July 28, 2010
It’s a critical time for ethanol
Published in Omaha World Herald
It's time for the federal government to move beyond offering tax credits to companies that combine ethanol with gasoline, said the CEO of the fourth-largest ethanol producer in the country.
Instead, he said, government incentives are needed for companies that install special pumps at gas stations and design cars capable of handling higher amounts of the fuel additive.
“Let's build the infrastructure,” said Todd Becker of Green Plains Renewable Energy in Omaha. “Roads, rail, pipelines — all had some kind of tax incentives or loan guarantees. It's happened in every single industry, even semiconductors.
“We believe the industry needs to grow up and the blender credit needs to go away. But we need to be able to get our fuel to the marketplace.”
This is a critical time for the ethanol industry. Congress could eliminate or reduce the ethanol industry's $6 billion tax credit by about 9 cents a gallon, from 45 cents to 36 cents.
Reactions by industry groups have varied.
Growth Energy, whose position Becker backs, has called for phasing out the credit in favor of infrastructure incentives. The Renewable Fuels Association, on the other hand, said it is important to extend the credit while also expanding infrastructure efforts.
Even without the credit, ethanol is competitive in price with gasoline, Becker said. Now the industry needs government approval to move from blending 10 percent ethanol with gasoline to 15 percent and the ability to move the product more efficiently across the country, he said.
“We want access to the market equally with the oil companies,” he said.
The government also should help companies build pipelines for ethanol so that the additive, which is largely produced in the Midwest, is less expensive on the East and West Coasts, Green Plains officials said.
Green Plains built its first ethanol plant in Shenandoah, Iowa, in 2006 and moved its headquarters to Omaha in August 2007. It employs 65 people in Omaha and more than 500 nationwide.
It had net income of $15.6 million, or 58 cents a share, in the first quarter of 2010 on $426.5 million in revenue. The company reports second-quarter earnings Thursday. Becker said he expects to have nearly $2 billion in revenue in 2010.
Becker grew up in Chicago and spent 10 years with Omaha-based ConAgra Foods, including as vice president of international marketing and president of its grain division in Canada.
He became CEO of ethanol investment firm VBV of Chicago in 2007, which merged with Green Plains in 2008.
Ethanol is key to the U.S. effort for independence from foreign oil, Becker said. It represents nearly 10 percent of the country's gasoline supply, surpassing Saudi Arabia, Mexico and Venezuela as a source of motor fuel.
Cars powered by natural gas and electricity also are important to the country's energy future, Becker said. “As long as we don't spend tens of billions of dollars overseas.”
Green Plains, whose headquarters are at 9420 Underwood Ave., has grown despite the national economic downturn and during a time when other ethanol companies struggled or went bankrupt.
That's because Green Plains' trading desk is experienced in managing the volatility of the commodity markets, continually balancing corn and natural gas purchases with sales of ethanol and distillers grains, Becker said.
Some companies failed to comprehend and adjust to that volatility, Becker said. They bought too much high-priced corn without selling ethanol, he said.
“People thought it was all about the corn. So people bought corn all the way up, and they neglected to sell the ethanol. It brought the industry to its knees.”
In mid-2009, Green Plains ....
