Dallas Is Banking On Ethanol, But Is It The Fuel Of The Future Or A Barrel Of Pork?

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."

The environmental attraction of biofuels is "carbon neutrality," meaning the carbon dioxide they add to atmosphere when burned is roughly equal to what the crops have absorbed through respiration. Thus, in theory, they don't add to greenhouse gas accumulation. Still, there are environmental costs, which reared their dirty heads during the unsuccessful re-election campaign of the first President Bush. In 1991, President George H.W. Bush proposed new clean air rules that slapped strict caps on fuel volatility, a measure designed to combat air quality problems in some of the nation's smoggiest cities. There was one problem: Ethanol didn't meet the cap. The new regulation would have barred ethanol splash-blended gasoline because the oxygen-rich fuel, though cleaner burning, evaporates more rapidly than gasoline, releasing more hydrocarbons, which cook in the atmosphere to form ozone. A year later, as the presidential election loomed, Bush found himself sagging in the polls.
Corn-based ethanol is "pure boondoggle," says Sterling Burnett of the Dallas-based National Center for Policy Analysis.
Mark Graham
Corn-based ethanol is "pure boondoggle," says Sterling Burnett of the Dallas-based National Center for Policy Analysis.
Digging for coe pies: Panda Energy Vice President Kyle 
Woodruff, CEO Todd Carter and COO Darol Lindloff break 
ground on Panda's manure-powered ethanol plant.
Digging for coe pies: Panda Energy Vice President Kyle Woodruff, CEO Todd Carter and COO Darol Lindloff break ground on Panda's manure-powered ethanol plant.

"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]."

Despite the environmental, economic and practical challenges corn-based ethanol poses, many environmental organizations embrace the fuel. Ethanol and other renewables, they say, are integral to strategies designed to slash gasoline and diesel fuel consumption. "We need to use corn ethanol as a foundation, as a building block to get to where we want to go," says the defense council's Greene. "So we want to see it done as smart and as clean as possible, and we think it can get a heck of a lot smarter and cleaner than it is done today...But we can't wait."

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.

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