The ethanol industry is essential — it deserves a boost from Congress

Very few sectors of our economy have been hit as hard by the COVID-19 pandemic as the fuel ethanol industry. 

Motor fuel consumption plummeted beginning in March, as workplaces, schools, churches and other public spaces shut down under stay-at-home orders. Freeways and thoroughfares that were gridlocked with traffic just a month earlier became deserted. And because nearly every gallon of gasoline contains at least 10 percent ethanol, demand for this homegrown renewable fuel completely collapsed. 

In just four weeks this spring, ethanol demand fell by 45 percent and prices tumbled to record lows. Ethanol storage tanks across the nation rapidly filled to the brim. More than half of the ethanol industry was forced to shut down, sending rippling impacts through the rural communities where ethanol plants operate. Some facilities announced permanent closures; others scrambled to switch to hand-sanitizer production in an attempt to keep their doors open. Meanwhile, workers in the industry faced pay cuts, furloughs and layoffs.  

The economic losses to the industry have been staggering. A new analysis by the Renewable Fuels Association (RFA), which I lead, found the pandemic has already resulted in $3.4 billion in lost revenue for the industry. Those losses could expand to more than $7 billion by the end of 2020 if fuel demand and prices remain as repressed as expected. An additional $1.8 billion in losses is expected in 2021, based on the latest fuel-demand projections from the Energy Information Administration. RFA’s estimate of nationwide losses to date is consistent with a study from Iowa State University, which found COVID-19 likely reduced revenues for Iowa’s ethanol industry alone by $2.5 billion.

These damages come on top of the economic harm ethanol producers were already experiencing prior to COVID-19 due to trade wars and the Environmental Protection Agency’s failure to enforce renewable fuel-blending requirements.

That’s why many members of Congress — from both sides of the aisle — are pushing for inclusion of emergency relief aid for ethanol producers in the next COVID-19 stimulus bill, currently working its way through the Senate. These lawmakers know that letting the ethanol industry, classified as “essential” and “critical” by the Department of Homeland Security, slip into insolvency would have devastating, long-lasting impacts for farm and rural economies.

Already, Congress has provided — and the U.S. Department of Agriculture (USDA) has distributed — billions in financial aid to other segments of the agriculture sector. Producers ranging from the pork and beef industries, to cotton and wheat (and even asparagus, cilantro and rhubarb) have received help. But, so far, ethanol producers have been left out. 

Meanwhile, the administration has taken unprecedented action to support the oil industry during the COVID-19 pandemic, with President Trump pledging to “never let the great U.S. oil and gas industry down.” He personally intervened to slow down a crude oil price war between Saudi Arabia and Russia that was cratering global energy markets. The White House directed the Department of Energy to use the Strategic Petroleum Reserve to take excess crude oil off the market and drive prices higher. The Federal Reserve launched an aggressive bond buyback program benefiting large oil and gas companies and electric utilities. The terms of the CARES Act’s “Main Street Lending Program” were altered specifically to allow larger fossil energy companies to participate. And EPA quickly granted “regulatory relief” to oil producers and refiners, allowing them to forgo certain regulatory requirements.

Yet, some pundits suggest it would be a “bad idea” for Congress to direct USDA to provide emergency relief funding to ethanol producers. Apparently, the chief complaint is that the most likely vehicle for distributing aid to ethanol producers — USDA’s Commodity Credit Corporation (CCC) — was “intended for farmers, not downstream industries like ethanol.” They argue that using the CCC to support ethanol producers would set a “bad precedent.”

Those arguments misrepresent the chartered purpose of the CCC and ignore many examples where the CCC has helped farmers by supporting downstream processing industries. As 15 senators recently reminded USDA Secretary Sonny Perdue, “Farm income and prices for corn and other crop commodities are directly linked to the health of the renewable fuel industry.”

USDA says the CCC was originally chartered “to stabilize, support and protect farm income and prices. CCC was also charged with maintaining balanced and adequate supplies of agricultural commodities and to aid in the orderly distribution of those commodities.” Aside from the fact that providing aid to the ethanol industry would help “stabilize, support and protect farm income” by ensuring that a large market for corn remains open, ethanol itself is classified as an “agricultural commodity” by USDA. Indeed, in the past, USDA specifically stated that prioritizing increased bioenergy production is in line with the CCC Charter Act.  

Moreover, CCC funds have been used to assist downstream processors or distributors of agricultural commodities and their derivative products. Under the CCC Bioenergy Program, for example, USDA paid ethanol and biodiesel producers directly based on their purchases of agricultural commodities. The program was popular and effective, and it helped many smaller, farmer-owned ethanol plants get off the ground. Other examples include the CCC Cotton Ginning Cost Share Program and the Biofuels Infrastructure Partnership initiative.

The ethanol industry isn’t asking for a “bailout.” It’s simply asking for Congress and USDA to lend a hand to help pull us up off the mat after COVID-19 dealt the industry a crushing blow. That helping hand has already been extended to many other agricultural sectors and producers, as well as the oil and gas industry. As the Senate completes work on its Phase 4 stimulus bill, it should ensure the ethanol industry is not again left behind.

Geoff Cooper is President and CEO of the Renewable Fuels Association, which represents America’s ethanol industry and drives expanded demand for American-made renewable fuels and bioproducts worldwide.