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E15 Blending Waiver.
In October 2010, the U.S. Environmental Protection Agency, or EPA, granted a partial
waiver for the use of up to 15% ethanol blended with gasoline, or E15, in model year 2007 and newer passenger
vehicles, including cars, SUVs and light pickup trucks. In January 2011, the EPA granted a second partial waiver for
E15 in model year 2001 to 2006 passenger vehicles. On February 17, 2012, the EPA announced that evaluation of
the health effects tests on E15 are complete and that fuel manufacturers are now able to register E15 with the EPA to
sell. Over 141 million vehicles or 60% of the passenger vehicles in service would be eligible to use E15. We also
believe that ethanol blended in the U.S. gasoline supply is an important step towards the long-term introduction of
more renewable fuels into the transportation sector and that increasing the ethanol blend percentage in the domestic
gasoline supply could have a positive impact on the demand for ethanol.
Economics of Ethanol Blending.
We believe that ethanol is cheaper to produce than petroleum-based gasoline.
Ethanol’s favorable production economics were previously enhanced in the United States by the Volumetric Ethanol
Excise Tax Credit, or VEETC (commonly referred to as the “blender’s credit”), which was realized by refiners and
blenders and was generally passed on to consumers for a benefit of $0.45 per gallon of ethanol used. The blender’s
credit expired on December 31, 2011. Ethanol is currently priced in wholesale markets at a sufficient discount to
petroleum-based gasoline to provide fuel blenders with a strong economic incentive to blend with ethanol, even
without the blender’s credit.
Mandated Use of Renewable Fuels.
The growth in ethanol usage has also been supported by legislative
requirements dictating the use of renewable fuels, including ethanol. The Energy Independence and Security Act of
2007, confirmed by the EPA regulations on the Renewable Fuel Standard, or RFS 2, issued in February 2010
mandated a minimum usage of corn-derived renewable fuels of 12.0 billion gallons in 2010, increasing annually by
0.6 million gallons to 15.0 billion gallons in 2015.
Ethanol Exports.
The United States has a long history as a net importer of ethanol. According to the U.S.
Department of Agriculture, or USDA, Brazil has historically been the world’s low-cost supplier of ethanol.
However, the USDA stated that in 2010, the United States became the global low-cost ethanol producer, generating
a trade surplus of $556.0 million. According to the RFA, U.S. ethanol exports in 2011 exceeded the volume of
exports in 2010, generating approximately 1.2 billion gallons in ethanol exports in 2011.
Our Operating Segments
Ethanol Production Segment
We have the capacity to produce approximately 740 mmgy of ethanol within our ethanol production segment. Our plants
use a dry mill process to produce ethanol and co-products such as wet, modified wet or dried distillers grains. Processing at
full capacity, our plants will consume approximately 265 million bushels of corn and produce approximately 2.1 million tons
of distillers grains annually. We operate all of our ethanol plants through wholly-owned operating subsidiaries. A summary
of these plants is outlined below:
Plant
Plant
Production
Capacity
(mmgy)
Start or
Acquisition
Date
Technology
Land
Owned
(acres)
On-Site Corn
Storage
Capacity
(bushels)
On-Site Ethanol
Storage
Capacity
(gallons)
Bluffton, Indiana
120
Sept. 2008
ICM
420
1,040,000
2,800,000
Central City, Nebraska
(1)
100
July 2009
ICM
40
1,200,000
2,250,000
Fergus Falls, Minnesota
(1)
60
Mar. 2011
Delta-T
114
1,325,000
2,000,000
Lakota, Iowa
(1)
100
Oct. 2010
ICM/Lurgi
93
1,410,000
2,500,000
Obion, Tennessee
(2)
120
Nov. 2008
ICM
230
2,100,000
2,894,000
Ord, Nebraska
(1)
55
July 2009
ICM
170
400,000
1,500,000
Riga, Michigan
(1)
60
Oct. 2010
Delta-T
138
525,000
1,239,140
Shenandoah, Iowa
65
Aug. 2007
ICM
123
500,000
1,500,000
Superior, Iowa
60
July 2008
Delta-T
238
525,000
1,226,406
(1) These plants operated under different ownership prior to the stated start date.
(2) We lease an additional 129 acres of land near the Obion, Tennessee plant.