RFS Field Hearing Testimony from Nick Bowdish of Badger State Ethanol
Posted on 06/25/2015
Full testimony as it was given from Nick Bowdish during the RFS Field Hearing on June 25, 2015.
Docket ID No. EPA-HQ-OAR-2015-0111
U.S. Environmental Protection Agency
Office of Transportation and Air Quality
1200 Pennsylvania Avenue, NW
Washington, DC 20460
To Whom It May Concern:
My name is Nick Bowdish and the ethanol industry has been the core of my career since completing my education in 2007. Thanks to the growth driven by the Renewable Fuels Standard and the opportunity afforded to me by Ron and Diane Fagen, I have both developed successful ethanol projects and managed a 135 million gallon per year corn ethanol plant for five years. Today, I am self-employed and work with both the agricultural and ethanol industries in a variety of different matters, two of which I think you’ll find particularly relevant. One, I have worked directly with your agency on more than 12 approved Efficient Producer Petition Applications, assisting existing corn ethanol producers with the work necessary to demonstrate exceeding the key 20% green house gas reduction metric. Secondly, I work with Al’s Corner Oil Company based in Carroll, IA, an owner and operator of 27 Sinclair branded “Sparky’s One Stop” convenience stores. It is this work I desire to comment to you as it relates to your proposal.
Simply put, your renewable volume obligation proposal for 2014, 2015, and 2016 has already had a very negative impact on increasing the consumption of renewable fuels in the future as is evident by the D6 RIN price dropping from approximately 70 cents per gallon prior to your announcement to the 35 cents per gallon range a few days after. The major point I would like you to understand is that the higher the RIN price, the quicker the infrastructure that is necessary to dispense additional renewable fuels gets installed. There can be no better example than my work with Al’s Corner to show you the reality of your decisions. Al’s Corner currently has two convenience stores that have been retrofitted to dispense ethanol blends of E15, E30, E50 and E85 in addition to the standard offering of E10 that all 27 stores provide. I work with Al’s Corner to directly procure denatured ethanol that we then blend with straight gasoline at these two stores. Working with our suppliers, we are able to blend the physical gallon of ethanol and sell the corresponding RIN to obligated parties under RFS2. Effectively, every penny per gallon that RIN prices go up is directly lowering our effective purchase price of denatured ethanol, which then directly lowers the consumer’s purchase price of renewable fuels at our stations. We procured nearly all of our ethanol so far in 2015 for an effective cost of $0.70 per gallon when wholesale ethanol was trading about $1.40 and gasoline about $1.75 thanks to a D6 RIN value of about $0.70 per gallon. Al’s Corner takes all that additional value and prices the corresponding products accordingly so that the direct implication of high RIN prices is lower consumer prices for blends of ethanol. In this example, E30 was posted at retail for 14 cents per gallon cheaper than E10 and what would otherwise be possible without a strong Renewable Fuels Standard. RINs are a zero sum game. For every obligated party that is willing to invest $1 in RIN purchases to avoid compliance with the law, there is a consumer on the other end of the supply chain that happily accepts and takes that dollar and puts it in their pocket via cheaper biofuel prices. Al’s Corner benefits by increasing the volume of liquid fuel it sells and makes a margin of approximately 10 cents per gallon. Al’s Corner made these infrastructure investments to sell more gallons, not to gouge a wider margin. And we will sell more gallons than our competition but for the uncertainty EPA creates when it administers this program with such unpredictability. STICK WITH THE STATUTUE AND YOU’LL ACHIEVE THE GOALS OF THIS STANDARD! When RIN prices are approximately 70 cents per gallon, we see our sales across all gallons average about an E17 blend rate. When RIN prices retreat back to 40 cents per gallon, we see our sales across all gallons retreat back closer to an E10 blend rate.
I recognize the authority Congress granted EPA to adjust the renewable volume obligations based on the Cellulosic Waiver Authority. For that reason, I can understand why you must do something regarding the statutory level of 4.25 billion gallons of cellulosic ethanol for 2016. The physical fuel does not exist at that volume. However, the same cannot be said for the 15.0 billion gallon conventional biofuel statutory level. The physical fuel exists and your recent manipulating of the definition of inadequate domestic supply to provide a basis for your reductions in this category ultimately leads to results that are opposite of this program’s goals. You ordered it and you’re about to get it, more GHG emissions and fewer companies like Al’s Corner doing a thing about biofuels infrastructure. If you want this program to be successful and particularly advanced biofuels, you must form policies that break down this artificial, oil-monopoly-driven E10 blend wall and there should be nothing more important to you and the Office of Management and Budget than to see RIN prices sky rocket. That’s right: if you want more biofuels, then let the market based mechanisms that were provided for in the original statute work. If the oil companies don’t want to transform this nation’s fuel infrastructure, then small family-owned businesses like Al’s Corner will do it for them and the consumer of higher blends of biofuels will gladly accept the oil companies payments for non-compliance.
I implore you to reconsider raising these renewable volume obligations. A decision to do so will drive the installation of biofuel dispensing infrastructure and increase renewable fuel consumption which both of us have just worked together on to show more than a 20% reduction in GHGs compared to the status quo, gasoline.