Ethanol production weathers economic and seasonal drought

News-DemocratApril 7, 2014 

Recent drought and an economic dry spell have not withered the local ethanol industry.

The 2012 drought and past recession posed challenges for the corn-based fuel industry, but that was followed by record yields across the country accompanied with lower prices.

Today in Madison, production remains strong at Abengoa Bioenergy. In 2010, the Chesterfield, Mo.-based company, a division of Abengoa SA in Spain, was the second ethanol producer to startup in the metro-east. Center Ethanol Co. is the other and has been operating in Sauget since April 2008.

Abengoa Bioenergy Executive Vice President Chris Standlee said the metro-east plant within America's Central Port employs 65 and has recorded increased margins since last year.

"The margins are much better after the drought we had in 2012," Standlee said. "That was a big challenge, of course. We are very happy to be beyond that after recording a record crop last year. Hopefully we will continue that into 2014."

Recent research reveals that the nation's ethanol industry has expanded. According to a study published in February by ABF Economics in Doylestown, Pa., U.S. ethanol production increased last year over the year before by an estimated 0.4 percent, or 13.3 billion gallons.

ABF Economics Managing Partner John Urbanchuk said, "All in all, when we're looking at the industry, it is poised for continued growth."

Urbanchuk also said the value of crude oil displaced by ethanol amounted to $48.2 billion in 2013 -- money that stays in the American economy. He said that only boosts the economy in Illinois, which is the nation's third-largest ethanol producer.

"I think the ethanol industry is actually doing very well," Urbanchuk said. "It's made significant and substantial contributions to not only the national economy, but also the local economy where ethanol is being produced, in states where ethanol production is concentrated."

Last month, the Global Renewable Fuels Alliance released its Global Annual Ethanol Production Forecast, which predicts continued growth in the ethanol industry. The Toronto-based nonprofit organization promotes biofuel friendly policies throughout the world. According to the forecast, a 2.7 percent increase in ethanol output is expected this year over 2013.

Spokesperson Bliss Baker says the ethanol industry employs more than 1 million worldwide and has expanded, but not as rapidly as it did a few years ago as the industry has picked up the pace when the drought from two summers ago slowed production.

"I would say it's modest growth," Baker said. "It's what we expected this year. We didn't expect rapid growth. The industry had a tough time last year with severe droughts so last year was a tough year, but we're still growing and we expect modest growth this year."

Other challenges remain. Last November, the U.S. Environmental Protection Agency issued a proposal to decrease ethanol production in 2014 from 14.4 billion gallons to 13 billion gallons -- about 10 percent less than initially scheduled. The proposal comes as refiners are looking to ease production regulations and proponents want to maintain them.

John Caupert, Director of the National Corn-to-Ethanol Research Center on the campus of Southern Illinois University Edwardsville, said a final ruling is not expected until this summer. But the proposal has already impacted the industry.

He said that within an hour of the EPA's proposal, gas prices in the Monroe County jumped by 10 cents a gallon and within the 24 hours about 15 percent of the money budgeted for research for the current fiscal year at the center was canceled.

"Not delayed, not postponed, not rescheduled. Canceled," Caupert said. "Within one day of this proposal by the EPA, this caused a ripple effect and political unrest."

He has been spending time in both the state capital and nation's capital supporting ethanol producers. He said most people do not realize that ethanol production is now in its ninth decade. The National Corn-to-Ethanol Research Center marked its first decade of research last October.

Caupert said the biofuels industry, particularly ethanol made from corn, has been a very resilient industry.

"It's an industry that has the ability to react to market signals and to political unrest," he said. "Our industry has the ability to react to that and what our industry needs more than anything is stability."

Contact reporter Will Buss at wbuss@bnd.com or 239-2526.

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