Ethanol producers attempt to heal rift, unify goals

Washington, D.C. - Ethanol producers face a fight to save their government subsidies, but first industry leaders had to stop squabbling among themselves.

Representatives of groups representing the ethanol industry and corn growers have been meeting weekly, including several times at Chicago's O'Hare International Airport, or talking by phone to resolve differences and strategize how to save the biofuel's federal subsidy.

The industry "is kind of a dysfunctional family at the moment," said David Nelson, a Belmond farmer and longtime board member of the National Corn Growers Association and the Renewable Fuels Association.

The industry split in the summer when a new rival of Renewable Fuels, Growth Energy, proposed to phase out the 45-cent-per-gallon tax credit and use the money to build ethanol pipelines and retrofit service stations to sell higher ethanol blends. Growth Energy also proposed requiring that all cars and trucks be equipped to run on ethanol and gasoline.

The group argued that the subsidy wouldn't be needed any longer if fueling infrastructure were in place to increase the ethanol market.

Other groups, including the larger Renewable Fuels Association, opposed the plan, saying that the subsidy is still needed and that there wasn't time for Congress to deal with the Growth Energy proposal. The subsidy, which goes to oil companies that blend the fuel, will expire at the end of the year unless it is extended by Congress.

"We're all working together," said Tom Buis, CEO of Growth Energy, which was formed in 2008 by industry leaders who wanted to take a more aggressive public stance against critics who blamed ethanol for spikes in the price of food.

Growth Energy is now calling for an extension of the subsidy. But some of the subsidy's critics have used the original proposal as ammunition. The U.S. industry is "sending signals that they don't need" the subsidy, said Joel Velasco, who represents the Brazilian industry in Washington.

What Growth Energy's proposal "did is confuse the message," said Darrin Ihnen, a South Dakota farmer who is outgoing president of the National Corn Growers Association and has been involved in the industry strategy meetings.

Ihnen has a tie to Growth Energy: He is on the board of an ethanol plant controlled by Poet LLC, the company that led the founding of Growth Energy.

"What (Growth Energy) said is that we don't need the tax credit anymore, if we get market access," Ihnen said, referring to the need for ethanol pumps. "The media really didn't pick up on that part of the message."

He said industry groups have similar goals.

"It was just a timing issue and how do we go about getting the same thing," Ihnen said.

The industry groups still aren't together on what they want Congress to do, other than a temporary extension of the subsidy. Renewable Fuels has yet to endorse the idea of shifting the subsidy to infrastructure development. Also, Renewable Fuels also is raising questions about how much good will come from another initiative of Growth Energy - asking the Environmental Protection Agency to increase the limit on how much ethanol can be added to conventional gasoline.

Renewable Fuels supports increasing the limit from 10 to 15 percent, a blend known as E15, but the group said the approach that the Environmental Protection Agency is taking may have little effect on ethanol sales. The agency is likely to restrict the sale of E15 initially to cars and trucks that are 2007 and newer. Later, although the agency hasn't said when, E15 could be cleared for sale to 2001 and newer vehicles.

Renewable Fuels fears stations will be reluctant to sell E15 with those restrictions. "We don't think that does much for the marketplace," said Matt Hartwig, an association spokesman.

His group asked the environmental agency to allow an increase to 12 percent as an interim step, but the agency hasn't gone along.

Officials with Growth Energy, which petitioned the agency in early 2009 to raise the ethanol limit, view the coming agency action more optimistically. The initial E15 approval, even if limited to the newest vehicles, will allow states to start making changes that need to be made in fuel regulations, the company said.

Growth Energy, the flashier of the ethanol groups, has former Gen. Wesley Clark as its co-chairman and leading spokesman. Its 13-member board includes three from Poet, including the privately held company's president, Jeff Broin.

Poet claims to be the nation's largest producer of ethanol through its network of plants. Buis was brought in from the National Farmers Union, a group with long ties to Democrats, who controlled Congress and the executive branch after the 2008 election.

Renewable Fuels Association's 44-member board includes representatives of all its member companies, which include agribusiness companies Archer Daniels Midland and Louis Dreyfus, Spanish ethanol producer Abengoa, and small firms such as Little Sioux Corn Processors in Marcus.

Growth Energy hasn't dropped its proposal for funding new pumps and pipelines and requiring that new cars that can run on ethanol.

"We won't be able to compete with the oil industry. We can't do that absent the infrastructure and flex-fuel vehicles," Broin said.

"Some in our organization came up with a great idea," he said. "Perhaps other organizations will come up with the great ideas to drive us forward in the future."

source: desmoinesregister