With substantial financial stress in the corn belt thanks to ethanol, be on the lookout for a bailout package by Chuck Angier
Sunday, December 14, 2008
A couple of weeks ago, I started hearing "rumors" in my circle about the recent (and not unexpected) financial struggles and closings of ethanol facilities. It was time to revisit ethanol.
It doesn't take a rocket scientist to understand the futility of ethanol and the even more offensive taxpayer sponsorship of such irresponsibility. Never mind how ethanol might be affecting the food supply. After pouring billions of taxpayer dollars into a politicized pipe dream, our "chickens are coming home to roost".
Cellulosic ethanol is still unproven on a commercial scale.
Ethanol from corn is questionable at best. Even at a just $2.00 per bushel, feedstock cost alone for a gallon of ethanol (at 2.8 gal/bu.) would be $0.71 per gallon BEFORE adding any other costs of production, refining or distribution.
Thanks to a number of factors including the adulterated demand for corn created by ethanol, corn skyrocketed to more than$7.00/bu. this past summer. That places feedstock cost at $2.50/gal or more.
Many refiners, expecting high corn prices to continue, forward-contracted corn at those inflated prices.
Corn at this writing is down to about $3.00 (still 50% higher than its historical average). Oil is down to the $40 range from $140 and gasoline is retailing for a $1.50 after adding all the costs, taxes and profit to it. $2.50 ethanol can't and won't pencil.
Corn growers planted their crop at a time when input costs were driven by the $7.00 market price of corn. Many covered their investment by forward contracting the sale of at least part of their crop. When corn and oil collapsed, refiners were unable to honor their commitments to the growers and the grower has gotten stuck sitting on a $7.00 crop in a $3.00 market. Can we not comprehend how government intrusion has so corrupted these markets?
On December 19th, 2007 President Bush signed HR 6, "The Energy Independence and Security Act" which calls for usage of at least 36 billion gallons of ethanol per year by 2022. To add insult to injury, it also authorizes a "new" $200 million to install blender pumps. (ACE Press Release, December 19, 2007)
36 billion gallons of ethanol from corn would consume ALL of our corn crop (over 12 billion bushels, 78 million acres, in a GOOD growing year).
No matter how you figure it we're being asked to convert AT LEAST 10% of our arable land to biofeedstocks, disrupting the economy for 25% of our gasoline and 11% of our total petroleum.
The much referenced Billion Ton Vision is a study published by the DOE in April 2005. It concludes that we need (and can) produce 1 billion tons annually of sustainable biomass to displace 30% of our petroleum. It goes on to state explicitly that the purpose of the study was NOT to:
"assess the economic competitiveness of a billion-ton bioenergy and bioproducts industry, and its potential impacts on the energy, agriculture (food and feed production), and forestry sectors of the economy"
Short version? Yeah, we can find a billion tons of biomass, but we can't say that it's feasible. I submit that we would be astounded at what it will take to gather, store, process and dispose of a billion tons of biomass, much of it subject to the fickleness of nature, and all for (only) a theoretical 30% of our petroleum usage, never mind the disruption to the environment and economy.
For the 6 years ended in 2007, the taxpayer has provided an excise tax exemption of $12.03 billion on production of 23.589 billion gallons of ethanol (51 cents/gallon), (Renewable Fuels Association). It is impossible to calculate how much funding has been provided for Research and development, but I venture to say that it is much more than the tax exemption. We've been subsidizing for over 30 years and it is still not viable.
Secretary of Agriculture Ed Schafer has already said that he would consider using USDA Rural Development Funds to assist ethanol producers that have "suffered losses in the volatile corn futures markets". Rural Development funds have been used in the past to promote ethanol and biodiesel plants. (DesMoines Register, Oct. 18, 2008
After pouring 10's (maybe 100's) of billions into a political pipe dream, that has brought the grain industry to the brink of collapse; considering the "no mis-managed, corrupt, government regulated, collapsing industry left behind" policies that have been implemented in the last few months, it is safe to say that there will be some kind of effort to save an industry that nobody wants. not even the environmentalists! But, then again, whatever the people want, Congress is going to do the opposite. (Can we say TARP?)
The USDA, on November 12th announced it was accepting applications for the Biorefinery Assistance Program.
"The Biorefinery Assistance Program provides loan guarantees for the development, construction and retrofitting of viable commercial-scale biorefineries producing advanced biofuels. The maximum loan guarantee is $250 million per project subject to the availability of funds. Preference will be given to projects where first-of-a-kind technology will be deployed on a commercial scale. Advanced biofuels are defined as fuels that do not rely on corn kernel starch as the feedstock." (USDA Press Release 0298.08)
Wow, $250 million per project. Non-corn starch. I bet that made the corn growers real happy!.
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Your arguement is interesting but there are two points I would like to add.¬† One is that your figure for total usage of gasoline in 2007 is not 390 million gallons.¬† The figure I found was 138 billion gallons of gasoline was used in 2008 plus 9 billion gallons of ethanol plus 800 million gallons of imported ethanol.¬† Therefore, about 6.5% of auto fuel is ethanol and the goal of reaching 36 billion gallons would be about 26%.¬† In my opinion, this is quite an achievement and the U.S. can be proud of it.
¬†Second, everybody knows that ethanol from corn is only a stop-gap measure.¬† We have the corn so we use it to get the biofuels revolution started and then when the ethanol factories are built, we introduce second generation feedstocks.¬† Algae may be the ultimate answer since it produces about 30 or so times the fuel that corn does.¬† The problems we are currently facing -- $7 dollar corn contracts and gasoline at $1.60 a gallon -- are temporary problems only.¬† The contracts will be rewritten, gas prices will go up eventually, so the ethanol industry makes sense long-term.¬† But most important of all is that ethanol reduces carbon into the air and a domestic ethanol industry keeps fuel-dollars inside the U.S.¬† The short-term problems are nothing compared to the long-term gains.
According to the DOE - EIA in 2007 we consumed 142 billion gallons of gasoline and¬† 317 billion gallons of petroleum.¬† DOE publishes barrels per day (1,000's) at 42 gallons per barrel.¬† I recalculated and corrected my article.¬† Thanks for the catch.
I like Algae because it was de-funded by the government in the '80s, yet still shows promise with private rather than taxpayer¬† funding.
I've read several articles just recently by environmentalists that have done a 180 on the ethanol issue.¬† Many now campaign against it.¬† I didn't get into it because it was not the point I was tryig to make.
My position is, and always has been, that we can't grow enough of our fuel to have a significant impact on our petroleum usage.¬†
Biodiesel from Algae does sound like a better way to go, since you can use salt water to grow it. There must be plenty of unfarmable coastal desert with no access to fresh water that could be pressed into production of this algae. Plus it produces far more energy per acre than using food crops.