Ethanol industry clearing pandemic hurdles

ELLISVILLE, Mo. — After falling to a seven-year production low in 2020, the ethanol industry is bouncing back.

“The ethanol industry really made great strides in 2021 in terms of recovering from the COVID pandemic,” said Geoff Cooper, Renewable Fuels Association president and CEO.

Cooper reflected on the past two years of challenges and opportunities in a RFA-sponsored Ethanol Report, produced by ZimmComm.

Where are we today compared to a year ago in terms of recovery from COVID with ethanol production and demand after that devastating drop in 2020 due to the pandemic restrictions that kept people off the road?

“2020 was a terrible year for the industry in terms of production and demand because of COVID. We saw ethanol production slump to about 13.9 billion gallons in 2020 because of COVID. That was a seven-year low. We don’t have the final numbers for 2021 yet, but we’re expecting somewhere around 15 billion gallons of production in 2021 and a very strong rebound in demand, especially domestically.

“We saw a nice bounce in demand coming out of COVID. Ethanol demand really did well in the back half of this year and is still doing well as we head into winter which is typically a period of lower demand and less driving, but we really haven’t seen that.

“When you compare the last few months of fuel consumption and vehicle travel to comparable pre-COVID levels in 2019 and 2018 we’re actually seeing very strong demand and it looks like that’s going to continue as we head into 2022.

“Overall, 2021 was a recovery year for the industry. We saw a lot of those facilities come back to normal operating conditions that had been either completely shut down or running at below normal operating capacity and actually touched some record levels of output at certain points in the fall as the industry was really trying to meet surging demand.

“That part of 2021 was good for the industry and it’s great to see the industry getting back on its feet after an awful year in 2020 and frankly not a very good year in 2019.”

Ethanol exports were impacted by COVID. How were the exports in 2021?

“We’re projecting we will export slightly less in 2021 than we did in 2020 even with COVID. We think that’s because other countries around the world have been much slower to recover from COVID. There are a lot of markets around the globe that just haven’t returned to the roadways quite as quickly as we’ve done in the U.S. We also are continuing to battle trade barriers, tariffs, tariff rate quotas and other policy barriers in certain markets that in the past have been robust export markets for the U.S. At the top of that list is Brazil.

“In past years, Brazil has been our top export market. We’ve sent a lot of product to that country, but in 2021 we sent very little ethanol to Brazil because of their 20% tariff on U.S. ethanol imports. We face similar barriers still in China, and we have some barriers in place in India, Columbia and other places that have been major markets in the past.

“So, trade was not quite as exciting and not quite as optimistic for our industry in 2021 and we clearly have a lot of work to do on that front as we move into 2022.”

There were also ups and downs in the domestic ethanol market. Can you recap some of the issues and where we stand at this point?

“One of the things that really marked 2021 in the domestic market was uncertainty. There was uncertainty around the recovery from COVID, but more so than that uncertainty around the Renewable Fuel Standard and around other federal regulations and policies.

“E15 was a big one. Back in July we had the D.C. Circuit Court overturn the regulation that we had worked so hard to secure that finally allowed year-round sales of E15 across the country. The court sided with the oil refiners and overturned that regulation.

“That put us back into a situation where retailers in two-thirds of the county will not be able to sell E15 in the summer months next summer unless we get this situation remedied. That was a big setback and negative news in 2021 on the domestic front.

“We also did see some positive news. Small refinery exemptions were certainly a challenge that our industry has been dealing with the last few years. Early in 2021 we got word from EPA they were going to change the way they approached SREs. They said they were going to stop granting so many SREs and their rationale for doing that was really the 10th Circuit Court decision in a case that we brought against EPA.

“We were pleased to see that and pleased to hear that commitment from EPA in March, but then we didn’t see any follow-up or any implementation of that commitment until just in the last few weeks when EPA finally followed through with a formal proposal to deny all of those remaining pending small refinery exemptions.

“We’re talking about 3 billion gallons of renewable fuel blending requirements that sort of hang in the balance with those pending petitions. So, we were very pleased to see EPA proposing to deny those petitions and we’re going to strongly support that proposed denial and hope that EPA moves quickly to finalize those denials early in 2022.”