RFA president says the organization is fighting back against RFS opponents

LAS VEGAS -- Renewable Fuels Association President and CEO Bob Dinneen declared on Feb. 6 that the American ethanol industry's "greatest challenge" is the oil industry's campaign to end the Renewable Fuel Standard, but he and other speakers at the National Ethanol Conference also acknowledged that the industry faces a range of other problems.

"The state of the ethanol industry can be summed up in five words: under siege and fighting back," Dinneen said in a speech to the 1,100 conference attendees.

"Mother Nature wreaked havoc on our feedstock," Dinneen said. "Falling gasoline demand, rising imports and a host of regulatory and commercial barriers to E15 -- all wreaked havoc on our market. And the angry birds at the Chicken Council, the mad cows at the American Meat Institute and the big spending oil companies have blended a witches' brew of half-truths, untruths and downright distortions to wreak havoc with the public understanding and political support for the continued growth and evolution of our vital industry."

In spite of "the worst drought in 50 years, falling gasoline demand, rising imports," and "a host of regulatory and commercial barriers to E15," Dinneen noted that the U.S. industry "produced 13.3 billion gallons of high-quality, high-octane biofuels, representing 9.7 percent of the nation's motor fuel and marketed in every state, from coast to coast and border to border."

But he acknowledged that because of the drought and the downturn, 36 of the 211 ethanol plants across the country have temporarily shut their doors and that many more have greatly cut back production, leaving the industry operating at approximately 85 percent of capacity.

For the first time in 17 years, he said, production declined from the previous year, falling by more than 600 million gallons from 2010.

But he added, "Our greatest challenge isn't our industry's production -- it's artificially constrained demand fueled by Big Oil's propaganda."

"The American Petroleum Institute has declared war on the RFS," he said. "The [American Automobile Association] is campaigning against E15. The public has been so inundated with misinformation that they now see a Pavlovian connection between ethanol and food prices. Even our most ardent congressional champions are growing weary of the fight."

Dinneen said that the industry is fighting on three fronts:

•Defending the Renewable Fuel Standard

•Promoting motor fuels consisting of 15 percent blends of ethanol with gasoline (E15)

•Opening new markets for American ethanol overseas, while opposing protectionist policies in Brazil and the European Union.

During a panel discussion, however, several Washington insiders said they doubt that the American Petroleum Institute will succeed in its attempt to repeal the RFS and that any changes to it will be difficult to achieve in Congress.

Louis Finkel, the executive vice president for government affairs at the Grocery Manufacturers Association, said he has devoted much more effort to fighting biotech labeling and other issues than to his members' concern about the RFS.

John Reese, the downstream policy and advocacy manager for Shell Oil, noted that his company supports the RFS and produces ethanol even though it is also a member of API. But he said a major challenge for E15 is that most gas stations are independently owned and that the owners resist spending $40,000 to $200,000 to put in the tanks to sell it.

Mark McMinimy, a director of Guggenheim Securities LLC in Washington, said that uncertainty surrounding the RFS and tax policy for renewable fuels makes investors nervous about biofuels.

The EPA's decision last year not to grant a waiver for the ethanol mandate has made investors realize that "the statutory bar for a waiver is high so concern about waviers is diminishing."

But he also said that if "gasoline use is stagnant or declining, if E15 is struggling and cellulosic is a next-year product, then investors wonder if the RFS schedule is realistic."

Rick Tolman, CEO of the National Corn Growers Association, said that the RFS is like his aging left knee, which his doctor has suggested he replace

"It has served me well. It has some problems," he said. "But, it's mine. I don't want to give it up, but I might change my mind in the future."

Linda DiVall, a pollster who has done work for RFA, released data from a poll of 1,000 adults taken in January that showed that when people are informed about the positive aspects of ethanol, they have a positive image of it, but that most Americans have only a vague image of the industry and the fuel.

Ethanol has improved its image in the past year, but so have the oil companies, DiVall said. Arguments such as ethanol is cleaner, oil companies are subsidized and ethanol has a positive economic impact are influential, she said, but people also listen to arguments that ethanol is not fuel efficient, that it raises the cost of meat and dairy products and that E15 reduces car performance

About 31 percent of respondents were "core favorable" for ethanol, 17 percent were "core unfavorable" and 52 percent are "available consumers" whose opinions are open to influence, she said.

Asked whether the Obama administration's recent EPA announcements and Democratic control of the Senate put the ethanol industry in a fairly good political position, Dinneen told Agweek, "They pay me to be worried. I'm never going to ignore API."

Dinneen said ethanol has political support, but so does API. "We are going to have a fight and I am committed to winning it."