U.S. Deputy Secretary of Agriculture Kathleen Merrigan had never visited an ethanol plant before. On October 20 she got the chance to tour the Lincolnway Energy ethanol plant at Nevada in central Iowa, and also Renewable Energy Group's cutting-edge biodiesel feedstock research lab just down the road at Ames.
Merrigan is the second highest ranking official in USDA, behind U.S. Secretary of Agriculture Tom Vilsack. She was an assistant professor of nutrition at Tufts University before her confirmation as deputy secretary this year.
"It's always nice to have people in high places in government better understand agriculture and what we are doing with biofuels," says Monte Shaw, executive director of the Iowa Renewable Fuels Association, who accompanied Merrigan on the tour. "This was a successful tour."
First-hand look at cutting-edge technology
At the Lincolnway Energy ethanol plant, Merrigan saw how the ethanol industry is gaining in efficiency in production of ethanol, is becoming even more environmentally friendly in that process and is adding still more value to corn. For example, she learned how the ethanol industry is extracting corn oil from distillers grains, and how the corn oil is one of several feedstocks being used for making biodiesel.
When Merrigan toured the REG headquarters and research lab a few miles away at Ames, she got a further explanation and a look at the cutting-edge commercialization research on biodiesel feedstocks that is taking place there.
Officials of REG, a company that manufactures and markets biodiesel, showed Merrigan some samples of corn oil, which can be used as a feedstock to make biodiesel, and samples of the finished biodiesel product made in the lab. The lab researches and tests various feedstocks for use in producing biodiesel, as the lab can replicate the full scale production process that takes place at commercial biodiesel plants.
Biodiesel is produced from various feedstocks
Merrigan observed the wide variety of feedstocks that can be used to produce biodiesel. Officials of both Lincolnway and REG appreciated the opportunity to explain this information and show her the facilities. "We wanted the deputy secretary to know that there is a lot of research and technology that we in the biofuels industry focus on, regarding feedstocks, so she can now better understand how versatile our sources are for biofuels—in particular biodiesel," says Jeff Stroburg, CEO of REG.
Merrigan also discussed with her hosts several issues related to biofuels. One is the pending decision that will hopefully be made soon by the U.S. Environmental Protection Agency, regarding the rules for RFS2, the new federal Renewable Fuels Standard, to put it into effect.
EPA has to make decision on E15 ethanol blend
The other major issue is the decision that EPA will make regarding whether or not to allow E15 gasoline-ethanol blends to be used in the United States in non-E85 vehicles. The E15 blend is 15% ethanol and 85% gasoline, and the ethanol industry and corn growers are trying to get the government to allow E15 to be used in conventional car engines. Currently, only E10, the 10% ethanol blend, is legal to use in non—E85 vehicles.
Merrigan pointed out that whether or not to allow this 15% blend rate is an EPA decision, not a USDA decision. However, she also noted that USDA Secretary Tom Vilsack is pushing EPA to raise the limit to 15%.
Vilsack, the former governor of Iowa who has always been a strong supporter of biofuels, says the science indicates that a 15% blend is safe for automobile engines. He also say increasing the production of ethanol, made from corn in the U.S. would help meet the U.S.'s national goal of energy independence and help keep rural America profitable.
What are chances of E15 blend being approved?
Shaw of the IRFA thinks the chances are good that EPA will eventually approve the E15 blend rate. He just doesn't think it's going to happen by December 1, which has been the date often mentioned by some government officials.
"We are doing everything we can to get EPA to approve E15 use in conventional engines," says Shaw. "We've submitted comments, we've traveled to Washington D.C., we've lobbied the EPA, DOE, USDA, White House, Congress—you name it. And we're going to keep that effort up."
But the signals EPA is sending out, including recent comments by top officials of the agency, is that EPA officials don't feel they have the data necessary to approve E15 on December 1, 2009. "This doesn't mean we're giving up in our effort trying to convince the EPA that the agency should allow the 15% ethanol blend to be used," says Shaw. "And it doesn't mean EPA is saying 'no' to this idea. But what I think it all means is that we may have to fight this battle a little while longer, to make sure EPA gets the data and information they think they need."
Critical biodiesel policy issues also discussed
Regarding biodiesel, Stroburg of REG says his group also talked to Merrigan about two key issues and USDA's Merrigan expressed support for REG's concerns. Again, EPA will make the final decisions, not USDA, she emphasized.
"The first key point we made regarding biodiesel is that EPA needs to get the rules out for the new Renewable Fuels Standard, or RFS2, by the end of this year," says Stroburg. "The second issue is that we want soybean oil to be included in the RFS2 final rules as a feedstock for biodiesel production that will result in reduced carbon emissions. We believe that the science is there to show that soybean oil qualifies to be included."
Multi-feedstock biodiesel plants do better financially
Biodiesel made from soyoil is currently having a hard time competing with petroleum fuel in the marketplace. That's why some biodiesel manufacturing plants have taken the multi-feedstock approach. They use lower priced animal fats, corn oil and recycled restaurant grease as feedstocks in addition to soybean oil. Plants that use only soyoil struggle to make a profit.
Biodiesel production for plants that use only soyoil has been unprofitable and a number of plants have been shut down this past year or are currently running at reduced production capacity. "However, the profitability of biodiesel will improve if we can get EPA to implement the RFS2," says Stroburg. "That was the intent of the Renewable Fuel Standard legislation when it was passed by Congress and signed into law."
For biodiesel to become profitable, RFS2 is needed
The main thing RFS2 will do, when EPA eventually issues the final rules to implement it, is require oil companies and other fuel blenders to use an increasing amount of renewable fuel each year. They will have to distribute that increasing amount as a percentage of the total number of gallons of gasoline and petroleum diesel fuel they sell in the U.S. annually.
For biodiesel for example, the RFS2 calls for 500 million gallons of biodiesel to be distributed in 2009 and 650 million gallons in 2010. Obviously, 2009 is almost over and that target won't be met for this year. But the point is the RFS2 would require these amounts of usage of biodiesel in the United States. That number each year would translate into a percentage, and companies like Exxon, BP and other distributors would have to buy and distribute the required amount of biodiesel per year.
"This is a significant number," notes Stroburg. Biodiesel industry estimates put U.S. biodiesel consumption at about 300 million gallons in 2008. The RFS2, if implemented as the legislation calls for, would boost the amount of biodiesel required to be used in the U.S. by an increasing amount annually - and move biodiesel farther into the nation's fuel supply and fuel market.