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Ag Versus Big Oil

November 9, 2013
By: Ed Clark, Top Producer Business and Issues Editor
Ag vs Big Oil
  
 
 

An uncertain Renewable Fuels Standard puts biofuels industry in limbo 

The vibrant ethanol industry has survived four major political attacks by the oil industry and other groups in recent history, but this year’s broadside is the fiercest attack to date. For farmers, the stakes are high.

"Without the ability to grow from the current 10% blend to higher blends, we’ll return to the era of high government stocks and grain prices below the cost of production," says Jeff Broin, POET founder and board chairman. "This is not just an attack on ethanol; it’s an attack on agriculture."

Corn-based ethanol isn’t the only target. If the oil industry succeeds and blocks future renewable energy sources, it would curb growth of cellulosic ethanol that is just becoming a market reality, along with biodiesel. Biodiesel production has increased 26-fold since 2000.

"It’s all about market share," says Tom Buis, CEO of Growth Energy, an ethanol trade group. "Big oil doesn’t want anything higher than a 10% blend coming from renewable energy. It cuts into their profits."

The battleground is the Renewable Fuels Standard (RFS), first passed by Congress in 2005 and amended in 2007 (RFS2). The RFS-created ethanol mandates spurred rapid-fire production that tripled growth from 2005 to 2011 to reach a high of 13.9 billion gallons. This created demand for nearly 5 billion bushels of corn, making ethanol the No. 1 corn use category, bigger than livestock feed or exports. In 2012, ethanol production was 13.3 billion gallons.

Under the RFS, the ethanol mandate will increase from 13.8 billion gallons this year to 14.4 billion next year and 15 billion by 2015.

"Big oil does not want to let that happen," Buis says. "They have stated clearly that their goal is to eliminate the RFS."

All hands on deck. To do so, the oil industry is attempting to create legal and regulatory obstacles for bioenergy. Lawmakers friendly to the oil industry have introduced bills to modify or eliminate the RFS in both the Senate and House.

"We’re confident we will win this fight," Buis believes, but it is going to take an all-hands-on-deck approach by agriculture to do so, and that includes efforts by farmers. Farmers have stepped up to the plate by sending 60,000 e-mails to Congress in support of the RFS, Buis notes.

Agribusiness is also supporting the bioenergy cause. New Holland makes a contribution to Growth Energy for every piece of new equipment sold to farmers who are part of the ethanol industry.

When will the battle finally be over? "Never," Buis says. "Our opponents will never give up, but the short-term battle in Congress should be over sometime this year."

Buis acknowledges that it will take more than just the mandate to expand ethanol use, however. It will also require more gas station pumps that sell E15 and other higher ethanol blend fuels, and regulatory changes. That won’t happen overnight, he says.

So far, the oil industry has failed in its attempts to thwart future industry growth. For example, this summer, the U.S. Supreme Court refused to hear a lawsuit brought by the oil industry to block E15 blends.

This year’s fight won’t deter the enthusiasm of some farmers, such as Robert Maust, a Preston, Minn., corn and soybean farmer, who says, "The future is bright for ethanol."

Maust believes the advantages of ethanol will win out once the advantages of the high-quality fuel become apparent and higher blends become a reality. "But you have to walk before you can run," he says.

Maust does more than talk the talk. In 2006, he purchased shares in an ethanol plant; earlier this year, he increased his investment. How’s his return on investment been? "Satisfactory," he says, noting that he receives dividend checks each year. 

You can e-mail Ed Clark at eclark@farmjournal.com.

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FEATURED IN: Farm Journal - Mid-November 2013

 
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COMMENTS (1 Comments)

flipped56 - Sioux Falls, SD
What is the Big Oil griping about? They get Billions in subsidies even when their profits are at an all time high. All types of energy are good for the USA and for Big Oil to try to destroy sources other than their own is not American. We are all in this together. Monopolizing "Market share" is a bad way to promote America and does not serve the needs of all Americans.
9:09 PM Nov 12th
 



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