While COVID-19 has been wreaking havoc on the economy across the country, the biofuel industry in particular has been struggling under the added strain. The problem, industry leaders explained to Senator Amy Klobuchar (DFL) in a conference, is that biofuel producers were already dealing with problems of over-supply and weakening demand.
On the call with Senator Klobuchar was CEO of Granite Falls Energy Steve Christensen who explained, “we have two plants, Granite Falls and Heron Lake, and they both shut down for two months.” This was a concern echoed by others on the call, such as POET plant manager Chris Hanson who said that “this affected every ethanol producer, whether it’s the small independent ones or as big as POET,” adding that “we shut down half of our production. This has affected people’s livelihoods and pay.
Others, like Brian Kletscher, CEO. of Highwater Ethanol in Lamberton, said that his plant was able to keep running during the spring, but they were forced to cut down capacity. “On March 19, we cut production by approximately 22 to 25%, and we remained at that reduced rated until the middle of May. We didn’t make any money at all, but we were able to run through April with trying to minimize our loss.”
Greg Webb, vice president of Archer Daniels Midland concurred, saying, “the industry is pretty much impaired.”
As the COVID-19 pandemic spread, gasoline consumption in the United States plummeted to 50-year lows around the country. From March 8 to April 4 of this year, the total miles driven dropped by 58 percent. This rapid decrease in consumption has led more than 130 biofuel plants to partially or fully shut down.
Not only has this negatively impacted biofuel producers, but it has also hurt local farmers and other associated parts of the rural economy. “If you look at a plant like mine, explained Hanson on the phone call, “maybe we didn’t buy a million bushels that we would have, so now those farmers don’t have somewhere to bring that million bushels of corn. There aren’t new consumers looking for that grain.” Christensen agreed, saying that, “the big thing was, that’s 4 million bushels a month between the two plants that we didn’t purchase from farmers.”
Klobuchar told the biofuel producers that she had been working in the Senate to ensure biofuel producers received support. Back in May, Klobuchar along with the Republican Chair of the Finance Committee Senator Chuck Grassley, introduced a bill to support biofuel producers negatively affected by the pandemic. This legislation will require the U.S. Department of Agriculture (USDA) to reimburse biofuel producers for 75% of the feedstock purchases from January 1, 2020 through March 31, 2020 through the Commodity Credit Corporation.
Klobuchar said she has been taking action to help support the ethanol industry. In May, Klobuchar and Sen. Chuck Grassley, R-Iowa, introduced a bill that would require the U.S. Department of Agriculture to reimburse biofuel producers for 75% of the feedstock they bought from Jan. 1 through March 31, through the Commodity Credit Corporation. Klobuchar said she and Grassley have also led bipartisan letters calling for a strong Renewable Fuel Standard, as the EPA worked toward finalizing its annual rules on biofuels volume requirements.
Klobuchar and Grassley initially pushed for this proposal as an amendment in the CARES Act to match the proposed funding for the Strategic Petroleum Reserve. When assistance for the oil industry was not included in the package, neither was the biofuel amendment. However, there have since been purchases for the Strategic Petroleum Reserve through administrative action. Klobuchar and Grassley continued to hear from their constituents and members of the biofuel industry and introduced this as separate legislation.
“At a time when many farmers and rural communities are feeling disproportionate impacts from the coronavirus pandemic, it’s important we work to keep our renewable fuel industry strong,” Klobuchar said at the time. “Renewable fuel processing plants employ thousands of people in rural areas, purchase billions of bushels of commodities from farmers, and provide stability in our agricultural supply chain. This legislation will ensure farmers and workers receive our support during these tough times.”
These lifelines appear to be making a difference for biofuel producers. In Granite Falls, Christensen reported that the ethanol plant is back up and running, though it is not yet yielding profits. “The biggest thing is going to be gas demand, and having someplace to go for our product,” Christensen said.
According to Kletscher, Highwater’s total production is also increasing again (now up to about 90% of where it was before production was cut). “We still are watching the ethanol market and watching fuel usage through the United States,” he said.
Still, problems persist for the biofuel industry. “Before the pandemic, we were already having challenges for biofuels,” largely in the form of numerous waivers being granted by the EPA to refineries that would otherwise have had to mix renewable fuels into their products, Klobuchar explained. “They used to be like, under 10 a year, and then they went up,” to more than 80 waivers issued, she said in the phone meeting. “We were really focused on that last year, and we still are.”
The producers expressed their appreciation for Klobuchar’s efforts to provide support and relief for their industry. They told the Senator it was important to find ways to grow demand for biofuels, with Webb telling Klobuchar that biofuels are better for air quality, among other factors.
At the end of the meeting, Klobuchar told the assembled producers that, “I think it’s helpful to have these stories.” She intends to give a floor speech centering on rural issues soon. “This is right up there as one of the top challenges we’ve seen, and it’s affecting small towns all over the state.”