WICHITA, Kan. (AP) — Ethanol producers say they are running up against market and regulatory pressures that are putting a crimp on the industry's future, despite lower prices for a key commodity to produce the fuel.
The ethanol industry is distilling enough product to satisfy the government mandate for blended fuels, usually about 10 percent ethanol. But without increased demand or mandate for more ethanol content in fuels, the industry has hit a so-called "blend wall" that is forcing small, higher-cost plants to close.
One such facility was the Abengoa plant in Colwich that closed in 2011 after 25 years in operations.
Dave Vander Griend, president of ICM, a Colwich-based designer and operator of ethanol plants in south-central Kansas, told the Wichita Eagle (http://bit.ly/1cK9Mvy) that the ethanol industry won't cease to exist but is stagnating and could lead to the eventual takeover by the large oil companies.
"Ethanol at E10 (10 percent of a gallon of fuel) will not go away," he said. "The government established it, and the petroleum industry likes it."
Congress created the Renewable Fuel Standard in 2005 requiring refiners and blenders of gasoline to purchase ethanol each year, increasing to 36 billion gallons by 2022, with the goal of reducing the demand for foreign oil and boosting domestic agriculture. About 12 billion gallons was purchased in 2012.
Most of the fuel is made from corn, though regulations gave hope for the feasibility of developing ethanol from other sources such as wheat straw or switch grass.
According to the U.S. Energy Information Agency, Kansas produced 41.5 million barrels of crude oil in 2011, the most recent statistics available, compared to nearly 10.7 million barrels of ethanol. Nationally, more than 2 billion barrels of crude were produced and 331.6 million barrels of ethanol produced in 2011.
Other regulations were at play including the Environmental Protection Agency's rule on how much ethanol could be added to fuel without damaging engines. Tax incentives were passed to help develop the industry.