Biofuels Industry Seeks Bailout to Weather 'Collapsing Demand'

(Reuters/NewsMax Finance) The U.S. biofuel industry has asked the Trump administration for funds from the U.S. Department of Agriculture's Commodity Credit Corporation to help it survive a demand slump triggered by the coronavirus outbreak, according to a letter seen by Reuters.

The funds could be used to offset a portion of the industry's corn and soy bean purchases, or as direct assistance to companies to help them retain staff, according to the April 1 letter addressed to Agriculture Secretary Sonny Perdue.

The letter, signed by representatives of the nation's top biofuel trade groups including the Renewable Fuels Association, said that "collapsing demand" for fuel during the outbreak had idled some 3.5 billion gallons of annualized ethanol output at a quarter of the nation's production facilities. READ MORE

Excerpt from Ethanol Producer Magazine: The American Coalition for Ethanol sent a letter to the U.S. EPA on April 3 urging the agency to address the shortcomings in its implementation of the Renewable Fuel Standard and outlining three steps the EPA has the authority to take to mitigate the economic fallout that biofuel producers and farmers are experiencing due to COVID-19.

The letter references the 2020 RFS requirement that was set at 20.09 billion gallons in December 2019. The total renewable volume obligation (RVO) for this year was set at 11.56 percent. “Importantly, the statute specifically instructs EPA to set the total RVO at a level that ‘ensures the requirements’ of the statutory obligations are met,” wrote Brian Jennings, CEO of ACE, in the letter. “Circumstances have changed dramatically since December 2019 which necessitate the immediate attention of EPA if the statutory requirement is to be fulfilled.”

“COVID-19 has exposed a flaw in EPA’s rulemaking approach,” Jennings continued. “Social distancing, stay-at-home, and shelter-in-place order are cutting gasoline demand by more than 50 percent in most of the country. As gasoline demand plummets during the coronavirus pandemic, so does ethanol demand, meaning the 11.56 percent RVO will not result in the use of 20.09 billion gallons in 2020 as required by statute. Without adjusting the percentage of renewable fuel volume obligated parties must use in 2020, EPA will be violating the RFS statute which amounts to an illegal waiver of blending volumes.”

Jennings urges the EPA to take three steps to address the crippling consequences impacting the ethanol industry. First, he said the EPA should use existing statutory authority to issue an interim final rule by July 1 to increase the RVO for 2020 to the percentage necessary to ensure the full 20.09 billion gallons of renewable fuel are used as required by law. Second, he said the EPA should restore the 500 million gallons of remanded volumes as ordered by the D.C. District Court in 2017. Finally, he called on the agency to deny most of the 25 small refinery exemptions (SREs) currently pending for the 2019 compliance year based on precedent set by the Tenth Circuit Court of Appeals in its Jan. 24 ruling.

“The Trump Administration has already used the interim final rule authority to address the economic fallout of COVID-19,” Jennings wrote.” For example, the Small Business Association (SBA) used this authority to provide economic assistance on April 2, 2020 stating the economic impacts resulting from federal, state, and local public health measures to minimize exposure to COVID-19 justified such action. The SBA concluded this was a good cause for using an interim final rule. Similarly, the ethanol industry is being economically impacted as a result of the COVID-19 restrictions.

“These issues are critical to the economic survival of many U.S. renewable fuel producers, farmers, and rural communities,” Jennings continued. “We urge quick action.”

Excerpt from Politico's Morning Energy: HELP AN INDUSTRY OUT: A bipartisan group of 15 senators urged Agriculture Secretary Sonny Perdue to direct some of the department's coronavirus relief aid to struggling biofuel producers, Eric reports. In a letter released Tuesday and led by Sens. Chuck Grassley (R-Iowa) and Tammy Duckworth (D-Ill.), the senators say 4 billion gallons of ethanol production have been idled since March 1 due to lack of demand. "As the U.S. Department of Agriculture considers the allocation of additional funds provided to the Commodity Credit Corporation by the Coronavirus Aid, Relief, and Economic Stabilization (CARES) Act we ask that you use the authority provided to assist the biofuel industry," the senators said.

POET SHUTTERS THREE, DELAYS FOURTH: POET, the largest ethanol producer in the country, said Tuesday it would idle three ethanol plants and delay opening a fourth, which in total had a capacity to produce 330 million gallons a year. READ MORE