Ethanol industry changing its strategy

Ethanol makers say they are ready to go head to head against gasoline in the marketplace — without federal tax subsidies.

But, while they can sell the fuel for less than gasoline, demand is limited in part because the public can't buy it directly.

That's why trade group Growth Energy and two Wichita-area companies, ICM and Poet Ethanol Products, said now is the time to launch the industry's next phase.

On Friday, they said they will be among those asking the federal government to switch its subsidies to new groups to continue building the industry.

Currently, the federal government provides a 45-cent-per-gallon tax credit to refineries to blend ethanol into their gasoline. The Environmental Protection Agency allows refiners to use up to 10 percent ethanol, called E10, in gasoline blends.

"Our problem is that our customers are our competitors," said David Vander Griend, CEO of ICM.

To increase demand, Growth Energy wants to provide incentives to car companies to build more cars that can burn higher blends and to gas station owners to install special pumps that dispense higher blends of ethanol. That way the public, rather than refiners, could decide whether to buy ethanol or gasoline, they say.

Robert Casper, president of Poet Ethanol Products, said ethanol in bulk sells for nearly 50 cents a gallon less than gasoline, without any federal tax credits.

"Let the marketplace choose," Casper said.

The ethanol industry, he said, could replace all oil imported from OPEC.

Federal environmental regulations are another barrier to industry growth.

The industry is currently pushing the EPA to raise its cap on ethanol in gasoline to 15 percent. After several delays to study the issue, the agency has said it will announce its decision in September.

The industry grew rapidly up to the size needed to supply E10 and then hit a wall because of the cap.

Nationwide, production of ethanol reached more than 10 billion gallons in 2009, up from 6.5 billion gallons in 2007.

But ethanol made from corn has been criticized by environmental group who say corn production hurts the environment, while those in the oil industry complain about the subsidies for competitors.