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Future acquisitions may involve the issuance of equity securities as payment or in connection with financing the business
or assets acquired and, as a result, could dilute your ownership interest. In addition, additional debt may be necessary in order
to complete these transactions, which could have a material adverse effect on our financial condition. The failure to
successfully evaluate and execute acquisitions or joint ventures or otherwise adequately address the risks associated with
acquisitions or joint ventures could have a material adverse effect on our business, results of operations and financial
The ethanol industry is highly dependent on government usage mandates affecting ethanol production and favorable tax
benefits for ethanol blending and any changes to such regulation could adversely affect the market for ethanol and our
results of operations.
The domestic market for ethanol is largely dictated by federal mandates for blending ethanol with gasoline. The RFS
mandate level for conventional biofuels for 2012 of 13.2 billion gallons approximates current domestic production levels.
Future demand will be largely dependent upon the economic incentives to blend based upon the relative value of gasoline
versus ethanol, taking into consideration the relative octane value of ethanol, environmental requirements and the RFS. Any
significant increase in production capacity beyond the RFS level might have an adverse impact on ethanol prices.
Additionally, the RFS mandate with respect to ethanol derived from grain could be reduced or waived entirely. A reduction
or waiver of the RFS mandate could adversely affect the prices of ethanol and our future performance. The RFS Flexibility
Act was introduced on October 5, 2011 in the U.S. House of Representatives to reduce or eliminate the volumes of renewable
fuel use required by RFS based upon corn stocks-to-use ratios. The Domestic Alternative Fuels Act of 2012 was introduced
on January 18, 2012 in the U.S. House of Representatives to modify the RFS to include ethanol and other fuels produced
from fossil fuels like coal and natural gas. We believe the RFS is a significant component of national energy policy that
reduces dependence on foreign oil by the United States. Our operations could be adversely impacted if the RFS Flexibility
Act or the Domestic Alternative Fuels Act of 2012 are enacted.
Referred to as the blender’s credit, the Volumetric Ethanol Excise Tax Credit, or VEETC, provided companies with a tax
credit to blend ethanol with gasoline. The Food, Conservation and Energy Act of 2008, or the 2008 Farm Bill, amended the
amount of tax credit provided under VEETC to 45 cents per gallon of pure ethanol and 38 cents per gallon for E85, a blended
motor fuel containing 85% ethanol and 15% gasoline. The blender’s credit expired on December 31, 2011.
Federal law mandates the use of oxygenated gasoline. If these mandates are repealed, the market for domestic ethanol
would be diminished significantly. Additionally, flexible-fuel vehicles receive preferential treatment in meeting corporate
average fuel economy, or CAFE, standards. However, high blend ethanol fuels such as E85 result in lower fuel efficiencies.
Absent the CAFE preferences, it may be unlikely that auto manufacturers would build flexible-fuel vehicles. Any change in
these CAFE preferences could reduce the growth of E85 markets and result in lower ethanol prices, which could adversely
impact our operating results.
To the extent that such federal or state laws are modified, the demand for ethanol may be reduced, which could
negatively and materially affect our ability to operate profitably.
Future demand for ethanol is uncertain and may be affected by changes to federal mandates, public perception and
consumer acceptance, any of which could negatively affect demand for ethanol and our results of operations.
Ethanol production from corn has not been without controversy. Although many trade groups, academics and
governmental agencies have supported ethanol as a fuel additive that promotes a cleaner environment, others have criticized
ethanol production as consuming considerably more energy and emitting more greenhouse gases than other biofuels and
potentially depleting water resources. Some studies have suggested that corn-based ethanol is less efficient than ethanol
produced from switchgrass or wheat grain and that it negatively impacts consumers by causing prices for dairy, meat and
other foodstuffs from livestock that consume corn to increase. Additionally, ethanol critics contend that corn supplies are
redirected from international food markets to domestic fuel markets. If negative views of corn-based ethanol production gain
acceptance, support for existing measures promoting use and domestic production of corn-based ethanol could decline,
leading to reduction or repeal of federal mandates which would adversely affect the demand for ethanol. These views could
also negatively impact public perception of the ethanol industry and acceptance of ethanol as an alternative fuel.
Beyond the federal mandates, there are limited markets for ethanol. Discretionary blending and E85 blending are
important secondary markets. Discretionary blending is often determined by the price of ethanol versus the price of gasoline.
In periods when discretionary blending is financially unattractive, the demand for ethanol may be reduced. A reduction in the