The Energy Report: New proposed Environmental Protection Agency (EPA) requirements for the renewable fuel standards (RFS) program could change the landscape for biofuels. What is the new supply-and-demand picture for corn ethanol, biodiesel and sugarcane ethanol?
Brett Wong: This is a proposal, and not a confirmed mandate, which we expect to get by the end of November. The two most important pieces in the standards cover corn ethanol and biodiesel usage requirements. The new proposal for minimum corn ethanol use would be 13.4 billion gallons (13.4 Bgal), which creates a floor. The blendwall, based on Energy Information Administration's (EIA) expectations for gasoline consumption this year, is about 14 Bgal based on 10% ethanol content in gas, which car manufacturers say is a safe level for the fleet. That is the domestic ceiling. This leaves discretionary blending from 13.4 up to 14 Bgal. Beyond that, the demand is from exports, which use up the overall capacity of about 14.7 Bgal. Some people talk about 15 Bgal, but I think that includes some facilities that will never come back on line.
We send a good amount of our ethanol to Canada, which has blending mandates as well. We send some to South America. Brazil has a large blend requirement of 27.5%, which was an increase from 25% last year. That country produces a lot of ethanol from sugarcane, but it has had some rough crop years and must import biofuel to fulfill mandates. There are also more exports going to Asia, where China is trying to clean up its air. Continue reading "How To Profit From Government Mandates In Biofuels"