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GPRE is fueling growth through key acquisitions and is looking to acquire additional grain elevators located near their ethanol plants in order to reduce their average cost of corn. In February 2011, GPRE bought a $55 million ethanol plant to increase production capacity.
In order to reduce the US’s dependence on foreign oil, the federal and state governments have encouraged use of domestically-produced alternative fuel. Some regulations that have benefited the industry are listed below:
As part of the 2004 Jobs Creation Act, Volumetric Ethanol Excise Tax Credit, or VEETC, allows gasoline distributors who blend ethanol with gasoline to receive a federal excise tax credit of $0.45 per gallon of pure ethanol used. It is set to expire in December 31, 2011.
Passed in 2007 as part of the Energy Independence and Security Act, a federal Renewable Fuels Standard, or RFS, requires that a certain amount of ethanol be blended into US fuel supply.
In March 2009, Growth Energy, an ethanol industry trade association, and 54 ethanol producers requested that the U.S. Environmental Protection Agency, or EPA, approve the use of up to 15% ethanol blended with gasoline, or E15. In October 2010 and January 2011, the EPA approved the use of E15 in model years 2001 and above for cars and light trucks. Over 129 million vehicles or 60% of the passenger vehicles in service are eligible to use E15, which will increase the demand for ethanol.
Because the market price of ethanol is not directly related to corn prices, ethanol producers are generally not able to compensate for increases in the cost of corn feedstock through adjustments to prices charged for their ethanol. Corn crush spread measures the relationship between the price of ethanol and corn. In addition, ethanol plants are expected to use approximately 22,000 to 32,000 British Thermal Units of natural gas per gallon of production. The price of natural gas can be volatile.