State of the Ethanol Industry 2012

February 23, 2012 |

RFA CEO Bob Dinneen comes out swinging at the RFA’s annual shindig.

In Florida, the 17th annual National Ethanol Conference will get underway today as 1200 delegates gather in Orlando. First up on the dais, Renewable Fuels Association CEO Bob Dinneen, who will give his annual “State of the Industry” address this morning.

Dinneen is expected to come out fighting, with a rousing speech in which he is expected to say: “This is not your granddaddy’s ethanol industry. Technology innovations you adopted have reduced energy inputs, increased efficiency and diversified output. In just the past few years, you have embraced oil extraction, you’re rapidly deploying combined heat and power and you’ve begun the process of morphing your ethanol plants into sophisticated bio-refineries capable of producing a wide range of fuel, food, feed, and chemical products.”

RFS and tax policy

Dinneen is expected to focus strongly on protecting the Renewable Fuel Standard and tax incentives. “With the successful implementation of the RFS providing the bedrock of demand, the tax incentive became less meaningful. When viewed in the context of the mountain of debt facing the nation, the U.S. ethanol industry demonstrated uncommon vision and leadership by standing down and letting it expire. I commend you for it. I only wish other energy industries would match your principled conviction. If it no longer makes sense for the taxpayer to support the use of renewable fuels, it certainly no longer makes sense for the taxpayer to subsidize drilling, fracking and offshore foreign energy investments, which are today permanent provisions of law.

“The government’s role should be limited to encouraging investment in new energy sources, innovative technologies and more sustainable fuels. The cellulosic ethanol tax incentive fits that criterion. The section 199 credits, foreign tax credits, and intangible drilling expensing (which has been around since 1916) do not! Congress needs to level and reform our energy tax structure NOW!”

The ethanol industry’s growth record

Dinneen is also expected to focus strongly on the industry’s track record of growth since 2000:

“In 2000, 55% of our gasoline supply came from imported oil and 1% came from ethanol. Today, ethanol makes up 10% of our gasoline supply, and oil imports have dropped to 45%. That’s right, in 2010, booming ethanol production helped send U.S. oil import dependence below 50% for the first time since 1997. Oil import dependence dropped to 45% in 2011.

“The Wall Street Journal and others contend it is increased domestic oil production and fracking that is responsible for this remarkable reduction in petroleum imports. Wrong! It is ethanol. And it is the Renewable Fuels Standard that provided the policy foundation for that success.

“On a cumulative basis, ethanol has accounted for 81% of new domestic fuel production since 2005. Since the start of the RFS, on a net basis, America’s ethanol industry has added 838 million barrels of new fuel to our energy supply, compared to 197 million barrels of new oil production. I’m sorry the Wall Street Journal missed that! The pundits seem to forget that the boom in domestic oil production is only a recent phenomenon. U.S. oil production actually fell in 2006, 2007, and 2008—even though our oil import reliance was declining during that time. Without question, the trend toward less oil import dependence that began in 2005 began because of rapid growth in ethanol production.

“Without ethanol, without the RFS, our 2011 oil import dependence would have been 52%. Better than the 60% it was in 2005, yes. But not the 45% it is today. That’s the fact. So if measured by our success in meeting the challenge of oil import dependency, I would say the state of the ethanol industry is shale rock solid!”

A complete copy of State of the Industry 2012, as prepared for delivery, can be downloaded here.

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