Ethanol Demand Outgrows Corn
By Eric Kelderman, Staff Writer
Corn is king of renewable auto fuels, for now. But federal and state governments already are racing to find alternatives to corn as they look for ways to use ethanol to help break the nation's dependence on foreign oil.
Georgia Gov. Sony Perdue (R) announced in February that a Colorado company would build the nation's first commercial-scale ethanol plant using - not corn - but wood chips to produce 40 million gallons of fuel a year in the Peach State. A plant under construction in Louisiana is slated to produce 1.4 million gallons of ethanol annually from sugar-cane waste. Tennessee has sunk $18 million into research to convert prairie grasses into auto fuel, and New York has awarded $25 million to two companies to produce more than 600,000 gallons of ethanol a year from wood chips and paper waste.
The U.S. Department of Energy announced Tuesday (June 26) that it would spend $375 million in Tennessee, Wisconsin and California to develop more efficient ways to convert non-food crops into auto fuel. That money is in addition to $385 million the Energy Department is investing in ethanol plants that use something besides corn in California, Florida, Georgia, Idaho, Iowa and Kansas. The six projects, announced in February, are expected to be finished within four years and be able to produce 130 million gallons of ethanol a year.
Currently, corn is the source of 98 percent of all ethanol, an alcohol that is blended with nearly half of the gasoline sold in the country to power cars and light trucks.
"In the final analysis, corn-based ethanol is practical now, but only as a transitional crop," said Robert J. Ludwig, a researcher with the Hale Group , a national consulting firm that specializes in agribusiness.
Still, these are heady times for Midwestern farmers who have been promoting ethanol since the energy crisis of the 1970s. Then, the relatively low cost of gasoline and high price of producing ethanol limited its appeal. Just 175 million gallons of ethanol were produced in 1980; by 1992, the industry crossed the 1 billion gallon mark, according to the Renewable Fuels Association (RFA), which promotes the ethanol industry.
Ethanol got a boost earlier this decade when several states began using it to meet federal Clean Air Act requirements to reduce summertime air pollution from vehicles, replacing the toxic gasoline additive MTBE ( methyl tertiary butyl ether) that was found to leak into water supplies.
Now, skyrocketing gasoline prices and instability in world oil markets have intensified calls to reduce U.S. oil imports. As a result, ethanol producers are expected to make at least 5.4 billion gallons of the fuel this year - double what was produced in 2003 and less than half of what is projected in 2009, according to the RFA.
The federal government offers a 51-cent-per-gallon subsidy for each gallon of ethanol blended with gasoline. Seven states require auto fuel in the state to contain a percentage of the largely corn-based biofuel. At least 10 give drivers a break on state gas taxes to fill their tanks with ethanol-blended gasoline, and more than 20 states are doling out tax incentives for producers to churn out ethanol made from corn or other organic materials, according to the American Coalition for Ethanol .
And the boom is expected to continue. President Bush called for the nation to reduce its gasoline use 20 percent by 2017 through a combination of higher mileage standards and expanded use of biofuels, alcohols distilled form organic matter. The U.S. Senate recently passed a bill to require that 36 billion gallons of biofuels be used annually by 2022, with 21 billion gallons of fuel made from something besides corn. A 2005 federal energy law mandated 7.5 billion gallons by 2012.
But the limits of ethanol, especially fuel made from corn, are already in sight as the expansion of biofuels creates major shifts in the nation's agricultural markets and is being blamed for rising prices on foodstuffs from corn flakes to the milk to pour on them.
The price of corn, used primarily as feed for farm animals, has followed the growing appetite for ethanol, increasing as much as 66 percent in a year, according to the U.S. Department of Agriculture. That's good for corn growers but raises the cost of feeding some livestock and poultry, especially outside the main corn producing states.
"Cattlemen aren't pleased," said Neil Moseman, assistant director of the Nebraska Department of Agriculture.
Beef and dairy farmers in Midwestern states that produce most of the nation's ethanol are able to feed their cattle with less expensive grains leftover from distilling that fuel. But ranchers in Texas and Oklahoma, which do not have large corn crops or produce as much ethanol, will be harder hit by high corn prices, Moseman said. In addition, hogs and poultry cannot digest the leftover grains from ethanol production, so those farmers will feel the pinch of higher corn prices, Moseman explained.
Along with making livestock feed more expensive, acres that have been dedicated to other crops or set aside for conservation now are being planted with corn, creating the biggest shift in planting patterns in the past century, said Ludwig of the Hale Group.
An annual federal report detailing farmers' planting plans estimates that corn acres will increase 15 percent over last year. Crops that likely will be supplanted by corn include rice and cotton with which U.S. farmers are not competitive with growers in other countries, said Ludwig.
Farmers also could be induced to set aside less land for conservation or quit rotating crops on their land, sapping nutrients from the soil or causing more erosion, the U.S. Department of Agriculture warns.
There are other hurdles to make renewable auto fuels a major replacement for gasoline over the long haul. Less than 1 percent of the nation's gas stations carry higher blends of ethanol necessary to make a significant dent in gasoline consumption, and only 2 of every 100 drivers are using cars and trucks that burn those higher ethanol blends.
All of the nation's cars can use a blend of gasoline containing as much as 10 percent ethanol. But even if all the gasoline used in a year in the United States were blended with that concentration of ethanol, the total amount of gasoline replaced would be roughly 14 billion gallons - one tenth of the roughly 140 billion gallons of gasoline used annually.
To reach the proposed federal goal of 36 billion gallons, more gas stations must sell so-called E-85, which has 85 percent ethanol and 15 percent gasoline. Only 1,232 of more than 170,000 gas stations across the country carry E-85, according to the National Ethanol Vehicle Coalition (NEVC). And the higher ethanol blend is completely unavailable in 10 states, according to NEVC's data: Alaska, Connecticut, Hawaii, Louisiana, Maine, New Hampshire, New Jersey, Rhode Island, Oklahoma and Vermont.
Although at least 26 states offer tax breaks, grants or low-interest loans to stations to install E-85 pumps, energy experts say the problem is too few vehicles capable of using the fuel. Retailers have little incentive to offer E-85 because only 6 million of the nation's 230 million cars and trucks are capable of using higher blends of ethanol.
"This is not going to happen overnight," said Larry Pearce, assistant director of the Nebraska Energy Office and a representative for the Governors Ethanol Coalition , a coalition of 36 states promoting ethanol.
The coalition is urging the federal Department of Energy to have a stronger hand in encouraging more E-85 pumps, said Pearce.