Largest ethanol maker closes Indiana plant, blames EPA waivers

At the same time that POET, the largest U.S. ethanol maker, said it was forced to shut down an Indiana plant due to EPA “mismanagement” of the ethanol mandate, the chairman of the Senate Finance Committee said that “farmers feel the government isn’t keeping its word” on biofuels. But Finance chairman Chuck Grassley warned on Tuesday that there may not be enough support in Congress to overrule the EPA, which recently exempted 31 refineries from complying with the mandate.

“Bringing up legislation might bury the RFS,” said Grassley, referring to the Renewable Fuel Standard, which guarantees biofuels a share of the U.S. gasoline market. Grassley is from Iowa, the No. 1 state in corn and ethanol production. Although corn ethanol was a Farm Belt darling for years as a homegrown fuel, it is now criticized by environmentalists and free-market conservatives.

Farm groups and ethanol makers say the EPA undermines the RFS when it issues “hardship” waivers that exempt small-volume refineries from requirements to mix a mandated amount of ethanol into their gasoline or to buy credits if they fall short. “At least 15 ethanol plants have now shut down or idled since EPA began its refiner bailout bonanza last year, and more than 2,500 jobs have already been affected. Ethanol production and demand continue to slide, prices continue to sink, and margins continue to bleed red,” said the Renewable Fuels Association (RFA), a trade group.

“Not only is the government not keeping its word, but it also in a sense is screwing the farmer when we already have low prices for grain,” said Grassley during a telephone news conference. The seven-term Republican senator was nearing the end of his annual circuit of town hall meetings in every county in the state. The Sino-U.S. trade war is causing concern for the farm economy, he said, based on comments at the meetings. “Of course, ethanol adds to that.”

POET said it will idle production at its 92 million-gallon-a-year ethanol plant in Cloverdale, in central Indiana, “after which the plant will cease processing of over 30 million gallons of corn annually, and hundreds of local jobs will be affected.”

“Unfortunately, the oil industry is manipulating the EPA and is now using the RFS to destroy demand for biofuels, reducing the price of commodities and gutting rural economies in the process,” said POET chief executive Jeff Broin. The company, based in Sioux Falls, South Dakota, has reduced production at half of its 28 refineries in seven states and will reduce corn processing by 100 million bushels.

Two new petitions were filed by refiners following the EPA approval on Aug. 9 of 31 small-refinery waivers. The waivers retroactively affect 1.43 billion gallons of biofuel obligations. The Trump administration has granted four or five times as many waivers annually as did the Obama administration. The oil industry says biofuel credits were unduly expensive in recent years and that the RFS plainly allows waivers during times of hardship.

President Trump ordered cabinet members to soothe Farm Belt anger over the waivers, reported Reuters. “It remained unclear what actions Trump would be able to take to appease farmers upset that he had granted the waivers.” Nonetheless, ethanol credits rose in price by a penny, to 13.5 cents each, following the wire service story.

Nearly 40 percent of the annual U.S. corn crop is used in making ethanol and co-products such as distillers grains, used as a livestock feed. POET says it buys 5 percent of the U.S. crop when its plants are running at full capacity of 1.71 billion gallons a year. ADM, the second-largest ethanol producer, has operating capacity that is just a hair behind POET. The dozens of U.S. ethanol plants produced nearly 16.1 billion gallons last year and exported 1.7 billion gallons of it, according to RFA data. The RFS for corn ethanol was 15 billion gallons this year.

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