Editor's Note

Give retailers latitude to take us beyond the wall
By Tom Bryan
Commercial-scale cellulosic ethanol plants will likely start production by 2010 at the same time the United States will be producing 15 billion to 17 billion gallons of grain-based ethanol per year-enough to quench the demand for E10 use coast to coast.

Syncing production capacity with E10 demand is practical, but it does little to lessen the United States' reliance on foreign oil. Experts say two things will simultaneously occur when the nation's annual ethanol production capacity hits 15 billion to 17 billion gallons: 1) Corn prices will ascend to a level that makes any additional corn-based ethanol production economically unfeasible; and 2) Nearly every gallon of gasoline in the United States will contain 10 percent ethanol. That's when America will hit the so-called "E10 wall," a point at which corn-based ethanol production and E10 markets peak concurrently.

Of course, cellulosic ethanol has the potential to take us far beyond that proverbial wall. However, assuming that cellulosic ethanol will be produced commercially-and in huge volumes-how, where and why will new markets for this added production capacity arise?

Proposed federal legislation would raise the national renewable fuels standard to 36 billion gallons and include "advanced biofuels carve-outs" to guarantee early life for cellulosic ethanol. Beyond that, consumer demand for price-competitive E85-or other high blends such as E20 to E50-will drive the market. The widespread acceptance of "blender pumps" that allow drivers to make their own ethanol blend purchasing decisions could redefine the way Americans think about transportation fuels. At the same time, it's possible that we'll soon see the emergence of fuel-efficient flexible-fuel vehicles (FFVs) that aren't just capable of running on ethanol blends, but are optimized for them.

Finally, with the availability and widespread acceptance of higher ethanol blends (E20 to E85) being necessary for the long-term success of cellulosic ethanol, producers and retailers should be given increased latitude to price biofuels competitively without being hamstrung by "minimum markup" laws originally designed to prevent unscrupulous gasoline retailers from putting their competitors out of business with predatory pricing. Wisconsin ethanol producer Utica Energy LLC and its associated retailer Renew E85 have been sued for selling E85 at unfairly low prices, which seems ludicrous at a time when complaining about prices at the pump is practically a national pastime. I'm not saying E85 retailers should be totally sheltered from predatory pricing laws, but if this nation is serious about lessening its oil addiction and getting beyond that E10 wall, retailers of high ethanol blends should be granted some leeway with new market development.

Tom Bryan
Editorial Director