Iowa Ethanol Production Ticked Up In 2011

Iowa Ethanol Production Ticked Up In 2011

More ethanol was produced in 2011 than the year before but the growth in production slowed as the market for E10 (10% ethanol blend) as become saturated.

The Iowa Renewable Fuels Association (IRFA) December 31 announced that Iowa's ethanol production ticked up in 2011, but the rate of annual growth slowed as the domestic E10 market became saturated. The 41 Iowa ethanol plants in the state produced 3.7 billion gallons in 2011, up from 3.5 billion gallons in 2010.  This represents 27% of the estimated 13.8 billion gallons of nationwide ethanol production in 2011.

"2011 was certainly a good year for Iowa ethanol producers with increased production and profitability," says IRFA executive director Monte Shaw.  "However, we relied on export markets for growth. We also have the expiration of ethanol's federal tax credit to contend with now. Those factors place a premium on pushing the rapid commercialization of E15. Congress let the tax credit expire at the end of 2011."

Higher blends of ethanol like E15 "are the only way to guarantee increased ethanol production in the future and the jobs and foreign oil displacement that comes with it," says Shaw. "We are still waiting for final federal approvals to allow E15 ethanol to be sold nationwide, but Iowa will be a leader in E15 production when the 15% blend is eventually allowed to be sold."

Iowa ethanol production growth in future depends on allowing E15 to be sold

Iowa is the leader in renewable fuels production. Iowa has 41 ethanol refineries capable of producing 3.7 billion gallons annually. In addition, Iowa has 13 biodiesel facilities with the capacity to produce 320 million gallons annually. The Iowa Renewable Fuels Association was formed in 2002 to represent the state's liquid renewable fuels industry. The trade group fosters the development and growth of the renewable fuels industry in Iowa through education, promotion, legislation and infrastructure development. For more information, visit the Iowa Renewable Fuels Association website at:  www.IowaRFA.org

Looking at life without an ethanol subsidy--ethanol tax credit is allowed to lapse

Failure by Congress to renew the Volumetric Ethanol Tax Credit at the end of 2011 has created a new world for the ethanol industry. The quiet expiration of the 45 cent per gallon tax credit, under the hubbub of job creation bills and debt ceiling limit raising, didn't go unnoticed by the industry.

The end of VEETC also brings along an end to the 54 cent per gallon tariff on imported ethanol. However, that may not be an issue given that Brazil is buying plenty of U.S. ethanol to burn in Brazilian cars and trucks. The cars in Brazil are predominantly flex-fuel vehicles and they burn a lot of ethanol. Over the past year, Brazil has become a big importer of U.S. produced ethanol. That's because Brazil has had problems producing it's sugarcane crop, which is the main feedstock for Brazilian ethanol production. So Brazil began buying ethanol, a significant amount of it, from the United States.

What many consumers don't realize is that the 45 cent per gallon tax credit that expired at the end of 2011 didn't go to ethanol plants. It went directly to oil companies as they splash-blended ethanol into the trucks that hauled the ethanol-gasoline blend to local gas stations. As the tax credit expired at the end of 2011, fuel providers raised their prices to cover, and consumers were surprised. It doesn't mean less ethanol will be used, since the biofuel is a mandated oxygenate in many states—at the 10% ethanol blend level with gasoline or E10 blend.

Corn growers gave up ethanol tax credit, but oil companies didn't give up petroleum subsidies

Corn growers supported the end of the federal tax credit for ethanol blenders as a way to help reduce the federal deficit, but as one corn group notes, the oil companies "didn't follow suit and offer up their century-old petroleum subsidies as a budget-saving measure" for the federal government.

The math on oil company economics of ethanol use are pretty clear. For the last four years ethanol has been less expensive than gasoline so when oil companies use ethanol they're already making a gallon of gas cheaper to produce. The VEETC was worth about 4.4 cents per gallon at the 10% blend. That's the price advantage that was lost starting January 1, 2012. It's not the ethanol that might make gas prices go up, it's the loss of VEETC.

So, it's the end of the ride for the 30-year old VEETC, and the ramifications are not completely known. Industry groups report that ethanol plants will continue to produce, but how consumers react to a 5 cent gas price rise as of January 1 remains to be seen.

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