With ethanol industry profits plunging and investments in second generation biofuels slowing, the renewable fuels industry faces a challenging year ahead. Will renewable fuels be included in the next stimulus? Can the industry meet the early mandates set by the Renewable Fuels Standard? During today's OnPoint, Bob Dinneen, president and CEO of the Renewable Fuels Association discusses the current state of the ethanol industry and gives his expectations for the year ahead.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. With us today is Bob Dinneen, president of the Renewable Fuels Association. Bob, great to have you back on the show.
Bob Dinneen: Great to be here!
Monica Trauzzi: Bob, the ethanol industry had a rough year in 2008. Several companies filed for bankruptcy. There were volatile commodities prices, the credit crunch weighing in to all of that. What's the current state of the ethanol industry?
Bob Dinneen: Well, it remains a difficult time in the industry. The ethanol industry is not immune to the economic situation that's affecting our entire economy. So yeah, last year was a rough year. Nobody anticipated oil going to 140, much less then plummeting to $40. That kind of volatility in the energy market affects everybody. Nobody certainly anticipated the cash crunch and the access to capital issues. And that absolutely impacts our industry, like everybody else. So, our hope is that 2009 is going to bring a stronger economy and that access to capital issues will begin to clear up and our industry can continue to move forward and evolve and innovate and continue to provide this country with the high-quality, high-performance, high-octane motor fuel.
Monica Trauzzi: What do you see for the first six months of 2009? Are we going to still see companies filing for bankruptcy? I mean the state of the economy is still pretty fragile at this point.
Bob Dinneen: Well, yeah, I think there's going to continue to be some volatility. I think that you will probably see some additional consolidation in the industry and, ultimately, Monica, I think that's probably a good thing. I think if our industry can become more efficient and some consolidation occurs, probably something that needs to happen. So it's going to be a rough time for a while, but we will get through it, I'm confident of that, and I believe that the long-term outlook for our industry is brighter today than ever before because more people recognize that we need to have more domestic energy resources, more people recognize that the only way to really address climate change is to reduce our reliance on petroleum. And certainly more people have recognized the significant economic contribution that ethanol can provide to rural economies across this country. So the movement toward more renewable fuels, more ethanol, the movement toward more innovation in our industry with new feedstocks and new technologies is going to continue.
Monica Trauzzi: RFA has reached out to the Obama transition team and part of your outreach relates to the upcoming stimulus package. Are you essentially asking the government for a bailout by asking to be included in the stimulus?
Bob Dinneen: Not at all. We're not looking for a bailout. Look, they're looking for green jobs. You're looking for ways to stimulate economic activity. Well, Monica, ethanol is the original green job. We had 238,000 green jobs last year and we can certainly continue to provide more. If you want to stimulate employment opportunities across this country, if you want to stimulate economic activity and growth then doing so in ways that allow for renewable energy technologies, like ethanol, to move forward makes a great deal of sense to us. And so, yes, we have said to the Obama transition team, we've said to the Congress, if you're looking for economic stimulus then try to look for ways to stimulate additional growth in the demand for ethanol and allow this industry to continue to grow and innovate.
Monica Trauzzi: Can you give me some specifics on how much money you're asking for from the stimulus?
Bob Dinneen: We're not asking, we are suggesting that there may be things you can do. So let's get some effective loan guarantee programs out there for cellulosic ethanol. Let's take a look at the demand side of the equation and make sure that we are maximizing, not minimizing the amount of ethanol that can be blended into gasoline. So there are some things that can be done and we hope that the new Congress and the new administration are going to be looking for ways to continue the tremendous progress that has been made over the past several years in getting us to where we are.
Monica Trauzzi: Beyond the stimulus, what pieces of legislation will you be lobbying for in 2009? What are some of the major headlines we're going to be seeing coming out of your industry?
Bob Dinneen: Well, look, we've not yet closed the door on the energy bill that was passed in 2007 and so job number one is going to be making sure that EPA is implementing that bill as effectively and as appropriately as possible. And a lot of our work is going to be focused on that regulatory process. This Congress is going to be looking however at perhaps new energy bills as well as climate change legislation. And we're going to be working with the Congress to make sure that as those public policies are moving forward they are also moving it forward in a way that recognizes the role that ethanol can play in addressing our nation's energy and climate change challenges.
Monica Trauzzi: Do you think Obama will move to remove the ethanol import tariff?
Bob Dinneen: I don't see any reason why he should. The only reason that tariff exists is to protect the taxpayer and I think the Obama administration will recognize that there's no reason to subsidize imported ethanol that's already being subsidized by the host country. It only offsets the tax incentive that is available to refiners when they purchase ethanol, whether that ethanol is foreign or domestic, so, no, I don't see that as a real big item high on anybody's agenda today.
Monica Trauzzi: Production and development has slowed as a result of the financial crisis. How do you think that's going to impact your industry's ability to meet the Renewable Fuel Standard in the short term and in the long term?
Bob Dinneen: There is no question that our industry is going to be able to meet the demand created by the RFS in 2009, in 2010, and going forward. There will be challenges on the cellulosic side of the equation. Those targets were very aggressive. It was intended to stimulate investment, which it has done. It was intended to stimulate innovation, which it is doing. And our industry is hard at work in trying to commercialize cellulosic ethanol technologies, whether or not we were to meet those early targets is still somewhat of a question, but we will get there. And there is no question in my mind that we will be able to produce cellulosic ethanol to meet the targets of the later years. And certainly we believe that EIA's projections that we won't be able to meet 21 billion gallons of cellulosic ethanol in 2022 was just flat out wrong. We believe that the industry will be able to meet those targets without difficulty.
Monica Trauzzi: Specifically on cellulosic ethanol, how has the financial crisis impacted research and development and the construction of cellulosic plants? I mean what are we seeing on the ground?
Bob Dinneen: Well, like everybody else, it's hard to get money these days. Going to the financial communities seeking financing for any industry is difficult, but for a new technology that's unproven it's that much more difficult. And that's why the government's role in stimulating that investment is so important. And that's one of the reasons why we have indicated to the Congress and to the Obama administration that if you're looking to stimulate the economy provide some loan guarantees so that you can free up money, so that these new technologies and new feedstocks are able to move forward on the path that we want them to do so.
Monica Trauzzi: The cost of cellulosic has always been an issue and a big question. Does it become an even bigger issue now considering the state of our economy? I mean are you putting more expensive fuel on the market? Is it doomed from the beginning?
Bob Dinneen: I don't think it's doomed at all. Look, there are challenges out there and, again, we are producing ethanol from cellulosic materials in demonstration plants, several demonstration plants across the country, and there are commercial plants that are being built today. But it is a more challenging environment today than it was a year ago. And if we want to succeed, if we want to move this nation's energy and environmental agenda forward we better make sure that these technologies do succeed or we are sentencing ourselves to more dependence on petroleum, more tar sands from Canada, more drilling that will have to occur and we think that's the wrong approach. We think if you make an investment and you maintain your commitment to this industry we will continue to evolve and we will meet the challenges that are out there.
Monica Trauzzi: Former Iowa Governor Tom Vilsack has been nominated as the new Secretary of Agriculture. He's no stranger to the ethanol industry. And Steven Chu has been selected to head up DOE. He's been a strong proponent for advanced biofuels. What do you think they both bring to the table? What are you expecting from the two of them?
Bob Dinneen: I think they share President-elect Obama's vision for producing domestic renewable fuels, for allowing the industry to evolve to these new feedstocks using these new technologies, not to walk away from an industry that has built the foundation that is there today, but recognizing that if we are going to maximize our nation's production and use of renewable fuels we have to move to these new technologies. So, we think both Governor Vilsack and Dr. Chu are great additions to a cabinet that we believe is going to share President-elect Obama's vision for growth and innovation in our industry.
Monica Trauzzi: All right, we're going to end it right there. Thanks for coming on the show, nice to see you again.
Bob Dinneen: As always Monica, thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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