It’s Time to Deregulate Denaturant

by Geoff Cooper (Renewable Fuels Association/Ethanol Producer Magazine) On his first day in office, President Trump issued an executive order directing federal agencies to identify and suspend unnecessary regulatory requirements that “impose an undue burden” on domestic energy resources, specifically including biofuels.

While ethanol producers face undue regulatory requirements each and every day, there is no better example of a wasteful, unneeded and costly regulatory burden than the requirement that fuel ethanol must be “denatured.” Both the Alcohol and Tobacco Tax and Trade Bureau and Environmental Protection Agency require that small amounts (generally 2-2.5%) of toxic denaturing agents be added to ethanol to render it unfit for beverage use.

The denaturant requirement is a regulatory relic that dates back to the early 1900s. At the turn of the century, the government allowed distillers to denature grain-based alcohol so that it could avoid steep beverage taxes when used as a solvent, cleaning agent, or additive in consumer products like detergents and perfumes. During Prohibition, the government began mandating the use of denaturants like methanol and benzene to prevent human consumption. Rigid requirements have been in place ever since, with natural gasoline (a product of fracking) emerging as the denaturant of choice in recent decades.

Of course, the world has changed significantly since denaturant regulations were first put in place. The requirements have clearly outlived their purpose, and there is no logical justification for maintaining them today.

Fuel ethanol is produced at highly regulated, high-tech, large-scale biorefining facilities (not the small distilleries and farm stills of a century ago) and shipped to gasoline blending facilities primarily in secure 29,000-gallon railcars or 5,000- to 11,000-gallon tanker trucks (not oak barrels and jugs!). Whereas prior to the Prohibition, the same small distillery might manufacture alcohol both for beverage use and fuel use, today the fuel ethanol industry and its supply chains are entirely distinct and separate from the beverage alcohol industry. In addition, a host of other regulatory requirements have emerged for both beverage alcohol and fuel ethanol that serve to further isolate the two markets from each other.

Today, there is essentially zero risk of fuel ethanol finding its way into the beverage alcohol marketplace. Similarly, there is effectively zero risk that beverage alcohol manufacturers could somehow attempt to avoid taxation by “disguising” their product as fuel ethanol.

While the societal benefits of denaturant requirements are illusory, the costs to ethanol producers are very real. A typical biorefinery will spend $3-4 million per year on denaturant. In fact, ABF Economics estimates that industrywide spending on denaturant is close to $600 million each year—roughly equivalent to the industry’s labor expenses. In addition, biorefineries must install and maintain separate storage tanks for denaturant, along with equipment to blend denaturant into ethanol.

At the same time, adding fossil-derived denaturant to ethanol raises carbon intensity, lowers the octane value, adds sulfur and boosts certain tailpipe emissions. Why are we polluting an intrinsically clean fuel with dirty, toxic denaturants?

And because it displaces pure ethanol, denaturant requirements reduce ethanol and corn demand. The industry adds 300-400 million gallons of denaturant to ethanol each year—displacing volume that could otherwise be satisfied with ethanol. Thus, eliminating denaturant requirements would immediately bump ethanol demand, which in turn would boost corn grind by roughly 125 million bushels per year. That would provide a welcome shot in the arm for America’s farmers.

As administration officials ramp up efforts to identify and remove “burdensome and ideologically motivated regulations,” we encourage them to start by eliminating costly, outdated and completely unnecessary denaturant requirements. READ MORE