Should Ethanol Go Back to Business as Usual after COVID-19?

by Christina Stella (WVIK/NPR) ... As Americans hunkered down for lockdowns, gasoline demand across the country plummeted. Ethanol industry leaders issued warnings that the financial repercussions of widespread lockdowns could be significant to plants across the country. They later reported half of the nation’s facilities were forced to shut down.

Most ethanol plants have since reopened, and losses so far are lower than initially feared. But the sector’s slow recovery has some questioning if it’s in the U.S. ethanol industry’s best interest to continue making as much fuel as before the pandemic.

For the first time in his career, Leiding (Tony Leiding, operations manager at Trenton Agri Products) had to decide to stay open or idle the plant. He ultimately decided to cut production by 60% until around mid-May. That way, nobody got laid off, nearby livestock producers could still purchase feed, and local corn growers could still sell their bushels.

About half of Nebraska’s 25 ethanol plants couldn’t find a way to stay open, and two are still closed. But the ethanol industry’s financial problems started long before COVID-19.

“No one's disputing that the ethanol industry was going through a very difficult period in 2019 and early 2020,” said Scott Irwin, an agricultural economist at the University of Illinois.

The debate over why the industry ended up in such a financially vulnerable place mostly falls into two camps.

“Was the dire straits of the U.S. ethanol industry due to adverse policy decisions by the EPA under the Trump administration … or was it due to an industry that had overbuilt ... and was suffering from an oversupply situation?”

Despite the uncertainties facing the industry right now, ethanol advocates like Roger Berry say there’s room for more growth. He thinks higher ethanol blends could help the U.S. transition away from gasoline.

“The day will come when we're all driving electric vehicles,” he conceded. “But that's going to take time. However, we offer a fuel right now.”

A recent legal challenge could dampen the EPA’s flexibility in approving exemptions going forward: in January, the 10th Circuit Court of Appeals struck down three of those waivers, saying the agency overstepped its authority in granting them.

The EPA may wait to decide on pending small refinery exemption applications until petitions by refiners following the 10th circuit decision are fully resolved. That could drag out past the transition of power between President Donald Trump and President-elect Joe Biden.

Blending mandates, the ethanol-to-oil ratio set by the EPA at the end of each year, could also impact ethanol revenue in 2021. A lower mandate might drain even more income for ethanol plants at a time when they’re clinging to every dollar of revenue they can muster. READ MORE includes AUDIO