Home Commentary Should the Ethanol Industry Do a Deal with the Devil?

Should the Ethanol Industry Do a Deal with the Devil?

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The battle for ethanol has always been a David and Goliath story. The oil industry is one of the richest and most politically powerful industries in the world. The fact that they have secured lucrative tax advantages from the U.S. government while making hundreds of billions of dollars in profits is a good example. Despite negligence that has led to massive oil spills causing untold environmental damage, they still enjoy plenty of support in Congress.  The ethanol industry, on the other hand, has been divided and underfunded although a more unified and politically active industry has scored some major advances in recent years, The RFS and E-15 for example. But now civil war has erupted between ethanol groups, prompted in part by an oil industry baron.

A brief background note. There are two issues facing the ethanol industry. First is the RVO which is an EPA regulation that makes it difficult and costly for retailors to sell E-15 and higher blends of ethanol during the summer.  The second is the Point of Obligation. This is a requirement of the Renewable Fuel Standard that says gasoline refiners are responsible for blending the ethanol into the fuel.

At the beginning of March press reports surfaced that the Renewable Fuels Association was negotiating with oil magnet and Trump advisor Carl Icahn to eliminate the RVO in exchange for moving the point of obligation to retailors.  There was even talk of an executive order coming from the White House. At this point, the rest of the ethanol industry went ballistic and basically called RFA head Bob Dinneen a traitor. While tempers have cooled and the White House says no such deal is in the works, the industry remains divided.

This may have been what the oil industry wanted all along. Icahn, who owns a controlling stake in refiner CVR Energy, Inc, is also a major contributor to the Trump campaign and is an advisor to the President.  Mr. Trump’s statements that he wants to increase the amount of ethanol blended into our fuel supply is not welcomed by the oil industry which has been fighting
E-15 for years.  Creating a family feud among ethanol groups would suit the oil industry just fine.

According to Growth Energy changing the point of obligation would throw the industry into chaos. “Shifting the point of obligation would remove all economic incentive for retailers to sell higher ethanol blends,” said a Growth Energy analysis.   RFA claims the benefits from getting year-round sales of E-15 and the elimination of other burdensome EPA regulations is worth making a change in the point of obligation.  Dineen accused the rest of the industry of sticking their heads in the sand and refusing to look at a great opportunity.

While I have interviewed, and observed Bob Dinneen for a long time, and I believe he genuinely cares for the ethanol industry, it looks to me like he got snuckered on this one.  The oil lobby has had nothing but enmity toward renewable fuels for decades. They have spent millions of dollars to lobby against ethanol and have shown they will lie and mislead the public to keep ethanol from gaining market share. So why would they suddenly decide to be peace makers?

To get E-15 out of the starting gate, year-round sales are a must, but we may not need to wait for the EPA to remove these outdated regulations. Bills have been introduced in the U.S. Senate and House that would mandate the removal of these regulations. Thus if the industry can come together and focus on getting this legislation they would not have to do a deal with the devil. The ethanol industry needs to keep the main goal in sight: getting market share.  We need more ethanol in our fuel, and we need more pumps dispensing that fuel. Let’s not be distracted by shadowy promises made by oil industry bigwigs.

 By Gary Truitt