Published in Economic Development

Michigan ethanol plant explores capacity for sanitizer alcohol as broader concerns loom

BY Monday, April 06, 2020 05:05am

Responding to concerns from renewable fuel advocates, the U.S. Food and Drug Administration this week relaxed regulations that would allow ethanol producers to provide alcohol for the manufacturing of sanitizer.

Advocates say it may provide at least some boost for an industry in a sharp decline after fuel consumption dropped nationwide because of travel restrictions from the coronavirus outbreak. News reports say the move could expand the sanitizer market to potentially millions of gallons of alcohol from U.S. ethanol producers.

Officials at a Lake Odessa ethanol plant between Grand Rapids and Lansing are exploring the potential to sell a type of alcohol that can be used in sanitizer, which is in strong demand across the country.

While the FDA’s guidance may be helpful, it’s unlikely to provide much of a lifeline to an industry in sharp decline as driving and fuel consumption nosedives.

“We’re having a real hard time right now even keeping the plant operational,” said Gabe Corey, commodities and risk manager for Carbon Green BioEnergy LLC, which includes an ethanol production plant in Lake Odessa. Corey is also an industry representative on the board of the Michigan Corn Growers Association.

Corey said facility officials are exploring how they can participate in the supply chain for sanitizer. Ethanol plants don’t typically produce the type of pharmaceutical grade alcohol used in sanitizer, he said.

“From our understanding, (the FDA) has tried to reduce some of the obstacles to get these hand sanitizers in the market,” he said. “At the end of the day, it’s really still unclear how much we can do, and how much any ethanol producer can do to supply that market.”

Jessica Sexe, spokesperson for POET, which owns an ethanol plant in Tuscola County, said the company is also exploring its options.

“POET is currently evaluating how we can provide ethanol for hand sanitizer and direct disinfectant applications,” Sexe said. “We will make an announcement once we are certain we can produce a product that meets the necessary specifications.”

The FDA will reportedly consider requests from ethanol producers on a case-by-case basis. The Renewable Fuels Association said this week that 15-20 ethanol plants have already responded to the new FDA rules. Alcohol from ethanol plants can’t contain additional additives or chemicals under the rules.

As far as helping the industry through a dramatic downturn: “It doesn’t appear we could even make enough to sell the hand sanitizer to offset the reduction in driving. But it’ll help some,” Corey said.

The U.S. Energy Information Administration reported this week that motor gasoline consumption dropped roughly 25 percent last week from the previous week.

Ethanol produced at facilities like Carbon Green BioEnergy is sent to fuel terminals to be blended with gasoline. In areas with stay-at-home orders like Michigan, gasoline demand has dropped by up to 60-70 percent, Corey said. The Lake Odessa plant has already reduced production, and may have to stop depending on the length of the stay-home order. Production halts have occurred elsewhere in the Midwest. 

Meanwhile, the biofuels industry has been in an ongoing dispute with small oil refiners, which have been receiving waivers from federal biofuel-blending mandates from the Trump administration. Ethanol producers claimed a recent victory when the Trump administration declined to appeal a court ruling that limits refinery waivers.

The coronavirus has only exacerbated uncertainty for the corn-based ethanol industry. Their production uncertainty trickles down to the growers of the feedstock, Corey said.

“It’s having a huge economic impact on our industry, but it’s also going to have a huge economic impact on the agriculture industry,” he said, adding that staying open right now is “day to day.”

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