By JORDAN STRICKLER

Kentucky Correspondent

COLUMBIA, Mo. — The U.S. ethanol industry could lose 4.6 billion gallons of domestic demand and nearly $20 billion in sales revenue over the next six years if refinery waivers continue at the current rate, says a new report by the University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI).

The study was published as an update to its March 2018 U.S. Baseline Outlook for Agricultural & Biofuel Markets and adopts a new assumption that future implementation of the Renewable Fuel Standard (RFS) "follows recent practices, including small refinery waivers.”

“The FAPRI analysis clearly shows that demand destruction from small refiner exemptions is real and has substantial economic consequences," said Renewable Fuels Assoc. (RFA) Chief Economist Scott Richman.

Among points that the study specifically finds is that U.S. ethanol consumption could drop by an average of 761 million gallons per year between 2018-23, or a total of 4.6 billion gallons over the six-year period. That is equivalent to 1.64 billion bushels of corn demand, or nearly 300 million bushels per year.

It also shows that wholesale ethanol prices could plunge by an average of 19 cents per gallon, or 11 percent, between 2018-23. Ethanol prices would be hit especially hard in the longer term, with the updated outlook lowering 2023 ethanol prices by 27 cents per gallon, or 15 percent, compared to the March 2018 outlook.

The combination of reduced U.S. ethanol production and lower ethanol prices would reduce the industry's gross ethanol sales revenues by an average of $3.3 billion per year, or $19.7 billion over the 2018-23 period – 12 percent below the March 2018 projection.

According to the EPA, the agency granted a total of 49 refinery waivers for 2016 and 2017 renewable volume obligations under then-administrator Scott Pruitt. An indication that the new acting administrator, Andrew Wheeler, would continue the waivers caused a pair of Congressmen to pen a bill requiring the EPA to reallocate the gallons.

Reps. David Young (R-Iowa) and Collin Peterson (D-Minn.) introduced the Restoring Our Commitment to Renewable Fuels Act, which says "the administrator of the EPA shall reallocate (in a manner determined appropriate by the administrator) each gallon of renewable fuel covered by such exemption to refineries, blenders, distributors and importers subject to a renewable fuel obligation for that calendar year."

“What we’ve seen with refinery wavers is demand destruction,” said Chris Bliley, vice president of Regulatory Affairs for Growth Energy. “In EPA’s own words, they have waived over 2 billion gallons of RINs (Renewable ID Number credits) in 2016.”

On Sept. 12, a coalition of ethanol groups appealed to President Trump in regards to the RFS allocations as well as approval of year-round sales of E15. The letter – sent by Growth Energy, the National Corn Growers Assoc., National Farmers Union, RFA, American Farm Bureau Federation, National Sorghum Producers and American Coalition for Ethanol – read: "Thousands of manufacturing and farming jobs in America's heartland are now at risk due to the EPA's recent mismanagement of the RFS and inexplicable delay in removing the de facto summertime ban on E15.

“With ethanol prices hitting a 13-year low and net-farm income plummeting to half of the record $123 billion achieved in 2013, such an announcement could not come at a more critical juncture for rural America … The situation is even more dire in the grain markets, where prices received by farmers are sagging below the cost of production.

“With a near-record corn crop expected this fall and tariffs putting a damper on trade opportunities, farmers desperately need expanded access to markets and new sources of demand,” it stated.

“The President has already said he supports E15 and finds regulations against it unnecessary,” said Bliley. “If we were to move to a national E15, you’re talking an additional 7 billion gallons. It is critical that we keep the market open for both ethanol and ag demand.

“If we were to move to a national E15 standard, you’re talking an additional 7 billion gallons. That would be more than 2 billion bushels of corn.”

In the September edition of its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) increased its forecast for 2018 ethanol production but lowered its estimate for 2019 production.

The EIA predicts production of ethanol will average 1.05 million barrels per day this year, falling to 1.03 million in 2019. Last year, production averaged 1.04 million per day. In its August STEO, the EIA predicted ethanol production would average 1.04 million per day in both 2018 and 2019.

"If EPA continues to retroactively grant these exemptions, it will cause further harm to the ethanol industry through lower prices, reduced production and additional demand erosion,” said Richman.

“The solution to this problem is straightforward. EPA should project exempted volumes when it sets the annual RVOs (renewable volume obligations), which effectively reallocates them to other obligated parties and keeps the RFS whole."