Ethanol industry, nat’l security experts link arms in defense of RFS

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, October 23, 2012

Ethanol supporters are portraying biofuel production as a national security concern in a bid to outflank their foes in the petroleum and livestock industries.

National security is the theme of the new ad campaign rolled out by biofuel organizations to win political support for the renewable fuel standard. And that was the message of several security experts who spoke last week in defense of ethanol at a Washington, D.C., event where they warned of future $200-a-barrel oil prices.

“There’s a big problem that’s coming our way like a freight train” in high oil prices, Bud McFarlane, a former Reagan national security adviser, said at a conference of the American Council on Renewable Energy. “There is a solution in alternative fuels.”

The focus on national security comes amid a political uproar over ethanol and its contribution to corn prices that spiked as the drought baked the Midwest. There have been heightened calls in Washington to change or completely repeal the renewable fuel standard, which calls for 36 billion gallons of biofuel production by 2022, with 15 billion gallons coming from traditional ethanol.

Most of the talk about ethanol until now has been of “food versus fuel.” Critics argue that demand for ethanol, spurred by the renewable fuel standard and other federal policies, has driven up the cost of food and taken land away from food production.

The criticism spurred the creation last month of Fuels America, a coalition of ethanol, agriculture and national security organizations that is trying to reframe the debate over ethanol and highlight areas where ethanol production has contributed to local economies and national interests.

Making the case for national security is a large part of the group’s strategy. Retired Navy Vice Adm. Dennis McGinn, president and CEO of the American Council on Renewable Energy, has emerged as one of Fuels America’s most vocal spokesmen and spoke at last week’s conference. The coalition also includes the American Security Project.

The groups are arguing that by introducing competition into the market, ethanol can help break the grip of the Organization of the Petroleum Exporting Countries on world oil prices and drive down the price of gas for American consumers.

“You can only break their ability to control how much oil is pumped out of the ground by introducing an alternative,” McFarlane said, “and make it a real market-driven purchase when you drive up to the pump.”

The recent Arab spring has made the case for ethanol all the stronger, the panelists last week said.

When conflict erupted last year in Libya, concerns about the area drove oil prices up, prolonging the recession for many nations, McGinn said. He warned of similar incidents that could halt oil production for weeks in Middle Eastern nations that provide more of America’s oil needs.

“It would make $4-a-gallon gasoline look like the good old days,” McGinn said. “We’re see oil spike up to $150, $200 a barrel, and the reverberations through our economy would be unbelievable. Anything that relies on wheels, whether it’s tractor wheels, harvester wheels, combines, train shipment of rail freight, would immediately spike up in price.”

The Arab spring has also increased the budgets of OPEC nations because governments are providing more to each of their citizens in social services and paying for it with oil, said McFarlane, who serves on the boards of a number of Washington, D.C., national security groups.

It’s not in OPEC’s interest to lower oil prices, he said.

Inside the Beltway, ethanol supporters need to channel the idea of competition more in their calls for support to the industry, Anne Korin, co-director of the Institute for the Analysis of Global Security, said at last week’s panel.

“If you frame this as something that is, let’s say, good for farmers, good for your company, good for your state because it expands jobs … that might make sense to the people you’re talking to and the people you know, but that’s not thinking about the issue in a way that makes sense to the public, really,” Korin said.

“The issue has to be framed as one of competition,” she added. “Oil has a monopoly over transportation fuel, OPEC has a monopoly over transportation fuel, and all energy commodities need to be able to compete over the fuel pump. Biofuels are a part of that picture.”

Flip side

The panel came a day after the European Commission announced a new biofuels policy that caps food-based fuels at 5 percent of the current consumption of fuel in the E.U. transportation sector, and requires refiners to report greenhouse gas emissions from indirect land-use change associated with ethanol production (E&ENews PM, Oct. 17).

European officials said the policy was needed to make sure ethanol production does not compete with food production. Anti-poverty groups concerned that ethanol production has contributed to the global food crisis praised the move but said it did not go far enough.

Those groups have also recently channeled national security, but in their arguments against ethanol.

In a study released earlier this month, anti-poverty group ActionAid blamed ethanol production for higher global food prices that were contributing to social unrest like that seen in the Middle East and undermining the effectiveness of U.S. food aid.

“Ethanol, I think you can say pretty conclusively, is contributing to that problem,” Timothy Wise, a researcher at Tufts University and an author of the report, said when the report was released.

Ethanol groups dismiss the food-versus-fuel debate as a myth.

“You want to know about the real food-versus-fuel controversy?” McGinn said last week. “That is when the Iranians close down the Strait of Hormuz, driving up the cost of a barrel of oil above $150 a barrel.”

The oil industry, which calls the renewable fuel standard a broken policy, concedes that national and energy security relies partly on biofuels production. But domestic oil and natural gas production will be more important than biofuels in the coming decade, Bob Greco, director of the American Petroleum Institute’s downstream group, said today.

Refiners are quickly approaching the physical and regulatory blend wall that impedes more ethanol from being added to the gasoline supply, Greco said, creating “considerable obstacles” for ethanol to exceed 10 percent of the gasoline pool.

Greco said the national security arguments of ethanol supporters don’t hold weight.

“They’re arguing from a position from 2007,” when the RFS was amended to its current state, Greco said. “They’re not arguing from where we are today with the outlook of domestic oil and natural gas production.”