ETHANOL FACTS & FIGURES
U.S. Government Ethanol Policy
The federal government’s Renewable Fuel Standard (RFS) has caused record increases in food prices and should be
repealed.
• The Renewable Fuel Standard mandates usage of ethanol
– Began in 1995 when EPA mandated all gasoline in U.S. be reformulated with either MTBE or ethanol as an
additive
– Increased substantially with the Energy Policy Act of 2005 w/ 2006-2012 gasoline blending ramp up from 4 to 7.5
billion gallons of ethanol
– Increased again with the Energy Independence & Security Act of 2007 w/ 2008-2022 gasoline, diesel, and jet
fuel blending ramp up from 9 to 36 billion gallons of biofuel
– In 2012 the EPA mandated blending of 13.2 billion gallons of ethanol
– In 2013 the EPA mandated blending of 13.8 billion gallons of ethanol
– In 2014 the EPA proposed mandate calls for blending 13.0 billion gallons of ethanol (outside of schedule)
– To date the EPA has not released the final blending mandates for 2014, 2015, or 2016
• Many lesser known policies of Federal & State governments aid the ethanol industry as well
– Flex Fuel Vehicle (FFV) production spurred through fuel efficiency standards and corresponding FFV credits
– Lack of clear labeling of FFV vehicles or E85 fuel pumps explaining mileage penalty
– Farm Bill contains a number of programs aimed at aiding ethanol producers, including the Biorefinery Assistance
Program and the Feedstock Flexibility Program
The Effect On Food Prices
• The U.S. is the world’s largest producer and exporter of corn
• Corn is primary feed component of protein complex and the driver of crop acreage competition
• Over 43% of the U.S. corn crop was diverted to ethanol production in 2012/2013 crop year
• For every bu of corn (56 lbs) you put into ethanol you get only 17 lbs of dried distillers grains (DDG’s) back out of the
process, so nearly 28% of U.S. corn crop disappeared into gas tanks in 12/13
• From crop year 00/01 to 12/13 the % of U.S. corn crop used in ethanol rose from 6% to over 40%
• From crop year 00/01 to 12/13 the price of corn rose from $2.06-$6.79/buDuring that same time, food prices in the U.S.
have risen roughly 41% (BLS CPI Food Data)
• During that same time, food prices globally have risen roughly 124% (UN FAO Food Price Index)
• While all food price inflation cannot and should not be attributed to biofuel policy, it is difficult to argue that it has not
contributed to a significant portion of the inflation
• Due to ideal growing conditions and back-to-back record corn crops the total % of the U.S. crop diverted to ethanol
production fell in the 2013/2014 and 2014/2015 crop years to an estimated 36%
• This decline in total % has helped drive corn prices lower to approximately $4.00, but much of the damage has continued
to reverberate through the food supply chain
The Effect on Gas Prices
• Gasoline prices have steadily risen in conjunction with ethanol’s introduction into supply, however not to the degree that
corn prices have risen (00/01 to 12/13 from $1.51/gal to $3.59/gal)
• Although difficult to prove, ethanol tax subsidies probably reduced gas prices by a small amount
• However, it is also difficult to compare this to the tax burden on the gasoline consumer
• Due to a substantial increase in crude oil production in the U.S. and slowing global growth, gasoline prices have recently
fallen to multi-year lows, and have at least temporarily made ethanol on a per gallon basis uncompetitive with gasoline
Wendy’s Position or Policy: REPEAL THE RENEWABLE FUEL STANDARD (RFS)
After thorough, careful analysis we believe the RFS must be repealed. The RFS law unfairly supports certain businesses
(biofuel producers, corn growers, etc.) while adversely affecting Wendy’s. The RFS inhibits free-market forces from
determining the use, production, and price of agricultural commodities, particularly primary grain crops and as a result beef,
chicken and other products. The federal government has picked winners (biofuel industry) and losers (Wendy’s). The RFS
should be repealed.
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Current Pending Ethanol Legislation
• Cong. Bob Goodlatte (R-VA) will introduce legislation (H.R. 703) to repeal the RFS.
• Senator Pat Toomey (PA) and Senator Diane Feinstein (CA) have introduced S. 577 in the Senate that amends the Clean
Air Act to eliminate the corn ethanol mandate for renewable fuel.
What is Ethanol?
• Ethanol (ethyl alcohol) is an alcohol similar to what is found in alcoholic beverages
• It can be produced from a number of agricultural and non-agricultural feedstocks
• The most common and commercially viable feedstocks today are corn and sugar
• It can also be produced in commercial quantities from fossil fuels like natural gas and coal
• Second generation ethanol from cellulose, algae, and biomass, are not yet commercially viable
Ethanol as a Fuel Source in U.S.
• Ethanol was commercially introduced into fuel supply in the 1990’s as additive alternative to MTBE
• In the mid-2000’s states began banning MTBE in gasoline and switching to all ethanol additive
• Legislation in 2005 & 2007 created Renewable Fuel Standards (RFS) that mandate ever-increasing amounts of ethanol
and other biofuels to be blended into the U.S. fuel supply between 2006-2022
• Almost all gasoline sold in the U.S. is an E10 blend, meaning it contains 10% ethanol
• The majority of cars and other gasoline vehicles can run on an E10 blend with no ill effects
• A growing % of cars sold in the U.S. are Flex-Fuel capable meaning they can run on an E85 blend
• Virtually all ethanol produced and sold in the U.S. is corn starch based ethanol
• The U.S. is the world’s largest producer and user of ethanol
Ethanol as a Fuel Source Around the World
• Ethanol is used in small quantities in many countries around the world
• Brazil is the world’s second largest producer and user of ethanol and most efficient producer of ethanol due to cane sugar
based feedstock
• The U.S. and Brazil are responsible for the majority of production and export of ethanol in the world
Energy/Environmental Benefits of Ethanol
• Studies vary on the energy balance of ethanol, meaning how much energy is put in vs. extracted
• The energy balance is believed to be positive for all forms of ethanol, meaning more energy is extracted than put into the
process
• Corn starch based ethanol is one of the least efficient forms of ethanol w/ most studies showing a range of 1.1 to 1.5
energy balance
• Cane sugar based ethanol is currently the most efficient form of ethanol w/ most studies showing a range of 6.0 to 8.0
energy balance
• These energy balance studies are inclusive of the little known fact that ethanol gets lesser gas mileage than gasoline (fuel
economy of pure ethanol is 20-30% less than pure gasoline)
• While the energy balance of ethanol would make a general case for environmental benefit, most environmental
organizations argue that the increased clearing of land for agricultural production and increased use of fertilizers and
pesticides for biofuels is a detriment to the environment
• Hunger advocacy groups also find the production of ethanol to be a detriment to their cause
TERMS
• Renewable Fuel Standards (RFS) = Government legislated and mandated gallon quantities of biofuels to be blended
into the fuel supply, annually set by the EPA, and subdivided by biofuel type. These total quantities are applied to fuel
blenders, like Exxon & Valero, based on the quantity of fuel they produce, and these blenders are fined if they do not
meet their portion of the RFS.
• Corn Starch Ethanol = The primary and currently largest type of biofuel mandated by the RFS, considered a 1st
generation biofuel, blended with conventional gasoline at different levels
• E10 = 10% ethanol blended with 90% conventional gasoline
– Virtually all gasoline purchased in the U.S. meets or exceeds the E10 blend level
– Most internal combustion engines can run on E10 with no adverse effects
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E15 = 15% ethanol blended with 85% conventional gasoline
– The EPA has issued waivers allowing for the use of E15 in model year 2001 and newer cars
– These waivers allow for, but do not require the introduction of E15 blended gasoline
– E15 can cause damage to older vehicles, motorcycles, lawn equipment, and virtually all off-road and marine
engines
– Currently E15 is now registered and legal for distribution, but must be approved at the state level and requires
additional investment at station (currently available at only a few gas stations in the U.S.)
E85 = 85% ethanol blended with 15% conventional gasoline
– For use only in FFV vehicles, with engines designed to run on anything between E0 & E85
– Commercially (but not widely) available at gas stations throughout the U.S.
– Often sold at a discount to conventional (E10) gasoline, but not commensurate w/ mileage penalty
The Blend Wall = A term that describes the total gallon volume of ethanol that can be blended into the U.S. fuel supply at
an E10 level. The mandated gallons schedule in the RFS was created with the thought that total gasoline consumption in
the U.S. would continue to increase (not decrease as it has been doing). The mandated volumes of ethanol now meet
this blend wall, creating an issue and potential burden to both gasoline blenders and consumers in the form of increased
costs associated with fines and the purchase of RIN credits. The blend wall is the primary driver behind the recent EPA
proposal to lower the 2014 mandate.
RIN = Stands for Renewable Identification Number, which is the assigned identifier credit for biofuel production, use, and
trading purposes. RIN fraud is the improper creation and sale of RIN credits.
Advanced Biofuels = A catch-all term used by the EPA for all biofuels other than corn starch ethanol, including but not
limited to bio-mass based diesel and cellulosic ethanol
Bio-Mass Based Diesel = More commonly known as biodiesel, this is the term used by the EPA within the RFS annual
mandate to classify biomass fuels to be blended into diesel fuel, and usually refers to biodiesel created from virgin
vegetable oil (less commonly recycled vegetable oil or algae)
Cellulosic Ethanol = Ethanol made from a variety of cellulosic feedstocks, such as wood chips, yard waste, waste paper,
and corn stover (left over leaves and stocks). Cellulosic ethanol is not yet available in commercial quantities, but is
mandated at minimal levels and blenders who fail to meet their blending mandate will be fined.
Flex-Fuel Vehicles (FFV) = Vehicles manufactured with engines that are capable of running on a range of ethanol to
gasoline blends (range of E0 to E85). This option is available on many vehicles, and for some vehicles is now standard.
Stocks-to-Use Ratio = Amount of corn carried over from the previous crop year divided by the annual usage of corn,
expressed as a % (anything below 10% is generally considered small). Some have argued for legislation tying the U.S.
ethanol mandate to the U.S. corn stocks-to-use ratio, in an attempt to mitigate some of the impact to food prices.
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