On Tuesday POET announced it will idle production at its bioprocessing facility in Cloverdale, IN because of the Small Refinery Exemptions (SREs) the EPA issued earlier this month. POET officials say the process to idle the plant will take several weeks, after which the plant will cease processing over 30 million bu. of corn annually.
While it’s unclear what level of demand destruction this will create in the short term, AgriTalk host Chip Flory says the situation could have been avoided entirely if the EPA was following the law.
“The action by POET to idle plants in reaction to the SREs is unbelievably unfortunate and would be unnecessary if EPA would be following the letter of the law of the RFS,” Flory says.
EPA says its actions are not responsible for POET's decision.
“There is zero evidence that EPA’s congressionally mandated small refinery exemption program, which provides regulatory relief to small refineries around the country, has had any negative impact on domestic corn ethanol producers," EPA said in a statement provided to Agweb. "In fact, the Trump Administration has overseen year-over-year increases in domestic fuel ethanol production, to the highest level in history and the United States exported a record volume of ethanol in 2018 for the second consecutive year."
The EPA can issue SREs under the RFS, however, the law states when they do they’re required to reallocate the blending obligations to other obligated parties. The problem? They’re not doing that.
“That’s where the problem is with the EPA’s interpretation of the RFS,” he said. “This is really frustrating and really unfortunate.”
POET Chairman and CEO, Jeff Broin said in a press release the ethanol industry invested billions of dollars based on the belief that oil interests could not restrict access to the market and EPA would stand behind the intent of the RFS.
“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,” he said.
Flory says it’s too soon to know just how much POET’s announcement will change the overall amount of corn being used for ethanol.
“That’s been under pressure already,” he said adding “We’ve built up stocks in recent weeks.”
According to a press release, POET has reduced production at half of its biorefineries, with the largest drops taking place in Iowa and Ohio. As a result, numerous jobs will be consolidated across POET’s 28 biorefineries and corn processing will drop by an additional 100 million bu. across Iowa, Ohio, Michigan, Indiana, Minnesota, South Dakota, and Missouri.
Just last month President Trump visited a POET ethanol plant in Iowa where he instructed EPA Administrator Andrew Wheeler and Agriculture Secretary Sonny Perdue to find a solution to support farmers and the ethanol industry.
“POET made strategic decisions to support President Trump’s goal of boosting the farm economy. However, these goals are contradicted by bailouts to oil companies. The result is pain for Midwest farmers and the reduction of hundreds of jobs and hundreds of millions of dollars of economic activity across Indiana.” said POET President and COO Jeff Lautt
POET officials say EPA has cut biofuels demand by four billion gallons and reduced demand for corn by 1.4 billion bushels, causing severe damage in rural America.