Last week, DuPont Industrial Biosciences announced that they shut down operations at an Iowa ethanol plant just two years after it opened. As the plant closed its doors, 90 employees were told they had just 45 minutes to evacuate the premises, and any stragglers would be escorted out by the local police. A small skeleton crew remains to maintain the facility until DuPont is able to sell it.
DuPont, a branch of DowDuPont Inc, made this decision to shy away from producing ethanol from corn waste at the same time a politics are shifting from biofuels and renewables in the U.S. While DuPont said that the Iowa plant closure has more to do with their merger with Dow than anything else, local organization Iowa Renewable Fuels said it’s clearly a symptom of low government support and lack of tax credits.
Under the new management brought on by the Trump administration, The Environmental Protection Agency (EPA) made a major effort this year to cut down the required quantity of cellulosic biofuels to be mixed into the nation’s fuels, walking back a Bush-era mandate. The EPA argues that the industry has not produced enough of these cellulosic biofuels to keep the policy realistic. Cellulosic biofuels are fuels created from inedible plant waste like husks and stems, as well as non-food plants such as grasses and seaweed.
When the DuPont plant was opened in 2015 at a construction cost of $225 million, it was widely publicized as the world’s largest cellulosic ethanol plant. The facility utilized corn stalks and stems (a resource more than plentiful in Iowa) to make ethanol, with a production capacity of 30 million gallons per year, to be blended with gasoline to aid refineries’ compliance of the U.S. Renewable Fuel Standard, instated in 2005 and expanded in 2007. Related: Google Gets There First: Autonomous Cars On The Road
When the ethanol-blending portion of the mandate was passed in 2007, with the hope of reducing U.S. dependence on foreign oil, the EPA predicted that by 2020 domestic ethanol production would be at 10.5 billion gallons per year. It’s become evident that this won’t be the case. Output for 2017 is expected to be around 7 million gallons. That’s a far cry from those original, optimistic numbers, thanks to high production costs and still-evolving technologies.
Now, in an ironic twist, the government’s response to insufficient biofuel production will cause the nation to have even less. The EPA made their proposal to cut biofuel blending requirements in July, with the goal to slash this year’s 311 million gallons to 238 million gallons in 2018, reversing the previous requirement to increase the ethanol blend each year.
Inside the oil industry, however, there are many that feel the Trump administration and the EPA have not done enough to overhaul biofuel requirements and “drain the swamp.” Notably, just one day before DuPont shuttered its ethanol plant, the chief executive of Icahn refinery CVR Energy accused Trump of caving in to corn-state fuel refiners by failing to completely overhaul the federal biofuel agenda. Icahn was previously a special adviser to Trump on regulations, but left the unpaid position amidst criticism that he stood to make a lot of money off of his proposed policy changes.
Perhaps unsurprisingly, DuPont is not the first company to start unloading its biofuel facilities. DuPont’s competition, Abengoa, sold its 25-million-gallon Kansas facility almost a year ago. DuPont itself has been showing signs of trouble since last year, when they stopped collecting corn stocks from local farmers because they’d run out of storage. DuPont said that they don’t intend to move away from biofuels completely, but shuttering the world’s largest cellulosic plant just two years after its lauded opening doesn’t bode well for the sector’s future.
By Haley Zaremba for Oilprice.com
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