right? Well, not so.

First of all, it is hard to imagine an EPA under this administration doing anything that might be seen as retarding the development of electric vehicles. This three year window of the set may not assume significant penetration of EVs in year one, but in subsequent years they may.  That could easily translate to them projecting a shrinking gasoline market, making it difficult to call for 15 billion gallons in a 100 billion gallon or less pool. Again, however, lets say they do.

No worries, EPA may be thinking. Politically we’ll keep these ethanol folks happy but create every tool we can think of to ensure we never see all those gallons hit the market.  Get ready for a deluge of RINS that will be coming soon from Renewable Diesel and its 1.7 RIN multiplier, biodiesel with its 1.5, cellulosic ethanol, biogas, and the new kid on the block, E RINS, that may also have a multiplier.  These excess RINS—Renewable Diesel alone will generate several billion “extra” RINS – can be used to meet the conventional category, meaning corn ethanol gets by-passed.  So a 15 billion gallon implied corn category could wind up being 8-10 billion actual gallons.

A recent Reuters article stated “ The administration’s early and extensive outreach reflects that expanding the scope of the U.S. Renewable Fuel Standard (RFS) to make it a tool for electrifying the nation’s automobile fleet is one of Biden’s priorities in the fight against climate change.”

So the vision is to use the RFS as a way to get to EV heaven?  If so then look out.  EPA could propose a multiplier at any time that would give EVs, when all their tax breaks and RIN values are considered, a substantial advantage.

A loss of ethanol demand and a corresponding loss of corn grind is a daunting thought.  Do we turn to exports? Well, a news story in AgriPulse last week reminded anyone who is paying attention that Brazil continues to increase their corn production, taking advantage of a three-season growing cycle. They could, in time, surpass U.S. corn production, something previously unthinkable.

 Our good friend and colleague Dave Vander Griend of ICM wrote an article here in the digest exactly 5 years ago   ( The Brazilians Are Coming!! The Brazilians Are Coming!! October 19, 2017)  warning of the looming threat Brazil represented for both corn and ethanol. He said then they were completing a rail line from the middle of the country to the coast that will position them to beat us to the punch in terms of exports.  Vander Griend noted that the loss of ethanol demand puts more burden on corn growers and issued this dire warning—“There is a new player at the table in the world of corn and we’d better find some domestic uses for ours because we may not be able to beat them in the world market.”

Where does this leave us?  What do we do faced with a shrinking gasoline pool, a serious erosion of the actual demand from the RFS, and export markets for both corn and ethanol facing brutal competition.  To us the answer is simple–Use more ethanol here, at home, in the largest gasoline market in the world. If the pool is shrinking, then increase our share of the pool.

That is what we are doing in South Dakota as we are successfully using 30% ethanol blends.  A recent economist’s report from Growth Energy found that nationwide access to E15 could save drivers billions in annual fuel costs, create new jobs, and return billions to the U.S. economy. That’s good news for sure, but why stop there?  Why not double those benefits with E30.  With all the negative factors we have noted here chipping away at corn and ethanol demand, in two or three years the demand from E15 might be less than the demand we have now from E10.

An analysis by the Clean Fuels Development Coalition looked at the economic impact of a nationwide E30 program and the reduction of imports alone represented a $100 billion annual savings by backing out 1 billion barrels of imported oil. Add to that the health care cost savings and other avoided costs and it is a strong argument for such a blend.

There is no reason we cannot get to these truly high volumes and every reason we should.  When the Department of Energy tested E15 as part of the E15 waiver request they used 20% blends in order to give themselves a cushion. This was consistent with the DOE’s Co-optima program that concluded higher ethanol blends in the 25%-40% range were excellent fuels. With an estimated 200 million miles behind us, our E30 Challenge in South Dakota has been incredibly successful with no reports of any mechanical issues while providing huge savings in fuel costs.  Our neighbors in Nebraska have successfully demonstrated E30 in their state fleet  (  https://ethanol.nebraska.gov/?s=E+30 )  in an EPA sanctioned test.  At the 30% blend level there is no vapor pressure increase, meaning getting an rvp waiver is a non-issue.

What’s more is the fact that 30% ethanol blends are super premium fuels, the high octane replaces toxic, carcinogenic, high carbon aromatic compounds. Supported by the aforementioned University of Nebraska study, we would argue an E30 blend is a low carbon fuel and an advanced biofuel at that.

And here is the good part:  EPA is required to reduce those toxics. They have been ducking that responsibility for decades and we challenge the rest of the industry to join us in demanding they do so.  Pulling out the bad octane, like we did with lead, opens the door for significant new octane demand that is not tied to the RFS.

With more regulatory challenges facing EPA in the near future, the ethanol industry and corn growers need to think beyond just E15 and just the RFS and do it now. Truly higher blends like E30 could make compliance with new particulate reductions easier for automakers.  New fuel economy regulations will need to be developed for 2026 and beyond and increasing octane while ensuring it does not come from toxics will allow automakers to increase mileage and lower carbon.

And lets reach for the stars—as the limitations of EVs become of some concern, the flexibility of hybrids are being seen as an attractive option. Brazil is demonstrating E40 Hybrids that would re-define the value of ethanol.

High oil and gasoline prices are not going anywhere anytime soon.  We have the ability with domestic oil and domestic ethanol to chart our own future, and it centers around higher blends from our homegrown corn and bio resources.

More about the authors

Jim Seurer is the Chief Executive Officer of Glacial Lakes Energy, a 360 million gallon per year ethanol producer with four production facilities.

Doug Sombke is President of the South Dakota Farmers Union and past Chairman of Farmers Union Enterprises.

This article was originally published in the BioFuels Digest, October 24, 2022: https://www.biofuelsdigest.com/bdigest/2022/10/24/capturing-a-larger-share-in-a-shrinking-pool-the-ethanol-survival-guide/