Newsletter | July 2019

JULY 2019

Company Update

RFA Celebrates E15, Cautions on Small Refinery Waivers

The Renewable Fuels Association welcomed the U.S. Environmental Protection Agency’s final rule allowing retailers to sell gasoline containing 15% ethanol year-round, and in June the President visited an RFA-member ethanol plant in Iowa to celebrate. The EPA announcement was the culmination of a process that began at an October 2018 event in which President Trump directed the Agency to implement the regulatory fix before the 2019 summer driving season.

When President Trump visited the Southwest Iowa Renewable Energy facility in Council Bluffs, he enjoyed a personal tour with RFA President and CEO Geoff Cooper and SIRE CEO Mike Jerke, an RFA board member.

In the nine years since EPA first approved the use of E15, RFA has worked tirelessly to remove the costly and unnecessary regulatory barrier that prevented retailers in most of the country from selling the fuel during the busy summer driving season. RFA has long advocated for an administrative resolution to this antiquated barrier and was highly encouraged last fall when President Trump directed EPA to act on its regulatory authority to solve the problem.

The challenge now is to ensure that the success of year-round E15 is not marred by the granting of small refinery exemptions that remain pending.

“We are cognizant, however, that the promise of E15 could be undermined if EPA continues its unprecedented assault on the RFS with indiscriminate small refinery hardship waivers,” Cooper said when the year-round E15 final rule was announced. “Against the intent of Congress, EPA has been granting RFS exemptions to refiners without requiring them to demonstrate their claimed ‘hardship’ is somehow connected to the RFS. The demand destruction caused by EPA’s waivers must end. We urge the President to build upon the momentum of today’s announcement by reining in EPA’s abuse of the small refiner exemption program.”

It doesn’t take a mathematician to understand that the gallons of ethanol gained by the new #E15 rule are a drop in the bucket compared to the number of gallons lost to small refinery exemptions.

2nd Quarter Plant Update

Hot Summer greetings from everyone at Show Me Ethanol! Along with everyone in the county, we continue to work our way through the flooding challenges and keeping the plant operating at the top of our class. Several employees have been directly affected by the flooding, including one home lost. The plant survived with minimal impact, though we did have to slow production for several days in late May due to trucking challenges. We simply couldn’t move enough product in/out of the facility when Highway 65 was closed to the north and south, Highway 24 closed to the east, and Highway 10 closed to the west. As soon as Hwy 65 opened back up the north we were able to resume operating at our target rate.

Target rates have been reduced due to the continued poor operating margins across the industry. We have reduced the rate to meet demand without eroding prices. This rate reduction has improved some plant efficiencies also, our June ethanol yield is as high as we can expect during the hot summer months.

We completed a scheduled outage in late July to complete the new sieve bottle addition. Projects like this one continue to debottleneck the plant so we can operate at peak efficiency and maximum rate when margins allow.

Financial Results for Second Quarter Ended June 30, 2019

Total Sales were made up of $22.6 million of Ethanol, $5.6 million of Distiller Grains and $1.3 million of Corn Oil.

Total Expenses include Corn costs in the amount of $23.2 million. A Net Loss for the Second Quarter of 2019 was $0.05 million.

Biofuel industry testifies on proposed RFS levels

Small refinery exemptions still main point of contention with renewable fuel producers.

The Environmental Protection Agency hosted an annual hearing in Ypsilanti, Mich., on next year’s biofuel targets under the Renewable Fuel Standard (RFS). Many members of the biofuel industry pushed for higher levels and for the agency to correct demand lost from previous small refinery exemptions.

EPA released its proposed renewable volume obligations (RVOs) under the RFS on July 5, 2019. Under the proposal, conventional ethanol would hold steady at 15 billion gal., while advanced biofuels would see a slight uptick to 5.04 billion gal., including 540 million gal. of cellulosic biofuel. Biodiesel targets, which are set two years in advance, were proposed at 2.43 billion gal. for 2021.

In his testimony, Growth Energy vice president of regulatory affairs Chris Bliley noted the industry’s frustrations with EPA’s failure to correct its course on refinery exemptions through annual blending targets: “Once again, the proposal assumes that despite exempting at least 190 million gal. of biofuel every year since 2013, that there will be ZERO gallons exempted in 2020. If EPA is going to waive billions of gallons, it must properly account for those gallons in the RVO calculation so that demand loss is not borne by biofuel producers and America’s farmers.”

Biofuel industry members claim that these waivers have reduced RFS requirements by 2.61 billion gal. of ethanol equivalent, with 38 more exemptions pending.

“The proposed rule we are discussing today allows retroactive refinery exemptions to continue to destroy demand for renewable fuels. In addition, the proposal ignores the D.C. Circuit Court’s decision that EPA improperly waived 500 million gal. in 2016,” National Corn Growers Assn. board member and Ohio farmer John Linder said. “These volumes are meaningless amid EPA’s massive expansion of retroactive refinery waivers. Farmers have no confidence EPA will ensure these volumes are met – which the law requires – because EPA fails to account for projected waivers in this proposal.”

Scott Richman, chief economist of the Renewable Fuels Assn., said Congress gave EPA the direction and tools necessary to enforce the statutory RFS volumes. “That includes prospectively redistributing volumes from [small refinery exemptions] to non-exempt parties. It also includes complying with a court order to restore illegally waived volumes from 2016. We urge EPA to do both in the final rule,” he testified.

Billey added, “Ethanol plants have closed, employees have been laid off, trade has been cut, all on top of farmers’ crops being devastated – and EPA claims it is too difficult for refiners to blend 500 million gal. of biofuel as the law requires. What kind of signal does that send to farmers? What message does that send to companies seeking to invest in American biofuels? It speaks volumes.”

American Coalition for Ethanol (ACE) communications director Katie Fletcher testified, “EPA’s mismanagement of the RFS has placed an artificial lid on domestic ethanol demand, causing dozens of ethanol plants to consider slowing production or shutting down.” The national ethanol blend rate retreated from 10.13% in 2017 to 10.07% in 2018. “ACE members are convinced EPA refinery waivers contributed to these historic setbacks,” Fletcher said.

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