Media coverage of the ethanol issue has appeared in The Wall Street Journal, The Washington Post, The Chicago Tribune and The New York Times. Also see Robert Rapier’s blog, Energy Squared.

The two biggest proponents of the extension are the Renewable Fuels Association (RFA) and Growth Energy. They are currently split over their preferred type of government support for the industry. RFA is promoting a 5 year extension of the VEETC (and presumably the tariff) while Growth Energy supports a phasing out of the tax credit with government funding going into developing the infrastructure to promote ethanol sales.

They have been noticeably silent on the issue of whether or not the tariff will be extended. The tariff, $.54/gallon, prevents the Brazilian ethanol industry from competing with ethanol produced in the United States. When prodded, the domestic ethanol producers have successfully muddled the issue over threats of job losses if the tariff expires, while asking why the U.S. should replace its dependence on foreign oil with a dependence on foreign ethanol.

]]> http://www.factsaboutethanol.org/2010/08/10/following-the-ethanol-debate/feed/ http://www.factsaboutethanol.org/2009/06/16/faulty-ethanol-math/ http://www.factsaboutethanol.org/2009/06/16/faulty-ethanol-math/#comments Tue, 16 Jun 2009 15:15:05 +0000 GasMan http://www.factsaboutethanol.org/?p=627 In a press release this week, Todd Sneller, administrator of the Nebraska Ethanol Board claimed, “if all the fuel sold in Nebraska in the past five years was E85, Nebraskans would have saved $2.6 billion.”

Mr. Sneller might want to…

The original public comment period was to end on May 21, 2009, and will now end on July 20, 2009.

The current limit on the amount of ethanol that can be blended into a gallon of gasoline is at 10 volume percent ethanol (E10) for conventional (non flex-fuel) vehicles.

Growth Energy and 54 ethanol manufacturers submitted the E15 waiver application on March 6, 2009. The statutory provision calls for EPA to make a decision within 270 days of receipt, which is December 1, 2009. EPA said the comment period extension will not change this timeframe.

Associated Press — BILLINGS, MONT. — April 22, 2009 — A Montana biodiesel company, which has received more than $1.6 million in grants and loans from the state and a regional economic development corporation, owes farmers in Montana and North Dakota $1.2 million for crops grown last year.

Sustainable Systems LLC and a parent company agreed Wednesday to sign a consent agreement allowing the Montana Department of Agriculture to sell crops, seed and processed cooking oil held at several Montana locations and distribute a $113,000 surety bond to pay part of what is owed to Montana producers.

“We plan to work through this in an orderly process that maximizes the value of assets for the benefit of growers. Our first priority is to get producers paid,” Director Ron de Yong of the Montana Department of Agriculture said in a statement Wednesday.

A separate process is occurring in North Dakota. The state Public Service Commission will consider a motion next week to ask a judge to declare the company insolvent and to appoint the commission as a trustee, Licensing Director Sue Richter said Wednesday.

“Once we get further along in the process, the commission will publish a notice for anybody that may be a claimant to file claims,” she said.

Richter said a list so far indicates about a dozen North Dakotans may have claims, but that could change.

An official with Sustainable Systems did not immediately return a phone message Wednesday seeking comment.

The company contracted for oilseed in 2008 at rates far greater than current values and was unable to obtain bank loans to pay for seed and remain operational, according to the annual report Sustainable Systems’ parent company, New York-based Greenshift Corp., filed on April 16.

According to the company’s records, Sustainable Systems owes 54 safflower growers in the two states a total of $1.2 million for delivered crops.

In addition, the company signed 2008 contracts with about three dozen other safflower and sunflower growers who have not delivered the seed. The company has agreed to work separately on contract issues with those growers, Agriculture Department officials said.

Last month, the company voluntarily relinquished its license to purchase agricultural commodities and has cooperated with the investigation and planned liquidation to pay growers.

“The voluntary cooperation should speed up the process of getting money to growers and allowing future development of the bio-products industry in Montana,” de Yong said.

The company’s Culbertson oilseed processing plant has been in existence since 1956, and produced safflower cooking oil most recently under the Montola brand. At full production, 19 employees crushed and refined oil from crops. The plant now sits idle.

State officials said Sustainable Systems has not repaid about $124,000 in Growth Through Agriculture Loans dating back to 2002. All loans were deferred in 2006 and will be due in 2011.

In 2005, the company received a $760,000 loan for working capital through the Great Northern Development Corp., a regional development corporation in northeastern Montana. Sustainable Systems also received a $50,000 Growth Through Agriculture grant for engineering at the Culbertson plant that went through the GNDC.

In 2006, Montana awarded Sustainable Systems a $700,000 Workforce Innovation in Regional Economic Development grant. The terms of the grant, used for training and grower outreach, were satisfied, said Nancy Guccione, manager of the WIRED Program through the state Commerce Department.

DTN writer Todd Neeley reported yesterday  “The future of U.S. corn-based ethanol could hang in the balance as the California Air Resources Board prepares to consider a proposed low-carbon-fuel standard during a public hearing Thursday in Sacramento.

“For the past year ethanol industry officials have criticized the proposed regulations for penalizing corn-based ethanol for indirect-land-use changes when calculating ethanol’s carbon score, while not making the same calculations for other fuels.

“The regulation could lead the way for other states and countries to adopt similar laws that could hurt ethanol’s market.”

The DTN article stated that, “California would consider corn-based ethanol to be a greenhouse gas emissions contributor if the regulations are approved.”

The article explained that, “James Hrubovcak, deputy chief economist for USDA, said Monday some of the models being considered by CARB would effectively eliminate the state from using any ethanol from the Midwest to help reduce California auto emissions, though some ethanol from California could be used.

“That could be a major blow to ethanol marketers, considering California represents close to 12 percent of all U.S. gasoline sales.

“Eleven Northeast states are ready to adopt the California standard, Hrubovcak said, which could shrink the U.S. ethanol market by about 30 percent.

“‘If they move down that path, that’s a big market that corn-based ethanol could potentially lose,’ Hrubovcak said.”

“But what I find distressing is that this Administration is opposed to looking for oil offshore, but the President bows to the Saudi King, the president is friends with Venezuela whose biggest impact on us is that they sell us a lot of oil, and I just think that there is a shallowness about how they analyze things.”

Newt Gingrich on the Today Show

In the internet era anyone with a computer, an internet connection, and a clever blog name can stand tall in reply, offering the common sense of the masses as an antedote to foolishness such as the column penned by Mr. Yael Aboulhalka’s of the Star’s ed board. Read his editorial here which calls for a 50 cents per gallon gas tax.

And read below some comments from the KCStar’s readership, …

From CZMdivemaster on January 4, 2009 - 2:24pm:

Yael T. Abouhalkah, man are you living on the same planet as the rest of us? The economy is tanking, many, many people are losing their jobs and you think now is the right time for a large gas tax? …

From sonofrogue on January 4, 2009 - 10:32am.

Now that gasoline prices have returned to “normal,” morons like alphabet want to raise the taxes on gasoline to encourage “conservation” and the search for alternative fuels like wind and solar. Please. Oil is, and will remain, the most effective energy source (next to nuclear) for years to come. Lets encourage alternative sources, but not sacrifice our economy again to crippling gasoline prices.

“Without biofuels, which can be refined to produce fuels like the ones made from petroleum, oil prices would be even higher. Merrill Lynch commodity strategist Francisco Blanch says that oil and gasoline prices would be about 15% higher if biofuel producers weren’t increasing their output.”

What to make of this? Some preliminary thoughts.

(1) If Blanch’s analysis is correct, then proponents of the ethanol mandate, the 51-cent per gallon blenders tax credit, the 54-cent per gallon tariff, and other forms of policy privilege can no longer claim that ethanol ”displaces” petroleum in the nation’s fuel supply. Rather, ethanol adds to the total stock of motor fuel. It is by increasing total liquid fuel supply relative to global demand that ethanol, in Blanch’s analysis, reduces crude oil and gasoline prices.

If correct, this is also an argument for opening the Alaska National Wildlife Refuge (ANWR) and the Outer Continental Shelves to oil production. Increased oil production should also increase supply relative to demand, lowering oil and gasoline prices. 

(2) Blanch’s estimate, as far as I can determine, is not part of a formal or published study. It may merely be one analyst’s back-of-the-envelope. I find it troubling that RFA and others are making political hay out of an estimate based on assumptions, methods, and data that the RFA has not shared with the public, may not have evaluated, and may not even be privy to.

(3) The WSJ article says that global oil demand rose by 900,000 barrels per day (bpd) last year, and biofuel production rose by 300,000 bpd. We may surmise, therefore, that Blanch, assuming a particular elasticity of demand, estimated what would happen if biofuel production had not increased. 

That is a reasonable thought experiment, but it tacitly assumes an “other things being equal” universe. Yes, if demand grows by 900,000 bpd and biofuels don’t grow by 300,000 bpd, then–other things being equal–the price impact might be exactly as Blanch estimates. But usually other things are not equal.

For example, the same WSJ article says that OPEC’s output “declined by about 400,000 barrels per day, according to the IEA [International Energy Agency].” How do we know that if biofuel production had been lower, OPEC output would not have been higher? If OPEC is truly the cunning cartel that some commentators claim it is, then OPEC adjusts its production decisions in light of what other actors, including biofuel makers, plan to do. If OPEC’s 400,000 bpd cutback was a strategic decision, designed to prop up oil prices despite planned increases in other liquid fuels, then it wiped out any price reduction from the lesser, 300,000 bpd increase in biofuels.

For years, environmentalists have opposed opening ANWR to oil production on the grounds that its output would be just “a drop in the bucket,” the price-reducing effects of which OPEC could easily negate just by cutting back production. The same critique applies with equal merit (or the lack thereof) to ethanol.

(4) Blanch’s 15% estimate is questionable in light of recent changes in oil prices.  He estimated in late March that without the increase in biofuels, oil would be $115 a barrel instead of $102. However, some six weeks later, oil hit $120 a barrel. Between those dates there was no drop in biofuel production. So it is not obvious that, in March, biofuels were responsible for the price of oil being $102 instead of $115.

(5) As you’d expect, RFA ignores the many ways in which ethanol increases the price of gasoline. These include the increased costs to store and ship ethanol, the increased cost to refine gasoline mixed with ethanol to counteract ethanol’s volatility and the associated hydrocarbon emissions, and the fuel economy penalty resulting from the fact that ethanol has one-third less energy content by volume than gasoline. To what extent Blanch’s estimate takes these factors into account is unknown at this point.

In closing, let me make clear that I mean no criticism of Blanch. Making estimates is what economists do. But I am troubled by the facile conclusions that the RFA and others are drawing from his estimate. They may have no idea what assumptions it is based on. They very likely have never considered whether the estimate takes into account potential strategic behavior by OPEC, or whether it is reasonable to give ethanol credit for lowering oil by $13 a barrel in March when oil prices were $18 a barrel higher in May.

This does not mean that Congress should give up on biofuels as an important part of the effort to reduce the country’s dependency on imported oil and reduce greenhouse gas emissions. What it does mean is that some biofuels are (or are likely to be) better than others, and that Congress should realign its tax and subsidy programs to encourage the good ones. Unlike corn ethanol, those biofuels will not compete for the world’s food supply and will deliver significant reductions in greenhouse gases.

Last year’s energy bill required that 36 billion gallons of biofuels be produced annually by 2022. Of that, 21 billion gallons would be “advanced” biofuels that are still mostly in the experimental stage; the rest would be the corn-based variety beloved by farmers, Midwestern politicians and presidential candidates. This mandate comes on top of a 51-cents-a-gallon subsidy to ethanol blenders enacted when the industry was small and oil prices low.

The industry is no longer small - seven billion gallons and climbing rapidly - and oil is over $120 a barrel, making ethanol not only competitive but a bargain.

Ending the tax subsidy should be easy. Ending the mandate will be tougher, though some members of Congress are showing buyer’s remorse. One reason is the worldwide spike in food prices. That has been driven largely by a huge increase in demand and rising energy costs. The diversion of American corn from food to fuel - about one-fourth of the crop - has not helped.

The other reason is a spate of studies suggesting that some biofuels - corn ethanol in particular - could accelerate global warming. Environmentalists had long regarded corn ethanol as at least carbon-neutral, emitting greenhouse gases when burned but absorbing those gases while growing. But rising demand for corn, for fuel and food, can have a profoundly negative effect if it causes farmers to clear previously untouched land, in turn releasing more carbon into the atmosphere.

Congress’s guiding principle should be to tie federal help to environmental performance. The goal is not just to stop the headlong rush to corn ethanol but to use the system to bring to commercial scale promising second-generation biofuels - cellulosic ethanol derived from crop wastes, wood wastes, perennial grasses. These could provide environmental benefits and reduce dependence on oil without displacing food production.

Though Congress is unlikely to undo the mandate, the administrator of the Environmental Protection Agency can. Unfortunately, President Bush is an ardent corn ethanol supporter, and Stephen Johnson, the E.P.A. administrator, is nothing if not a Bush loyalist.

Without reform, rising food prices and increasing damage to the climate could provoke a reaction that could be the undoing of the entire biofuels industry. That would not be helpful to the industry or the planet.

DesMoinesRegister.com

May 12, 2008 

Iowa agriculture is booming now, but disaster looms on the horizon. An anti-ethanol media storm threatens to further destabilize commodities markets by undermining political support for biofuels.

After a long decline, agriculture in Iowa is surging, in part because Congress ordered the eventual production of 15 billion gallons of ethanol, distilled from corn. As a result, land given to corn for fuel now competes with land given to corn for grain and food. The increase in demand helped push corn prices to record levels, which is why Iowa farmers are thriving.

As such, the Corn Belt owes much of its good fortune to congressional politics, rather than market forces. But in an age of the 24/7 news cycle and poll-driven policy, political support for ethanol is even more volatile than the price of commodities on the Chicago Board of Trade, and ethanol’s political situation has worsened dramatically in the past few months. That should worry Iowa farmers. After all, government giveth, government taketh away.

When Congress voted to support ethanol last December, it was touted as an environmentally friendly miracle fuel that could reduce U.S. dependence on Middle Eastern oil. Farmers, environmentalists and national-security hawks came together to form a pro-ethanol coalition.

But the prevailing political winds began to shift against ethanol in March, when Time Magazine ran a scathing cover story, “The Clean Energy Scam,” blaming corn fuel for a bevy of environmental problems, from polluting America’s watersheds to accelerating climate change.

Then, in April, riots broke out over skyrocketing food prices in urban Asia, Africa and Central America. Ethanol may not be the only reason food is so expensive, but it is the most sensational. As unrest intensified, the talking heads began clamoring about the downside of burning food for fuel.

All this negative press has undermined two of ethanol’s key constituencies. Environmentalists are put off by ethanol’s big carbon footprint, while national-security hawks worry about the destabilizing effects of ethanol on the developing world, a historical breeding ground for terrorism.

The media’s anti-ethanol drumbeat is starting to get the attention of political players. A House committee in Missouri, part of the Corn Belt, is considering a measure to eliminate the state’s ethanol requirement. In late April, Texas Gov. Rick Perry sent a letter to the Environmental Protection Agency seeking a waiver for half of the national corn-ethanol mandate.

In Congress, 24 Republican senators, including presumptive Republican nominee John McCain, signed on to Perry’s letter.

Sen. Kay Bailey Hutchison, R-Texas, is drafting legislation to freeze the ethanol production quota at current levels. In the House, Rep. Jeff Flake, R-Arizona, introduced a bill to eliminate all federal supports for ethanol.

A bipartisan team of negotiators for the new farm bill has agreed to reduce federal ethanol subsidies, reportedly in response to the criticism. Sen. Dick Durbin, D-Illinois, who represents the country’s No. 2 corn-producing state, told reporters that Congress had to take “a closer look” at its ethanol policy. And in a hearing last week, Rep. Jane Harmon, D-Calif., said, “Our enthusiasm for corn ethanol deserves a second look.”

Of course, drastic action in Congress is unlikely. But support for “doing something” is growing.

Even before the media turned on ethanol, commodities markets were growing volatile because of record prices and subsequent speculation. A legislative assault on ethanol would add further uncertainty to the market, eroding price stability and endangering the utility of futures contracts and options - the two hedges that have protected Iowa farmers for a half-century from the boom-and-bust cycle that plagued their forefathers.

Buckle your seat belts, Iowa. The fickle politics of ethanol are about to take the Hawkeye State on a wild ride.