By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
The switch squeezed ethanol producers dry, and fuel terminal operators scrambled to meet the mandate for summer blends, especially in places like Dallas and Houston, sending ethanol prices far beyond the cost of the MTBE additive it replaced. According to the Houston Chronicle, July ethanol futures were selling for $3.73 per gallon in June compared with $1.99 for MTBE, though ethanol prices have subsided considerably since then, trading at $1.89 for November futures as of this writing.
"When you're talking about these things, lay out the benefits, but lay out the costs as well," says the National Center for Policy Analysis' Sterling Burnett. "Not too many people know about the costs related to these clean fuels, these renewable fuels. You can't justify them on economic grounds, and I don't think you can justify them on environmental grounds...It's just a pure boondoggle."
"But now, seeking to woo farm voters in Illinois and other Midwestern states crucial to his re-election, Bush has ordered his staff to find a way to rewrite the regulation, reversing its effect so it would promote higher sales of the corn-derived fuel instead," reported the Chicago Tribune on September 9, 1992. Fat ethanol refiner profits were at stake. Archer Daniels Midland Co., whose then Chairman Dwayne Andreas flushed the Republican war chest with more than $1 million, stood to earn at least $125 million in additional annual profits per year if the rule was amended to permit unrestricted ethanol-gasoline blends. In early October, Bush vowed to rewrite environmental rules to provide for an ethanol exemption, essentially "passing out an election-year goodie intended to shore up support in Illinois and other Midwestern farm states," the Tribune said.
Granted, these air quality problems are almost nonexistent in fuels with high ethanol concentrations, such as with E85. But evaporative emissions peak at about 10 percent ethanol and 90 percent gasoline, the very ethanol fuel most in use. "The irony is painful," says the National Resources Defense Council's Nathanael Greene.
But that isn't the only adverse ethanol impact. In April 2002, the Environmental Protection Agency declared most ethanol plants were in violation of federal clean air rules, emitting unlawful amounts of carbon monoxide. That same year, 12 ethanol plants entered into a settlement with the Department of Justice, the state of Minnesota and the EPA over clean-air violations, and the Sierra Club sued two Midwestern plants for releasing potentially carcinogenic volatile organic compounds. In October of this year, The Associated Press reported that the Iowa Environmental Council and the Iowa Department of Natural Resources are concerned about the soil erosion large-scale corn cultivation causes and laments that ethanol plants are fairly large emitters of contaminants.
"It's not environmentally friendly at all," says Kevin Hassett, director of economic policies for the American Enterprise Institute, a Washington, D.C.-based public policy think tank. "So you're left wondering: Why have all of these subsidies? The answer is not because of the characteristics of ethanol; rather it's because of the characteristics of the senators who decide to [promote it]."
Because corn-based ethanol does provide benefits, even if marginal, we need to start using it to reshuffle our transportation fuels portfolio in a way that is easier on the national economy and environment and doesn't exacerbate security risks, Greene insists. He sees corn-based ethanol as a starting point to more efficient and less land- and fossil-fuel-intensive cellulosic ethanol, or fuel derived from switchgrass and agricultural wastes such as cornstalks, rice hulls and wood chips. Though the process to convert cellulose into sugars and then fuel is barely in nascent stages, proponents see it as the most potent punch to finally put a sizable dent in U.S. oil consumption.
And the potential is stunning. While corn-based ethanol can yield 300 to 450 gallons per acre and soy generates just 50 to 60 gallons of fuel per acre, ethanol from switchgrass can potentially yield 1,000 gallons per acre or more, Greene says.