Ramstad: The debate over ethanol’s future stalls push for less-harmful gasoline in Minnesota

In mid-February, a dozen environmental groups wrote a letter to Minnesota legislators urging them not to adopt a low-carbon fuel standard recommended by a group of 40 people, including some of their own leaders.

It’s not often environmentalists oppose an idea known to lower emissions of carbon — one of the greenhouse gases causing the planet to warm. These dissenters had an effect. By late last month, when the Legislature locked in bills to act on this session, mandating a lower-carbon, Minnesota-only gasoline wasn’t one of them.

”They’re hearing a bunch of environmental groups that like it and they’re hearing a few that don’t. That puts [lawmakers] in a tough spot,” said Brendan Jordan, a vice president at Great Plains Institute for Sustainable Development, a Minneapolis nonprofit organization whose backers include energy producers. Jordan was a member of the Clean Transportation Standard Work Group that produced the low-carbon fuel standard report just before the Legislature convened.

When I started phoning around for details, I expected to learn this was one of those times when activists were unwilling to compromise and their pursuit of the perfect had become the enemy of the good. Turns out, something more interesting is going on.

The future of ethanol is being debated.

A business that has been sacrosanct in political circles for decades, shaped by perceptions about its environmental benefits and importance to farmers, is now on shakier ground.

This has implications for agriculture and the economy of Minnesota, as well as energy and climate. It’s not clear where the discussion among Minnesota policymakers is going, but the choices aren’t going to get easier for legislators and Gov. Tim Walz.

“The LCFS is, like ethanol itself, out of date,” the environmental groups wrote in that February letter, using an acronym for low-carbon fuel standard. “They have both been left behind by electrification.”

Americans’ demand for gasoline peaked in 2018. It fell sharply in the pandemic year of 2020 when people drove much less. It bounced back up in 2021, then resumed its downward drift in 2022 and 2023 as electric vehicle sales climbed. Last year, the nation consumed 376 million gallons of gasoline a day, down from 392 million a day in 2018, according to the U.S. Energy Information Administration.

At this point, let me express some caution. I wrote early last year that EVs aren’t the rage they’re portrayed to be and sales trends since then have borne out that observation. Some of the slower growth in EV sales is simply the law of large numbers at work; rates of change are harder to sustain against a larger base. Some of it is a mismatch in the market, with buyers wanting lower-priced models than manufacturers are producing. Some of it is the which-comes-first dilemma with charging station infrastructure.

EVs will continue to gain market share, however, and will pressure demand for ethanol, which is mixed into nearly every gallon of gasoline produced in the U.S.

Minnesota is the fifth-largest producer of ethanol by capacity, with 19 plants producing 1.35 billion gallons last year, a 1% jump from 2022, according to a February report by the University of Minnesota Extension. That report called 2023 “a year of stability and growth in the ethanol industry.” The state’s ethanol plants consumed the equivalent of one-third of Minnesota-grown corn.

California in 2011 became the first state to create a gasoline formula that was less carbon intensive, forcing producers to adopt processes and ingredients that reduce carbon pollution. Ethanol is one of those ingredients, and farmers see the prospect of more low-carbon standards as a potential hedge against declining overall demand for gasoline.

The likelihood that ethanol will play an important role in sustainable aviation fuel is another hedge — and something that has brought Delta Air Lines into the discussion.

Minnesota and a handful of other states, mostly with Democratic-led statehouses, started working on their own lower-carbon formulas after Oregon and Washington followed California’s lead. California has added other regulations, like one for the phaseout of sales of fossil fuel-based vehicles by the mid-2030s.

I don’t think Minnesota will go that far, which is why the rejection of the LCFS by environmentalists is so interesting. It’s a gamble the electrification movement will stay on track and that the power of the ethanol lobby has peaked.

“If we had tried to do this in Minnesota 10 years ago, I might have been supportive,” said Kathleen Schuler, policy director for Health Professionals for a Healthy Climate. She participated in the working group and then signed the letter opposing its recommendation. “Now, this policy hangs on to liquid fuels longer than we need to.”

Missing from the working group’s discussion was the potential price at the pump of a special Minnesota gasoline. Only the state’s two refineries — Pine Bend in Rosemount and Marathon in St. Paul Park — are likely to make it. Out-of-state refiners may find it unprofitable to make a special blend for a place where their market share is so low.

No surprise, Minnesota’s consumers will join corn farmers making tradeoffs to slow the warming of the planet. We’re seeing how difficult it is to decide what the tradeoffs will be.