Wesley Clark has two main arguments:

• The building of oil infrastructure was subsidized by government, therefore subsidizing ethanol infrastructure is only fair
• Using government money to install ethanol pumps and mandating that new vehicles be flex-fuel compatible would create an “open market” where ethanol can compete with gasoline

An open market for fuel choice in America would be great. I don’t believe that:

(1) mandating the production of vehicles that are able to run on ethanol

(2) using government money or tax credits to encourage gasoline stations to install E85 pumps

(3) extending the tariff on foreign ethanol

at all constitute an “open” market. Nor does the RFS mandate requiring that over 10 billion gallons of ethanol be blended into the fuel supply each year. Corn ethanol can compete, just not with anything produced abroad, not without a mandate requiring that Americans use it, and not without a tax credit or massive infrastructure investments.

Here is Wesley Clark’s statement in support of extending the tariff:  “There is absolutely no reason for the United States to trade dependence on foreign oil (for) dependence on foreign produced ethanol.”

That statement, along with the letter above, display an amazing ignorance of economics. Apparently international trade is harmful and we should erect more trade barriers to reduce our dependence on anything produced outside of the good ole US of A.

The less obvious point here is that billions and billions of dollars of government investment spent on infrastructure to persuade blenders and gas stations to offer E85 is also not, by any reasonable definition, an “open market.”

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/2009/05/12/senior-republican-on-ag-committee-sees-unintended-consequences-of-ethanol/ http://www.factsaboutethanol.org/2009/05/12/senior-republican-on-ag-committee-sees-unintended-consequences-of-ethanol/#comments Tue, 12 May 2009 14:28:50 +0000 GasMan http://www.factsaboutethanol.org/?p=610 GOODLATTE CALLS ON EPA TO STOP ETHANOL BLEND INCREASE

Washington, DC: Today Congressman Bob Goodlatte was joined by many other Members of Congress in sending a letter to President Barack Obama, Agriculture Secretary Tom Vilsack and Environment Protection Agency (EPA) Administrator…

We’ve just been alerted that despite House Democrats relenting on extending bans on offshore drilling and oil shale in the continuing resolution (CR) appropriations bill, Democrat Senate Leader Harry Reid has decided to sneak an extension of the oil shale ban through as Congress fights over the financial bailout.

Oil shale in America’s West is estimated to hold be between 800 billion and 2 trillion barrels of oil — that is more than three times the proven oil reserves in Saudi Arabia alone.

Here is the text of Reid’s proposed new ban on oil shale, that he is trying to add as an amendment to the CR or move seperately as a “stimulus” package, or we should say an anti-stimulus package if this is included.

Sec 1602 continues ban on oil shale. The language follows:

SEC. 1602. Notwithstanding any other provision of law, including section 152 of division A of H.R. 2638 (110th Congress), the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, the terms and conditions contained in section 433 of division F of Public Law 110-161 shall remain in effect for the 19 fiscal year ending September 30, 2009.
It would be an insult to all Americans if Senate Democrats worked to bailout Wall Street while damaging our future prosperity by banning development of vast energy reserves in oil shale.

For Ford Heights and other agricultural towns, the “green- collar” job revolution envisioned by federal biofuel mandates is a dream deferred. Knee-high grass and old tires cover the site as record prices for corn, the main ingredient in ethanol, discourage investment in new plants.

The $20.8 billion industry may have itself to blame. Breakneck construction led to 168 ethanol plants, already producing more than U.S. mandates require for the fuel additive this year. The distilleries buy so much corn — as much as a third of the U.S. crop this year — that they have contributed to price increases, the U.S. Department of Agriculture says.

“I kept saying they’re going to kill the golden goose,” says Jim Jordan, president of Jim Jordan & Associates LP, a Houston fuel-consulting company. “We have in fact overbuilt. This thing is pretty devastating.”

U.S. President George W. Bush and Democratic presidential candidate Barack Obama, a senator from Illinois, have backed ethanol as a way to support American farmers and reduce dependence on imported oil. It’s distilled from corn kernels in the U.S. and blended into gasoline. One corn bushel yields 2.75 gallons of ethanol.

Food Inflation

Initial enthusiasm has given way to concern that diverting crops for fuel is accelerating a rise in food costs. Riots have erupted over shortages from Haiti to Egypt.

Some U.S. food companies, including Springdale, Arkansas- based chicken producer Tyson Foods Inc., formed a “Food Before Fuel” coalition in June to oppose ethanol mandates. John McCain, the Republican presidential nominee and Arizona senator, has “traditionally been opposed to ethanol subsidies that distort the market,” says Tucker Bounds, a spokesman.

Ethanol may account for 20 percent of the gain in the rate of U.S. food inflation, says Ephraim Leibtag, a USDA economist. U.S. food prices may climb 6 percent this year, the most since 1980, the department estimates.

The overcapacity prevents lenders from financing ethanol plants that distill ethanol from corn kernels, says Mike Tian, an analyst at Morningstar Inc. in Chicago.

“A lot of these towns that hoped to get an ethanol plant probably aren’t,” he says.
Ford Heights Mayor Saul Beck says he was ecstatic in 2006 about having a distillery in his town of 3,300, where the U.S. Census found that 49 percent of residents live in poverty.

At least three ethanol producers went public that year, including Aventine Renewable Energy Holdings Inc., VeraSun Energy Corp. and Green Plains Renewable Energy Inc. in Omaha, Nebraska. At one point, the American Coalition for Ethanol tracked 500 planned plants, says Ron Lamberty, a vice president at the Sioux Falls, South Dakota, trade group.

Falling Margins

When Ford Heights Ethanol applied for a permit for its proposed $130 million plant, producers pocketed an average of $2.64 on every gallon made. By Sept. 10, rising corn prices reduced that margin to 57 cents, Bloomberg data show. Corn has risen 58 percent in the past year, to $5.3675 a bushel.

“This is a major bump in the road,” says Walker Filbert, president of Heartland Ethanol LLC in Knoxville, Tennessee, which abandoned plans to build seven plants in Illinois.

In Ford Heights, charred remains of homes pepper the plant site’s neighborhood.
“It would have brought some jobs,” says Beck, 71. “They got the permit and we haven’t heard anything else.”

Lenders balked at funding the project, says Jonathan Kahn, president of Ford Heights Ethanol: “One of our biggest regrets is that we couldn’t get manufacturing in a community that so desperately needs it.”

On Hold

Across Illinois, 795 million gallons of ethanol are on hold, Chicago-based investment
firm William Blair & Co. estimates. That’s slowed construction and growth in permanent ethanol-related jobs, says Tom Hauser, vice president of CoBank, an Omaha-based lender to ethanol companies. Each plant employs about 50 people, who earn $40,000 a year on average, he says.

Producers’ shares were battered. Aventine, based in Pekin, Illinois, fell 88 percent
from June 2006 through Sept. 10. VeraSun of Brookings, South Dakota, dropped 78 percent; and Green Plains declined 82 percent.

The 168 plants had capacity for 9.96 billion gallons as of Aug. 26, almost 1 billion
more than the U.S. requires this year, the Washington trade group Renewable Fuels Association says. Another 43 plants scheduled to be built or expanded would raise capacity to 13.8 billion gallons. Most make ethanol from corn.

Alternate Sources

Even established corn-ethanol producers put more emphasis on making “cellulosic”
ethanol from alternate sources such as wood chips. The still-imperfect process doesn’t promise immediate benefits for towns with nearby corn growers.
Poet LLC, which is based in Sioux Falls and is the largest U.S. ethanol producer, said in August it will open a $4 million South Dakota plant to produce ethanol from corn cobs by year- end. The capacity will be 20,000 gallons.

Asked whether Obama may reduce his support for corn-based ethanol as president,
spokesman Tommy Vietor referred to an April speech in Indiana:
“We have to recognize that corn-based ethanol is a transitional technology,” the candidate said then.

By Emily Kaiser
ST. PAUL, Sept 1 (Reuters) - U.S. Republicans called on Monday for an end to a controversial requirement that gasoline contain a set amount of ethanol, a policy backed by the Bush administration that critics say has helped drive up world food prices.
In their 2008 platform detailing policy positions, Republicans said markets — not government — should determine how much ethanol is blended into gasoline, and pushed for development of a cellulosic version, which could be made from grasses rather than corn.
“The U.S. government should end mandates for ethanol and let the free market work,” the platform said. It was unanimously passed at the Republican National Convention in St. Paul, Minnesota.
The position marks a major change from the 2004 platform, which supported expanding the use of ethanol as a way to reduce dependence on foreign oil and increase revenues for farmers.
While farm income has risen, food companies have complained that ethanol demand diverts corn from the food supply, driving up commodity costs and hurting their business. Many have raised prices, hitting consumers with heftier grocery bills as the economy fades and unemployment rises.
An industry spokesman said ending the program would be a mistake.
“Ethanol is providing a desperately needed, stable supply of motor fuel as we see threats to oil availability continue, either because of geopolitical unrest evidenced by Russia’s invasion of Georgia or by Mother Nature in the form of Hurricane Gustav,” said Matt Hartwig, spokesman for The Renewable Fuels Association.
“And, if it were not for ethanol, gasoline prices that have wreaked havoc on household budgets would be up to $0.50 higher per gallon,” he said.
President George W. Bush has been a strong backer of use of ethanol as fuel, and has touted it repeatedly in his annual State of the Union addresses. The current Renewable Fuel Standard requires 9 billion gallons of ethanol to be blended into the nation’s gasoline supply this year.
A growing number of lawmakers from both political parties have voiced objections to that policy as inflation pressures build in the United States and abroad.
FOOD VERSUS FUEL
In August, U.S. regulators rejected a request from Texas Gov. Rick Perry to halve the ethanol mandate, which he blamed for driving up the price of corn and making it more expensive for farmers to feed their livestock.
Douglas Holtz-Eakin, economic adviser to Republican presidential candidate John McCain, said the campaign did not ask the platform committee to include that provision, but McCain had long supported eliminating the ethanol mandates.
“This is a great piece of support for his principles,” Holtz-Eakin told Reuters in a videotaped interview.
John Miranowski, an agricultural economist at Iowa State University, said unless oil prices fall to $60 per barrel, ethanol will still be a cost-effective choice even without the government mandating its use.
Oil traded at $111 per barrel on Monday.
That makes this a politically smart time to push for eliminating the mandate because it would please the food industry without punishing farmers, an important voting bloc, as the November presidential election approaches.
“As long as the price of oil stays high, the ethanol plants can continue to pay a high price for corn,” he said “There’s very little (political) cost right now.”
Corn prices have retreated from a late-June peak of $7.79 per bushel, but are still up some 50 percent from a year ago.
High food prices have become a global problem, pushing some poor countries to the brink of starvation and creating headaches for policymakers in rich nations struggling to contain rising inflation.
The World Bank has warned that soaring food costs threaten to undermine years of poverty-reduction work. A top World Bank economist said in July that biofuels production in the United States and Europe was the main reason behind the steep rise in global food prices.
In the platform, Republicans said farmers needed technology to increase crop production and meet the growing global demand for food and called on the Agriculture Department to support agricultural research “to ensure that America and the world will never have to choose between food and fuel.” (With additional reporting by Corbett Daly; Editing by Howard Goller and Patricia Zengerle)

By Josh Voorhees, E&ENews PM reporter

May 19, 2008

 Sen. Kay Bailey Hutchison (R-Texas) today floated legislation [subscription required] to freeze the corn ethanol mandate at its current level of 9 billion gallons a year.

 The renewable fuel standard, which was expanded in 2007, allows for the entire 2008 requirement of 9 billion gallons to be filled by corn ethanol. The mandate calls for an increasing dependence on advanced and cellulosic biofuels beginning in 2010 and caps corn ethanol at 15 billion gallons starting in 2015.

Ten other GOP senators joined Hutchison as co-sponsors of the bill, including presumptive Republican presidential nominee Sen. John McCain of Arizona.

Halting the mandate now would help curb the recent spike in the price of food, Hutchison said. “Freezing the mandate is in the best interests of consumers, who cannot afford the increasing prices at the grocery store due to the mandate diverting corn from food to fuel,” she said.

 The food-fuel nexus has been a hot topic on the Hill in recent weeks, and while several lawmakers have called for a re-examination of the mandate, others are defending biofuels as a long-term energy solution.

 ”We must not lose sight of why our government is attempting to stimulate biofuels use,” Sen. Richard Lugar (R-Ind.) said last week. “If corn biofuel is curtailed, we will see additional pressure on global oil prices and a withering of nascent biofuel distributing infrastructure.”

 The chairman of President Bush’s Council of Economic Advisers, Edward Lazear, told Congress last week that the increased use of corn for ethanol has pushed up global food prices by about 3 percent in the last year, while an increase in demand for food from emerging markets accounts for about 18 percent of the rise.

 Katherine Ling contributed to this story.

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.
 

Ethanol’s defenders working “24-7″

Thursday, May 8, 2008, 4:47 PM

by Peter Shinn

The Nebraska Corn Board hosted National Corn Growers Association CEO Rick Tolman in Lincoln Wednesday. Tolman, who was originally scheduled to talk about corn research with University of Nebraska at Lincoln officials, added a press conference to his agenda in order to defend corn-based ethanol.

Tolman told Brownfield afterward he’s been working practically non-stop to counteract a sophisticated, multi-million dollar public relations campaign by the oil and food processing industries against ethanol. And Tolman is asking for the aid of agricultural producers who back the renewable fuel.

“We really need farmers to get up and help tell the story - make sure their Congressman their Senators know the facts and what’s going on,” urged Tolman. “But it is 24-7.”

The only multi-million dollar campaign working against ethanol is the costs imposed upon consumers by our outlandish biofuels policy

Senate Farm Bill - Food and Energy Security Act of 2007

The energy package includes $1.1 billion to encourage farmers to grow biomass crops, in financial aid to construct ethanol plants using cellulose, found in grasses and wood, as a feedstock, and to help refiners buy biofuel feedstocks.

An additional $1.1 billion would be expended in tax credits for biofuels, including credits for cellulosic ethanol.

Cellulosic ethanol would be eligible for up to $1.28 a gallon in credits. The bill has a credit to small producer of 67 cents for cellulosic ethanol, the current 10-cent credit available to all small producers and the long-standing 51-cent tax credit for blending ethanol into gasoline.

The energy title provides investments in farm-based energy by creating initiatives with financial incentives to help farmers transition into biomass crops, and supports the construction of biorefineries for cellulose ethanol with a loan guarantee program that will provide up to 80 percent of total project cost with a loan cap of $250 million.

The bill expands markets for biobased products, and invests in farm-based energy R&D, and in helping farmers, ranchers and rural small businesses move to renewable energy and energy efficiency.

House Farm Bill - H.R. 2419 - The Farm, Nutrition, and Bioenergy Act of 2007

(source of synopsis — Farm Energy Online)

·        The program would help finance the cost of developing and constructing biorefineries and biofuel production plants. Mandatory funding of $800 million for fiscal years 2008-2012

·        Reauthorizes the 2002 Farm Bill’s Energy Audit and Renewable Energy Development program through 2012. Does not fund it.

• Program authorizes loans, loan guarantees, and grants to farmers, ranchers, and rural small businesses to purchase and install renewable energy systems and energy efficiency improvements. Provides $500 million in mandatory funding for fiscal years 2008-2012
• The program provides competitive funding for research and development projects on biofuels and bio-based chemicals and products, administered jointly by the Secretaries of Agriculture and Energy.

Creates a new federal Biomass Research and Development Board, and a Biomass Research and Development Technical Advisory Committee.

Establishes a new Biomass Research and Development Initiative to focus work on competitively-priced biofuels, high-value biobased products, and the production of new biomass resources.

Provides mandatory funding of $420 million over five years. Also provides an additional $200 million in annual discretionary funding, subject to appropriations.

• Reauthorizes and expands the Bioenergy Program, which authorizes payments to eligible bioenergy producers based on any year-to-year increase in the quantity of bioenergy that they produce.

Encourages production of ethanol and biodiesel made from agricultural and forestry crops and associated waste materials, including animal manure and livestock/food processing waste.

Expands eligibility for combined heat and power production using biomass at biofuels plants, renewable diesel and biomass gasification as eligible types of bioenergy.

Provides $1.4 billion in mandatory funding for fiscal years 2008-2012.

• Establishes a program to encourage the sustainable production of feedstocks for cellulosic ethanol and other energy production and provides for 5 year contracts for producers to grow dedicated energy crops.

Provides for an incentive for producers to harvest, store, and transport biomass to bioenergy facilities. 

Offers an incentive to help farmers learn how to plant, cultivate, harvest and transport these feedstocks in a cost-effective manner.

Mandatory funding as necessary to implement program

A key departure from current farm-bill related energy provisions is that most new funding would be directed away from corn-starch-based ethanol production and towards either cellulosic-based biofuels production or to new as-yet-undeveloped technologies with some type of agricultural linkage.

Sugar Provisions -

The USDA’s Commodity Credit Corporation will purchase surplus sugar and sell it to bioenergy producers. Here’s what the Sweetener Users says: “Both bills guarantee U.S. sugar growers an 85% share of the domestic sugar market. To the extent that imports threaten the 85% share reserved for growers, taxpayers will be required to absorb the cost of removing surplus sugar from the market and diverting it into ethanol production. The cost of doing so is estimated to be $4 to 5 billion over ten years. This special treatment for sugar has no equal among the price support programs for other agricultural commodities, and it makes a mockery of any claim that the sugar program is operated on a no-net-cost basis.”