Comment: The good news on ethanol: U.S. a ‘biofuels superpower’

Source: By Dan Morgan, Des Moines Register • Posted: Monday, March 2, 2015

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Every day nearly a thousand railroad cars roll across the country carrying part of the soaring U.S. energy production that has shaken the global oil cartel and sent gasoline prices plummeting. The cargo is ethanol made from home-grown corn.

This other American energy boom has been overshadowed by the stunning comeback of the domestic oil industry. President Barack Obama didn’t mention ethanol, biofuels, or agriculture in his State of the Union address, even as he boasted that the country was “number one in oil and gas.” Yet a thriving renewable fuels industry also deserves a share of the credit for the energy renaissance.

Based on numbers from the Department of Energy and the oil industry, the amount of ethanol used daily in the United States is now roughly equivalent to the gasoline from 1.2 million barrels of crude oil. That’s about the volume of oil from North Dakota’s Bakken shale, and only slightly less than Qatar’s daily output in 2014.

Without ethanol, global stocks of oil would have been lower and crude oil prices would have been $10 a barrel higher at the end of 2013, according to a study last year by economist Philip K. Verleger Jr., an energy adviser to Presidents Gerald Ford and Jimmy Carter. Ethanol sold for less than gasoline for all but seven weeks between the start of 2011 and last November, according to data collected by Oil Price Information Service and New York Mercantile Exchange. “Blending ethanol with gasoline has been profitable to the refining industry and some of that has been passed on to consumers,” said Scott Irwin, a University of Illinois agricultural economist.

This is historic in light of the false starts that dogged past efforts to loosen petroleum’s grip on transportation. Rattled by the Arab oil embargo in 1973-74, a succession of presidents called for an end to America’s oil addiction. But alternatives such as liquid fuels from coal did not get far, and attempts by barnyard tinkerers to make “gasohol” from corn fell victim to tumbling gas prices. Soon Detroit was making huge profits selling gas-guzzling trucks to suburbanites.

This time is different. The United States is now a biofuels superpower, having overtaken Brazil in 2007 as the top producer in the world. Nearly 5 percent of all energy used by the transportation sector now comes from “non-petrochemical” sources, mainly biofuels, and almost all “regular” gasoline contains 10 percent ethanol, known as E10. NASCAR drivers have used an even higher blend since 2011. Along with fuel, the country’s 213 ethanol plants produce a mountain of food: concentrated meal to feed livestock, derived from the one-third of the corn kernel that is protein, oil and fiber.

Out of favor in D.C.

The success grows out of a quarter century of government actions aimed at reducing air pollution and carbon, enhancing national security and providing alternatives to petroleum. Yet ethanol from corn is now out of favor in Washington. In 2011, Congress cancelled a 33-year-old tax credit for blending it with gasoline. For more than a year, the White House has been considering a proposal by the Environmental Protection Agency to scale back requirements for biofuels in gasoline and diesel fuel that were set in 2007 energy legislation. EPA has taken other actions as well that could slow or even end the growth of ethanol, based on the agency’s concern about the fuel market’s ability to absorb larger volumes.

The just-released White House annual economic report to Congress does cite the growth of ethanol and biofuels along with other energy achievements. But President Obama, once an enthusiast, last mentioned ethanol publicly on Aug. 17, 2011, when he stressed the need to “figure out how we can make biofuels out of things that don’t involve our food chain.”

The government has reason to proceed cautiously. As ethanol demand expanded in the 2000s, farmers planted some 20 million more acres of corn — some of it on previously uncultivated grazing lands — raising concerns about the effect on soils, waterways and food prices. And there is heated debate about corn ethanol’s true contribution to limiting greenhouse gases and curbing air pollution. Oil industry analysts question ethanol’s overall impact. While the United States imports less oil than before the shale oil boom, it isn’t using less, they note.

Ethanol defenders

Yet ethanol defenders say these concerns overlook the essential place the fuel has in the nation’s sprawling commercial network of refineries, pipelines, tank farms and filling stations. With its very high octane rating, ethanol does what toxic lead and other now-banned compounds once did. It helps give gasoline an octane boost to prevent engine knock and optimize engine performance. That role is important enough for the Federal Trade Commission to require that octane ratings be displayed prominently on gasoline pumps. At the same time, the relatively cheap octane from ethanol has been good business for many refiners, say oil industry analysts. It has enabled some to divert costlier octane-boosting oil compounds from gasoline to more lucrative petrochemical uses such as polyester fibers and compact discs.

Automakers designing engines to meet tough new federal gas mileage requirements are also eying ethanol’s octane benefits. A 2014 study by research scientists at Oak Ridge National Laboratory concluded that alcohol fuels such as ethanol “exhibit some key properties that make them particularly attractive for future engines.” The study said gasoline with 30 percent ethanol, or E30, could “provide clear pathways to improve fuel economy.” Such fuel is not widely available now, though, and under current EPA regulations car makers couldn’t use it to demonstrate the efficiency of their next-generation vehicles.

Where big new volumes of ethanol will come from, or how they will enter a fuel market dominated by the oil industry without support from Washington, is unclear. Government laboratories and dozens of small companies are working on ways to convert the complex sugars in plants, trees and grasses into fuel; grow algae that make “bio-crude” in vats; and treat synthesized natural gas with fuel-making microbes. But these alternatives face daunting costs and technical challenges. Nine years after President Bush touted prairie switchgrass as a promising source of biofuels, not a single gallon is being sold commercially. And new, state-of-the art refineries in Iowa and Kansas that make ethanol from corn cobs and stalks still have to prove they can make money without heavy federal subsidies.

That has left plain old corn to do the heavy lifting, as has so often been the case in America’s rural past. With grain prices near lows of a few years ago and ethanol production at record levels, corn farmers insist they can grow more crops for energy without hurting consumers or the land. “No matter how you slice it, corn produces food and energy more efficiently than anything else,” said Ron Alverson, a corn farmer and founding chairman of Dakota Ethanol, a 48 million gallon-a-year plant in Wentworth, S.D.

The administration may not see it that way. Even so, the biofuels industry deserves better than to be the orphan of President Obama’s energy policy. In an “all of the above” energy strategy, it seems only fair to give the “corn patch” a place alongside the “oil patch.”

DAN MORGAN is a retired reporter and editor with the Washington Post, where he covered agriculture, energy and other topics. He is the author of “Merchants of Grain.” Contact: