Ethanol Under Stress

The renewable fuels industry has been on a roller coast for several months now and the financial stress is widespread throughout the sector.

In response to a challenge brought against the EPA by the Renewable Fuels Association, National Corn, the American Coalition for Ethanol, and the National Farmers Union, 10th circuit federal court ruled in early January that the EPA didn’t have the authority to issue small refinery exemptions from the renewable fuels standard (RFS) for three refineries. The court determined that hardship extensions were intended to help the industry transition to meeting the RFS blending requirements. If a refinery didn’t qualify for a hardship exemption in prior years, it shouldn’t qualify for an extension of an exemption that was not previously granted.

As background, the Trump administration’s EPA granted 85 small refinery ‘hardship’ exemptions between 2016 and 2018 totaling more than 4 billion gallons of demand that was lost. For 2015, the number of extensions approved by EPA was down to 7. Most of the exemptions that were granted in 2016-18 had either not previously received a hardship waiver or their temporary or ‘transitional’ exemptions had lapsed.

Refiners insisted that the ruling be appealed. In late February, thirteen oil state Senators asked President Trump to appeal the 10th circuit decision suggesting that if the ruling stands it would put, ‘a dozen small refiners under severe financial strain and thousands of jobs at risk.’

On March 24th, the Trump administration decided not to appeal the 10th circuit ruling and indicated that they may apply the ruling nationwide. This was a big win for the renewable fuels industry despite continuing efforts by refiners to continue with their appeal. Still, Trump administration officials indicated that they would look for other ways to help blunt the financial impact of the decision.

In the midst of all of this the oil and ethanol industry were beginning to feel the oil price war between the Saudis and Russians. Add to that the impacts of the novel coronavirus and all parties were pleading for federal assistance and relief.

The ethanol industry insists that the 10th circuit ruling be applied to the 25 pending petitions before the EPA for 2019. The industry also points to a 2017 U.S. District court ruling that ordered the EPA to restore 500 million gallons of inappropriately waived 2016 blending requirements and a 2020 EPA rule whereby EPA must account for exempted volumes to make sure RFS requirements are met.

On May 1st farm and renewable fuel groups asked the EPA to oppose the American Petroleum Institute’s petition to request reconsideration of the 2020 final rule on the RFS. The API letter wants the final rule to eliminate any measure to ‘reallocate’ demand destruction related to the small refinery, hardship waivers. They pointed out that the EPA has yet to officially confirm that the 10th circuit decision would be applied nationwide.

In late May, renewable fuel advocates became alarmed when they learned that small refineries were petitioning the EPA for exemptions for previous compliance years for which they had not timely applied. Presumably, the goal is to retroactively request waivers and make them eligible for continued waivers in line with the 10th circuit ruling. Importantly, the EPA informed members of the Senate Environment and Public Works committee that they were sending the DOE those requests despite the fact that they were not appearing anywhere on the EPA’s RFS dashboard (that would normally list all waiver applications).

In a letter to the EPA, Renewable Fuels Association President Geoff Cooper wrote that requests SRE exemptions from prior years is “no more than a thinly veiled attempt to circumvent” the 10th circuit court decision. “This end-run strategy was explicitly acknowledged by Under Secretary Menezes who described the prior year exemption petitions as ‘gap fillings’ intended to establish, without regard to merit, a continuous string of exemptions ‘to be consistent with the 10th Circuit decision.’”

After weeks of delay, on June 18th the EPA finally posted 52 petitions for retroactive waivers on their dashboard. The waivers are for compliance years 2011 through 2018. The oil industry is split on whether the EPA should approve the waivers. A refiners industry organization insists that the EPA wrongly denied waivers in the past to justify retroactive relief. The American Petroleum Institute (API), on the other hand, will not support granting prior year waivers. Instead, the API suggests the requests are evidence of a broken RFS that should be repealed.

In a statement released by Growth Energy, CEO Emily Skor stated, “EPA’s dashboard confirms that the refiners hope to rewrite history, just to bypass the 10th Circuit Court and push more biofuels out of the marketplace.”

Adding more uncertainty by consideration of these ‘gap filling’ exemptions would add insult to injury. More than 70% of ethanol plants have either shut down or substantially reduced production due reduced demand for driving fuels. Offering up more waivers (or a string of prior year waivers) would make the situation much worse for the entire corn milling industry.

Sources: Farm Progress; Progressive Farmer; American Coalition for Ethanol, Reuters

GGC Board Approves Distribution of $0.13/Unit

On June 15th, the Golden Growers Board of Directors approved a $0.13/Unit distribution of $2,013,762 to members of record as of June 1, 2020.

A $0.13/Unit distribution is a penny lower than what the Golden Growers Board had been distributing more recently.

It has been the GGC Board’s goal to level out distributions through the current ProGold lease. They estimated capital expenses, the timing of payment for capital projects, and declining lease payments. Now that estimates have been replaced with updated financial information, it appears they may fall short of their projected reserve balance at the end of the lease period. Therefore, the GGC Board decided to make an adjustment in member distributions to avoid more significant adjustments in the future. Future distributions may be adjusted up or down as we receive more accurate financial information.

This distribution will retire a portion of remaining 2018 allocated income. With this distribution, the remaining equity credit balance of $6,158,568 or $0.40/bushel. This balance is useful in determining per Unit basis levels and does not constitute an outstanding obligation for GGC.

Golden Growers has issued payments to members totaling $193,918,145 or 211.7% of the original investment in the ProGold plant.

Keeping the Flame Burning

“Our theme for this year’s annual meeting is ‘Keeping the Flame Burning’. In connection with this theme, we temporarily changed our logo and colors to reflect the concept. We had a dual purpose for today’s theme,” opened Harless. “We wanted to recognize and celebrate twenty-five years since Golden Growers member elected their initial Board of Directors. Second, we wanted to spend some time focusing on the very real issue of natural gas availability in the Wahpeton area.

“Twenty-five years ago, was an exciting time for the cooperative,” stated Harless. “The ProGold plant was THE major story and attracting it was a top priority for Governors, Legislators, and Mayors. Members anted up $54 million in equity, and a ground breaking was planned. A flame had been lit. Farmers were looking to climb the ladder of value added agriculture and activities surrounding Golden Growers and ProGold was an inspiration for others who had the same dream.” Harless noted that the flame ‘dimmed’ but that the leadership of ProGold and that original board identified a path forward that ultimately allowed the cooperative to return over 200% of the original investment to our members. “We owe a great deal of thanks to those who served on that original board.”

“We seek to keep the flame burning for many years to come,” said Harless. He highlighted infrastructure projects, replacement of the Distributive Control System, and repairs to the finish dryer as important as key investments intended position the ProGold plant well into the future. He then went on to discuss the importance of securing reliable and reasonably priced natural gas to keep the flame burning in a ‘literal’ sense. “The ProGold plant simply can‘t be utilized to its full potential. And unless this community shortage is resolved, there can be no discussion of new processing or expansion for the future.”

Harless discussed potential natural gas solutions and the problems associated with each option. The most viable options include: a) a pipeline from Mapleton to Wahpeton supplying Canadian gas originating from the Viking pipeline at a cost of over a million dollars per mile – the Viking pipeline is also Wahpeton’s existing supply for natural gas; or b) a less expensive pipeline connecting with the nearby Alliance pipeline with more expensive, unprocessed gas from ND oilfields. “Anyone tapping into the Alliance line is required to pay a ‘wet gas’ charge based on the value for those gasses once separated in the Chicago market.” This solution will require an adjustment to this wet gas charge.

After noting the flaring of gas in western ND, Harless mentioned that many communities would love to have access to this wasted natural gas for community development. “We are hopeful that a solution can be found that encourages greater ‘in-state’ (ND) usage for unserved and underserved communities.” Harless thanked the Wahpeton Community for hiring a consultant and for the efforts of local legislators, the Governor, and other state leaders for their efforts.

Harless and Bot Re-Elected, Retiring Board Members Honored

Golden Growers members re-elected Mark Harless (North District) and Richard Bot (South District) at the 2020 Annual Meeting.

Upon re-election, Rick Bot thanked members for their support over the past three years. “Serving on the board has been a great experience. I’ve been able to learn more about international trade, the many products made from corn, and how the corn milling industry has changed in my lifetime.”

Pursuant to bylaw changes approved in 2019, the total number of Board members is now twelve. After the 2021 annual meeting, the Board will be reduced to nine members.

Three directors retired from the Board after twelve years of dedicated service on the Board. All three were elected at a transitional time for the cooperative. ProGold had just executed a new lease with Cargill, the debt was paid off, distributions to members were occurring, GGC converted to a MN 308B Cooperative, and SEC reporting had begun.

Most recently, Glenn Johnson served on the Finance & Audit Committee; Chris Johnson Chaired the Personnel & Compensation Committee; and Shaun Beauclair Chaired the Strategic Planning Committee and served on the Executive Committee.

“We will miss Glenn Chris and Shaun for their valuable and dedicated service to our cooperative,” stated Harless.

NOTICE: Golden Growers to hold ‘Virtual’ Annual Members Meeting

The previously scheduled ‘in person’ meeting at the DoubleTree in West Fargo will not be held. 

Instead the Annual Meeting will be held through Remote Communication using GoToMeeting’s Conferencing Services starting at 9:45 am CDT on March 26th.  

This decision was not arrived at lightly because our Board values our annual face to face discussions. But they also fully understand concerns being raised by public health officials about COVID-19 and the risks associated with public gatherings. On Sunday evening, the CDC recommended that no gathering over 50 people should be held. We have decided to follow their guidance for the health of our communities and our members.
Note: Resources on COVID-19 are available at: www.health.nd.gov

Please join the meeting at 9:45 am (CDT) and contribute to a quorum for conducting our business:
• Dial-in number: (571)317-3112, Access code: 588-285-917
• Online Meeting: https://www.gotomeet.me/ScottStofferahn/annual-meeting-golden-growers-cooperative
• Install GoToMeeting App prior to the meeting: https://global.gotomeeting.com/install/588285917

We recommend that you call in on the dial-in number and watch the presentation online. Meeting links and Presentation slides will also be posted on the Golden Growers website for members to follow along.

If you are unable to see the presentation using GoToMeeting, you can follow along by clicking the link below.

Annual Meeting Presentation Slides

Your assistance is needed to meet our quorum. While we would prefer everyone join the meeting through the call, the simple act of voting as described below, will contribute to the quorum requirements of our bylaws.

Voting Option 1: Print the Ballot for your District in the links below, Mark the Ballot, and Mail it to:

Golden Growers Cooperative, 1002 Main Ave W, Suite 5, West Fargo, ND 58078

Voting Option 2: Review the ballot for your district in the links below and email your responses on the ballot questions to scotts@goldengrowers.com

Brian Jennings American Coalition for Ethanol CEO to Headline March 26th Annual Meeting

Golden Growers is pleased to announce Brian Jennings as our annual meeting guest speaker.

Mr. Jennings has served as the top executive for the American Coalition for Ethanol (ACE) since 2004. Prior to serving in this position, he served as a U.S. Senate Agricultural Policy advisor and for a South Dakota farmers organization.

ACE promotes and defends the ethanol industry by representing over 120 organizations in 19 states.

Jennings will inform GGC members about status of the Ethanol Industry at a time when the future of the Renewable Fuels Standard has become one of the hottest topics for agriculture.

The annual meeting will be held on Thursday, March 26th at the DoubleTree Conference Center 825 E Beaton Dr, West Fargo, ND.

This year, Golden Growers will celebrate its 25th year since members first elected a Board of Directors.

The schedule is as  follows:

8:00 am – Registration Opens

9:00 am – Morning Short Courses

  • Research: 60″ Corn Rows, Surprising Results – Kelly Cooper, Agronomist NDSU Oakes Irrigation Research
  • The Natural Gas Capture and Distribution Challenge – Justin Kringstad, ND Pipeline Authority
  • Corn Market Outlook for the 2020 Crop Year – Pat Pithey, Cargill Corn Merchandising

10:00 am – Golden Growers Annual Meeting

  • Election of Directors
  • Review of Financial Statements
  • Reports by the Chairman and Executive Vice President

11:00 am Guest Speaker, Brian Jennings CEO of American Coalition for Ethanol

11:45 am – Lunch followed by Your Questions

In the Midst of Excess, Shortages Abound

If you take a drive through oil country in western North Dakota at night, you will see hundreds of places where natural gas is being flared (or burned) off. This is because drilling activity continues to surpass the same industry’s ability to effectively capture, process, utilize, and export the gas. ND Pipeline Authority director Justin Kringstad recently reported that the state is falling short of its 88% goal by capturing only 83% of natural gas. Remaining gas is flared in order to allow continued oil production. While efforts are underway to meet the state goal through additional processing capacity and additional pipelines to transport natural gas liquids out of state. Still, to meet future goals, significant additiona investment in infrastructure will be required.

Meanwhile, many communities within North Dakota have no access to natural gas or suffer from shortages and farmers ran short of propane to dry their corn. In some circumstances, it may not be economically feasible to extend delivery infrastructure, but for other communities natural gas availability offers the potential for economic growth. Recently, State Legislators like Rep. Mike Brandenberg, Rep. Alisa Mitskog, Sen. Jim Dotzenrod, and Sen Terry Wanzek have discussed investing in distribution and delivery to meet farm and community needs. We are encouraged that state leaders are considering how to convert what is being wasted into a driving force to improve our state.

GGC Board Allocates 2019 Income – Announces Payment

On February 4, 2020, after review of the 2019 end of year financial and income statements, the Board of Directors allocated income of $6,962,196 to the members of Golden Growers Cooperative. The Board also approved the retirement of a portion of allocated equity credit in an amount of $0.14 per patronized bushel for a total of $2,168,667.  This payment was issued on February 14, 2020.  70% of members received their payments through the use of Direct Deposit.

SAVE THE DATE: GGC Annual Meeting Set for THURSDAY, MARCH 26TH

Golden Growers Cooperative will hold its Annual Members Meeting on Thursday, March 26th at the Doubletree Conference Center, 825 E Beaton Drive, West Fargo, ND.

Members will have the opportunity to elect Directors to serve on the Golden Growers Board. Current directors up for re-election are: Mark Harless, Borup, MN (N District); and Richard Bot, Minneota, MN (S District).

Directors Shaun Beauclair (N District); Chris Johnson (C District); and Glenn Johnson (N District) will reach their term limit and due to the change in Bylaws approved at the 2019 Annual Meeting, their director positions will not be filled and the total number of Directors will be reduced to twelve.

Any member in good standing is eligible to be nominated to the Board in the district where the member is registered. If you are interested in serving on the Board or want more information about district elections, visit our website at www.goldengrowers.com or contact us at 701-281-0468 or scotts@goldengrowers.com.

Anticipate a Direct Deposit Mailing in January

Over two thirds of Golden Growers members are participating in Direct Deposit of their Distribution payments. We have received numerous favorable comments about how well the system works. It is in the interest of members and Golden Growers to have our members participating in the electronic payment system. In early January, members who are not participating will receive a letter with a completed form and return envelope. Please consider enrolling to simplify your life, save time, and make your Cooperative more efficient.

Advantages include:

  • No Lost Checks – On an annual basis, Golden Growers spends a great deal of time tracking down checks that have been lost or not cashed. Direct Deposit eliminates this problem. Members ALWAYS receive their money and GGC saves time and expense.
  • Immediate Access to Payments – Direct Deposit participants have immediate access to their payments instead of waiting for the mail and the time needed to go to the bank to make a deposit. At the end of October, 23% of distribution checks worth over $220,000 remained uncashed AND 35 checks worth $28,000 from the June and February distribution were still outstanding. One month later, uncashed checks total exceed $119,000.
  • Confirmation of Deposit – Golden Growers mails out a confirmation letter identifying the purpose and amount of the payment for your records.