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Ethanol Fueling Debate

Posted on: Monday, 22 August 2005, 18:00 CDT

Aug. 21--Backers see alternative energy; others remain skeptical Ronal McMurtrey is a third-generation farmer who has sometimes struggled to eke out a decent profit from his 3,000-acre spread west of Cherokee.

But McMurtrey is hopeful that he and other farmers will see higher incomes after a $60 million ethanol plant is built nearby in north central Oklahoma.

The facility, a project of the Oklahoma Farmers Union Sustainable Energy Board, will be the state's first ethanol plant. It's expected to create a more lucrative market for milo growers such as McMurtrey.

"We should realize 15 to 20 cents more per bushel," he said.

For McMurtrey, that's roughly $15,000 more a year.

And there is talk of building more ethanol plants in the state. It could be the beginning of a whole new energy industry in Oklahoma, a state with a rich history in oil and natural gas.

The plant in north central Oklahoma is "almost a done deal," said Terry Detrick, vice president of the Oklahoma Farmers Union. The exact site will be announced in a few weeks, he said.

"If we can get this one up and running successfully, I assume we'll turn right around and look at another one," Detrick said.

Ethanol has made great progress as an alternative fuel, and more states are taking a hard look at ethanol investments now that record high gasoline prices are squeezing consumers.

Ethanol production in the United States has more than doubled since 2000 and will continue to grow. There are 90 ethanol plants nationwide, up from about 70 in 2003, and 15 more plants are under construction, according to the Renewable Fuels Association.

The rising demand for ethanol is undoubtedly a financial boon for farmers, who can make more money by selling their grain as feedstock for fuel than as food for animals and humans.

But even as refiners prepare to increase the use of ethanol in gasoline, the debate over its use as an alternative fuel has intensified.

Proponents of ethanol say increasing its use will lower gasoline prices, reduce oil imports and cut air pollution.

Ethanol's critics contend just the opposite, arguing that it will raise pump prices and increase oil imports because the amount of energy required to make ethanol exceeds the amount of energy it provides as a fuel.

In addition, the ethanol industry is heavily subsidized, receiving more than $3 billion in government money each year. That means taxpayers bear much of the cost of ethanol production. Without those subsidies, ethanol could not compete with gasoline.

Ethanol is an additive that has long been blended with gasoline to reduce tailpipe emissions and improve fuel efficiency. Ethanol's most common feedstock is corn, but it can also be made from milo and barley.

The use of ethanol surged after several states banned the use of methyl tertiary butyl ether, a gasoline additive suspected of polluting groundwater.

The ethanol industry was given another huge boost earlier this month when President Bush signed the Energy Policy Act of 2005. The law will nearly double the use of ethanol in gasoline to 7.5 billion gallons a year by 2012. In addition, it extends a 10-cent per gallon tax credit to larger ethanol plants. The credit is capped at $1.5 million per year per plant.

An ethanol plant in Oklahoma would receive another 20-cent per gallon tax credit, an incentive recently approved by the Legislature.

A recent study by Cornell University's David Pimentel and the University of California-Berkeley's Ted Patzek concluded that the making of ethanol burns 29 percent more energy than it produces as a fuel.

"We've tried to be as comprehensive and accurate as possible," said Pimentel, a professor of agricultural sciences.

Their findings have outraged ethanol's biggest supporters, who say studies by the U.S. Department of Agriculture show that ethanol creates a surplus of energy, not a deficit.

But the USDA ignores a number of energy inputs required to make ethanol, Pimentel said.

"For example, they leave out all the energy for the production and maintenance of the machinery," he said. "How many farmers have you seen raising corn by hand?

"If we left out as many inputs as they did, I'm sure that we could achieve a positive return."

But Detrick said the professors' study is skewed because it greatly overestimates the use of machinery such as tractors in the production of corn, milo and barley.

"The tractor is used for multiple things," he said. "In their study, they used 100 percent of the cost of that tractor against the production of ethanol."

Many other studies show that ethanol produces more energy than it consumes, Detrick said.

"For every one Btu (British thermal unit) we put into ethanol, we get from 1.4 to 1.7 Btus back," he said.

Because of record high gasoline prices, more motorists are turning to a unique blend of gasoline known as E85. It's 85 percent ethanol and 15 percent gasoline, and it's about 45 cents cheaper than regular unleaded gas. There are two places in Oklahoma to get E85 fuel, both in Oklahoma City.

But there's a drawback. Although E85 is cheaper, it contains just two-thirds the energy of gasoline. That means motorists using E85 can't go as far as they could if they were using regular fuel. As a result, they have to buy more E85 fuel.

"In terms of the number of gallons pumped through the engine, it's going to be higher," said Christi Patton, associate professor of chemical engineering at the University of Tulsa. "That's why petroleum products have been so wonderful over the years. They're an incredibly dense source of energy."

In addition, E85 only works in "flexible-fuel" vehicles. There are 4 million such vehicles on the road today, including 8,900 in the Tulsa area, said Yvonne Anderson, the Clean Cities program director for the Association of Central Oklahoma Governments.

Using E85 in a car not equipped to handle large amounts of ethanol will harm the engine, Anderson said.

"Ethanol in high concentrations is corrosive," she said. "Eventually, you're going to have some problems."

E10 fuel -- a blend of 10 percent ethanol and 90 percent gasoline -- works "quite successfully" in any vehicle that uses gasoline and is about 10 cents cheaper than regular unleaded, Anderson said.

The benefits of ethanol outweigh the drawbacks, Patton said.

"The fuel is cheaper and it's from a renewable source, so you're winning," she said. "I think it's really great for the environment."

A great investment

About half of the nation's ethanol capacity is owned by cooperatives consisting of farmers and other investors. The return on their investment has been significant, Detrick said.

"There are plants this year that are returning more than 50 percent on their investment," he said.

The 50 million-gallon-a-year ethanol plant planned for north central Oklahoma, which will be owned by farmers and other investors, is almost certain to be profitable, Detrick said.

"We've looked at this thing under the worse-case scenario and still haven't been able to make it lose money," he said.

For farmers struggling with higher fuel costs, an investment in ethanol could be fruitful.

"What better way for a producer to hedge against the increasing cost of fuel than to invest in a profitable energy-producing plant," Detrick said. "I'm not going to tell our people we're going to get you a 50 percent return. I will say there are plants today getting a 50 percent return."

McMurtrey, the farmer from north central Oklahoma, is ready to invest. He's expecting a generous result.

"We think the profits will be great," he said. "It's going to beat farming."

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Source: Tulsa World

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