(Afraid that a 22-year old wouldn’t be taken seriously, I grew a beard to look older. Unfortunately, some of those photos still exist!)
The South Dakota state producer payment was something the state legislature had already approved, but the funding wasn’t made available to producers. Since our upstart industry wasn’t yet competitive with the cheap oil of the time, it was very clear to me that our business, which we had mortgaged our family farm to purchase, was doomed to fail without this incentive.
On the federal level, an equally important policy was the tax credit that incentivized gasoline blenders to blend ethanol into the fuel. This later became known as the Volumetric Ethanol Excise Tax Credit or VEETC. Over the years this tax credit, that goes to the fuel blender, has been critical in helping ethanol be competitive in the market place so the renewable fuel industry could grow.
It’s a little known fact that tax payers have received a tremendous return on this investment. Our industry is responsible for the creation of over a half million American jobs, has helped to revitalize rural America and has helped our nation reduce our imports of foreign oil and eliminated significant farm subsidies. In 2010 alone, the ethanol industry contributed $53 billion to the U.S. economy. Not to mention, unlike some other multi-national oil companies, our industry actually pays billions annually in U.S. taxes!
As for POET, we’ve been able to grow from one small plant with 13 team members producing less than a million gallons of ethanol per year to an organization with 27 plants and 1,600 team members producing 1.7 billion gallons of ethanol and 10 billion pounds of distillers grains each year. We also have about 10,000 farmers who have invested in our facilities and over 30,000 farmers that provide us grain. I am quite certain that without VEETC, this growth would not have been possible.
I know there are plenty of skeptics and naysayers out there who say the government shouldn’t get involved in incentivizing businesses. But without policies and incentives such as these, it would be impossible for a small, upstart industry like ours to compete with an entrenched, monopolistic industry like Big Oil.
As a matter of fact, our nation has a history of helping new industries get off the ground – many that are critical to our economy today. Where would our rail, airline and broadband industries be today if not for the help of government policy?
But for our industry, times are changing.
Our Federal government is facing a debt issue that threatens our entire economy. And our political climate is as volatile and hostile as it has ever been. The ethanol tax credit is caught in the cross-hairs of this environment and there’s a strong chance that the 45 cent ethanol tax credit along with the ethanol import tariff will be allowed to expire at the end of this year. (I’d say it’s time Big Oil allows their lavish tax credits to expire as well.)
So what does this mean for POET?
Although these policies have been important to the health of our industry, I am extremely confident we will be able to continue to operate successfully in this new environment. Ethanol production today is more efficient than ever while oil prices have increased exponentially making ethanol competitive with gasoline. As a matter of fact, over the past two years, the wholesale price of ethanol has averaged 16 cents per gallon less than gasoline. Additionally, there is a Renewable Fuel Standard that ensures there is a stable market for ethanol.
At POET, we’re also diversifying our product line and marketing other biorefined products such as corn oil, fiber and specialty proteins; all in addition to our Dakota Gold brand of dried distillers grains that is sold throughout the world. And we’re on the cusp of commercializing cellulosic ethanol as we have just recently finalized a loan guarantee with the Department of Energy that allows us to finally finance Project Liberty.
So, as we are anticipating a new era without VEETC, we are thankful for this policy that has been critical to our industry, but we now look forward to showing the nation that ethanol is a competitive fuel on its own merit. Moving forward, we need to focus our industry efforts into commercializing E15 and building out a flex pump infrastructure so we can break through this regulatory ethanol blend wall and give consumers the true fuel choice they deserve.
