Additional Corn Ethanol Plant Capacity Can Now Replace The Cellulosic Mandate

The EPA clarified rules for corn based ethanol. These new rules validate corn based ethanol as a GHG reducer and may allow corn based ethanol to supplant the cellulosic requirement of 16 billion gallons.

This could be a boon to the seed companies and equipment makers including Monsanto, Syngenta, DuPont, John Deere and Case IH.

Analysis
Jonathan Fahey, a writer for Forbes, outlines some interesting facts about the EPA rulings relative to the Energy Policy and Security Act of 2007 that President Bush signed that encourages 15 billion gallons of corn based ethanol by 2015 and an additional 16 billion gallons of cellulosic based ethanol by 2022.

The new rulings state that older plants are "grandfathered" as long as they started construction prior to December, 2007. So this includes ADM's large coal fired plants, four smaller coal fired ethanol plants, and the other natural gas powered plants. The new ruling states that additional corn plants can be built as long as they achieve a 20% Greenhouse Gas (GHG) reduction. And they ruled that natural gas fired plant, increasing efficiency, lower carbon emissions for land use, and higher yields on corn all contribute to about a 22%GHG reduction when corn based ethanol is used.

But what is more important is that the cellulosic ethanol mandates are so far from being economically met, that the EPA lowered the 2010 requirement in the mandate from 100 million gallons to 6.5 million gallons. And, with the new rules issued, if the cellulosic mandate fails to meet its objectives (frankly, no seed company has invested a dollar in switchgrass genetics as compared to about $1 billion/ year in corn) corn ethanol, as long as it demonstrates the new GHG requirements could REPLACE the cellulosic requirement.

source: glgroup