Vilsack Swan Song

17 Feb 2016

By Todd Neeley
DTN Staff Reporter

NEW ORLEANS (DTN) -- It may have been his swan song speech at the National Ethanol Conference as U.S. secretary of agriculture, yet Tom Vilsack told industry representatives Tuesday in New Orleans he's hopeful the next administration will continue to give USDA flexibility to lend financial and technical support to the biofuels industry.

In recent years, the Vilsack-led USDA has used a variety of programs to support the expansion of the ethanol industry.

If a budding cellulosic ethanol industry is to reach full commercial-scale production, the overall ethanol market will need to continue to expand through the widespread availability of higher ethanol blends such as E15 and E85.

In October 2015, USDA announced a $100 million grant partnership with 21 states through the Biofuel Infrastructure Partnership (BIP) to nearly double the number of fueling pumps that offer a variety of biofuel blends to consumers. As a result, USDA received applications requesting more than $130 million -- exceeding the grant total by about $30 million.

Vilsack said the industry will need to continue to work to convince Congress and future administrations about the importance of the industry -- including the Biofuel Infrastructure Partnership.

"I think we have to show results from the program and the expansion of opportunities," he said about the infrastructure program. "If we begin to actually see results of this, we can build a coalition. This can help us convince Congress that it is worthy. The industry is beginning to branch out, and this effort has created political power to keep it going.

"We need results and I think we're going to get them. Right now I have to be a little cautious because I don't want Congress in appropriations to clamp down."

Vilsack said he admittedly took a chance on the BIP program and that it "exceeded my expectations" by drawing national interest -- even in oil-rich states like Texas.

AN E15 FUTURE

Michael Lorenz, executive vice president of petroleum supply at Sheetz, a national convenience store chain, said the Biofuels Infrastructure Partnership has made it possible for his company to become the nation's leading supplier of higher ethanol blends including E15.

If the ethanol industry can expand its available market beyond E10, this too would create a demand for more feedstocks including corn and cellulosic ethanol feedstocks such as corn stover, switchgrass and others.

Without BIP funds, Lorenz said his company wouldn't have been able to install E15 pumps at 34 of 60 stations in North Carolina. In addition to installing E15 pumps at the remaining 26 locations in North Carolina, Lorenz said his company plans to offer E15 at 100 more locations in four other states in the coming years.

"If it wasn't for that (grant program), I wouldn't be standing here today," he said.

At some point the ethanol industry will expand its market to higher blends, Lorenz said, meaning his company is positioning itself to offer higher blends ahead of the game.

What's more, he said the E15 market is promising considering some 75% of all vehicles can burn the fuel.

"There are the naysayers out there," Lorenz said. "Why don't we find out? We see it as potentially a competitive advantage. No matter what happens we would have positioned ourselves to go to higher blends. We're not afraid of taking risks.

"Ethanol is actually a great story. Without any marketing at all, we post a price (for E15) and people are finding it. We want our customers to find the same product in every store. Come April, we plan to put some marketing behind it."

ETHANOL SUSTAINABILITY

To coincide with the Vilsack speech, USDA's office of the chief economist released a report showing the corn-ethanol industry has become more efficient in every facet of production. In addition, the University of Missouri's Food and Agricultural Policy Research Institute, or FAPRI, released a similar report Tuesday.

In summary, the reports show the corn ethanol industry has become more sustainable despite claims by critics to the contrary.

"These research reports demonstrate, once again, that America's renewable energy industry has quickly expanded and evolved since President (Barack) Obama's administration embraced an 'all-of-the-above' energy strategy beginning in 2009," Vilsack said. "Since then, we have more than doubled renewable energy production, and today we import less than half our oil. Improved and expanded ethanol and biodiesel production have saved Americans money at the pump."

Between 1991 and 2010, direct energy use in corn production has dropped by 46% per bushel of corn produced and total energy use per bushel of corn by 35%, according to USDA.

Between 2005 and 2010, direct energy use fell by 25% and the total energy use by 8.2% per bushel. This means that between 2005 and 2010, the energy required per bushel of corn produced dropped by about 5%.

"The bottom line is, today, more energy is being produced from ethanol than is used to produce it, by factors of two to one nationally and by factors of four to one in the Midwest," Vilsack said.

"There are many reasons to be optimistic about the future of the bio-economy and the role biofuels and advanced biofuels will play in that future, and I am confident this administration has acted aggressively to expand the groundwork to support that brighter future."

Vilsack Swan Song

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