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demand for our products may depress the value of our products, erode our margins, and reduce our ability to generate
revenue or to operate profitably. Consumer acceptance of E85 fuels and flexible-fuel technology vehicles is needed before
ethanol can achieve any significant growth in market share.
Increased federal support of cellulosic ethanol may result in reduced incentives to corn-derived ethanol producers.
Recent legislation, such as the American Recovery and Reinvestment Act of 2009 and the Energy Independence and
Security Act of 2007, provides numerous funding opportunities in support of cellulosic ethanol, which is obtained from other
sources of biomass such as switchgrass and fast growing poplar trees. In addition, the amended RFS mandates an increasing
level of production of biofuels that are not derived from corn. Federal policies suggest a long-term political preference for
cellulosic processes using alternative feedstocks such as switchgrass, silage, wood chips or other forms of biomass.
Cellulosic ethanol may have a smaller carbon footprint because the feedstock does not require energy-intensive fertilizers and
industrial production processes. Additionally, cellulosic ethanol is favored because it is unlikely that foodstuff is being
diverted from the market. Several cellulosic ethanol plants are under development. As research and development programs
persist, there is the risk that cellulosic ethanol could displace corn ethanol. In addition, any replacement of federal incentives
from corn-based to cellulosic-based ethanol production may reduce our profitability.
Our plants are designed as single-feedstock facilities and would require significant additional investment to convert to
the production of cellulosic ethanol. Additionally, our plants are strategically located in high-yield, low-cost corn production
areas. At present, there is limited supply of alternative feedstocks near our facilities. As a result, the adoption of cellulosic
ethanol and its use as the preferred form of ethanol would have a significant adverse impact on our business.
Any inability to maintain required regulatory permits may impede or completely prohibit our ability to successfully operate
our plants. Additionally, any change in environmental and safety regulations, or violations thereof, could impede our ability
to successfully operate our businesses.
Our ethanol production and agribusiness segments are subject to extensive air, water and other environmental regulation.
We have had to obtain a number of environmental permits to construct and operate our plants. Ethanol production involves
the emission of various airborne pollutants, including particulate, carbon dioxide, oxides of nitrogen, hazardous air pollutants
and volatile organic compounds. In addition, the governing state agencies could impose conditions or other restrictions in the
permits that are detrimental to us or which increase our costs above those required for profitable operations. Any such event
could have a material adverse effect on our operations, cash flows and financial position.
Environmental laws and regulations, both at the federal and state level, are subject to change and changes can be made
retroactively. It is possible that more stringent federal or state environmental rules or regulations could be adopted, which
could increase our operating costs and expenses. Consequently, even if we have the proper permits at the present time, we
may be required to invest or spend considerable resources to comply with future environmental regulations. Furthermore,
ongoing plant operations are governed by OSHA. OSHA regulations may change in a way that increases the costs of
operations at our plants. If any of these events were to occur, they could have an adverse impact on our operations, cash
flows and financial position.
Part of our business is regulated by environmental laws and regulations governing the labeling, use, storage, discharge
and disposal of hazardous materials. Because we use and handle hazardous substances in our businesses, changes in
environmental requirements or an unanticipated significant adverse environmental event could have an adverse effect on our
business. We cannot assure you that we have been, or will at all times be, in compliance with all environmental requirements,
or that we will not incur material costs or liabilities in connection with these requirements. Private parties, including current
and former employees, could bring personal injury or other claims against us due to the presence of, or exposure to,
hazardous substances used, stored or disposed of by us, or contained in its products. We are also exposed to residual risk
because some of our facilities and land may have environmental liabilities arising from their prior use. In addition, changes to
environmental regulations may require us to modify existing plant and processing facilities and could significantly increase
the cost of those operations.
Our business is affected by the regulation of greenhouse gases, or GHG, and climate change. New climate change
regulations could impede our ability to successfully operate our business.
Our plants emit carbon dioxide as a by-product of the ethanol production process. In 2007, the U.S. Supreme Court
classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon
dioxide in vehicle emissions. On February 3, 2010, the EPA released its final regulations on RFS 2. We believe these final
regulations grandfather our plants at their current operating capacity, though expansion of our plants will need to meet a