The Great Ethanol Debate: Politicians vie for mandate cuts, advocates warn against changes

Earlier this month, 24 Republican U.S. senators – including presidential candidate John McCain – sent a letter to the Environmental Protection Agency asking the agency to repeal or waive the renewable fuels standard passed by Congress in December. That legislation required 36 billion gallons of renewable fuels by 2022, replacing the original mandate of 7.5 billion gallons by 2012.

Federal lawmakers also are considering a farm bill that would cut the federal 51-cent subsidy for blending ethanol with gasoline back to 45 cents on the dollar.

Political opposition to corn-based ethanol is mounting in Missouri, too, where a law that took effect in January requires unleaded gas lower than 91-octane to contain 10 percent ethanol – known as E10 – when ethanol is cheaper than gas. In late April, a bill repealing the E10 edict was fiercely debated in Jefferson City at a committee hearing that pitted corn growers against livestock farmers.

Livestock farmers have argued that the high price of corn – now trading at more than $6 a bushel for July delivery – has driven up feed costs to almost double what they were just a couple of years ago. But corn growers contend the skyrocketing cost of oil is the root cause of higher grain and, thus, food prices.

Caught in the middle of the acrimony are biofuel companies looking at waste products – rather than feedstock – for fuel, and they, too, are worried the backlash could hurt their efforts.

Dale Wiley, CEO of Crane-based renewable energy firm American Green Holdings Inc., agrees there are many drawbacks to corn-based ethanol, but he said that repealing biofuel mandates would be a mistake. AGH primarily works with producers of biodiesel, which can be made from a variety of feedstock oils as well as waste vegetable grease.

“This is what happens when people panic,” Wiley said. “They don’t even think about what they’ve spent 10 years on. … When oil hits $200 a barrel, we need to have more opportunities.”

Agricultural rift widening

For livestock farmers like Nick Flannigan, there’s an undeniable link between corn-ethanol production and soaring feed prices.

Flannigan, who is president-elect of the Greene County Cattlemen’s Association, said cattle feed has roughly doubled in recent years to $13 for 100 pounds of feed.

“There (are) ways to make ethanol other than corn,” Flannigan said. “I think (it’s all) a big money scheme. … I’d like to see major political powers say they’re going to quit subsidizing and see if (ethanol producers) can make it.”

Officials with the Missouri Corn Growers Association have received an earful from livestock farmers frustrated with rising feed costs, but MCGA President Mike Geske suggested prices will eventually stabilize.

“The livestock farmers in Missouri unfortunately are going to have to compete with the livestock producers in Japan and Mexico and everywhere else,” said Geske, who testified before Missouri lawmakers in April. “Their prices will adjust. The livestock prices, like corn prices, are cyclical. Over time – not overnight – they will adjust to the cost of their input.”

Geske also refutes widespread claims that higher corn prices due to ethanol are to blame for the increased cost of food items at grocery stores. He said he thinks most of those spikes are tied to the price of oil, which hit $127 per barrel last week, and the blame on ethanol is emotional in nature.

Geske warned that political efforts to derail corn-based ethanol by slashing the fuels standard and reducing government subsidies would hurt the developing cellulosic ethanol market. Cellulosic ethanol is made from plant matter, such as corn stalks, switchgrass and wood chips, but studies suggest the fuel is years away from commercial viability.

“I think if (opponents) do kill this and cause ethanol plants to go out of business … it will probably be a death knell for cellulosic ethanol,” he said. “I hope it is political grandstanding. I’m certainly not approaching it as if it is. We see this as a very real threat and are quite concerned about it.”

The next generation

Geske’s prediction is what concerns Wiley at American Green Holdings.

“There are breakthroughs coming on using (biofuels) more efficiently in vehicles,” Wiley said. “There are breakthroughs coming on what we can make (biofuels) out of. And people are just ready to throw the baby out with the bathwater.”

Rather than drastically cutting back the biofuels standard, Wiley said politicians should consider revising the current system of government subsidies to provide incentives for producers using waste products to make fuel.

“We’ve had concerns for a long time about the long-term sustainability of using corn and soy as your primary sources,” Wiley said. “What we hope happens … is there will be a greater look at how we can sustainably produce these things.”

Cellulosic ethanol will soon make its debut in the Ozarks.

Canada-based Dynamotive Energy Systems Corp. is moving forward with plans to build a $24 million plant in Willow Springs that will convert wood scraps into an industrial biofuel dubbed BioOil.

Using Dynamotive’s “fast pyrolysis” process, the plant will convert 200 tons of wood residue from nearby sawmills into 34,000 gallons of the industrial-grade biofuel each day, according to a Dec. 5 news release issued by the company. The competitively priced heating-oil substitute would be sold to regional commercial and industrial customers through a distributor, the company said.

“This first U.S. project will demonstrate the viability of our technology in the U.S. market and the enormous potential of BioOil to help America make the transition to clean, renewable fuels that do not depend on food crops for their production,” Dynamotive President and CEO Andrew Kingston said in the release.

Dynamotive spokesman Nathan Neumer declined to comment on recent developments in the biofuels debate, but he did say that the Willow Springs plant project is moving forward as planned.

The Associated Press reported in December that Dynamotive expected to open the plant in mid-2009 with 27 employees. The company operates two similar plants in Ontario, Canada.