The Midwest-based ethanol producer, which operates a biorefinery in Leipsic, is idling an Indiana bioprocessing facility and cutting production at half of its refineries, with the largest reductions expected in Ohio and Iowa.
Industry leaders are blaming the Trump administration — the Environmental Protection Agency in particular — for falling demand, citing EPA-issued waivers exempting oil companies from Renewable Fuel Standard requirements to blend ethanol into their fuels.
POET executives claim those waivers have cut demand for ethanol in the U.S. by 4 billion gallons, causing “severe damage” to rural economies by reducing demand for corn by 1.4 billion bushels and creating an “artificial cap” on demand for ethanol in the U.S. by “weakening the incentive for retailers to offer higher (ethanol) blends.”
The company, in turn, plans to reduce production by 130 million bushels across its refineries.
But Benjamin Brown, an assistant professor of agriculture markets in The Ohio State University’s Agricultural, Environmental and Developmental Economics Department, said the ethanol industry’s problems can also be traced to flat-lining gasoline consumption in the U.S. and disappointing international exports.
“It’s a problem that’s been building for a little while,” Brown explained.
“We’ve seen places like POET either build new plants or add on to existing plants. Without an increase in (domestic) gasoline consumption to meet that increase in supply,” Brown said the ethanol industry would need to boost international exports.
That hasn’t been happening, Brown noted.
But the legality of the way the EPA has issued waivers – intended for small refineries experiencing economic hardship as a result of Renewable Fuel Standard’s requirements – is being challenged.
The waivers have also complicated efforts to increase the market share for E15, or gasoline containing 15% ethanol, despite the Trump administration’s recent decision to lift a ban on E15 sales in the summer.
In a letter to the Trump administration Monday, ethanol industry executives claim the EPA has abused the exemption process by issuing waivers intended for small refineries to “some of the world’s largest oil companies,” undercutting the administration’s efforts to increase E15 sales.
“(The waivers) crashed the investment in future infrastructure for higher blends of ethanol,” Brown said. “It’s not price competitive anymore.”
Corn growers will feel the pressure too as the ethanol industry downsizes.
Ohio Ethanol Producers President Rick Fox estimated that even a 10% cut in the amount of corn purchased by biofuel producers could cost Ohio farmers $83 million.
“That’s the real impact, the impact on the farmers and losing that out of our state economy,” Fox said.
Reach Mackenzi Klemann at 567-242-0456.