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A Growing Demand for Alternative Fuels is Driving the Demand for Ethanol

Posted on: Thursday, 29 December 2005, 18:00 CST

By Joe Heitz, Cape Cod Times, Hyannis, Mass.

Dec. 28--DECATUR, Ill. -- The only cloud crowning the broad, cold prairie of central Illinois billows from a complex of metal and concrete.

Here, set against the winter-shorn eastern Corn Belt, is where corn from the surrounding expanse of fields is processed for the nation's gas tanks. In 2005, factories such as this one -- headquarters of the Archer Daniels Midland Co. -- produced a total of about 4.2 billion gallons of ethanol.

Ethanol-blended fuel now accounts for about one-third of the nation's gas supply, according to the Renewable Fuels Association. Once a predominantly Midwestern product, ethanol now appears to be gaining prominence on both coasts.

President George W. Bush recently signed legislation that calls for America to double its ethanol production by 2012.

What ethanol is is relatively simple. It's essentially alcohol -- corn moonshine formulated for your gas tank.

But what the increased production of ethanol means is less clear.

Proponents say it could reduce dependence on foreign oil, while critics contend ethanol is merely the product of politics -- tax dollars subsidizing a quintessential feel-good product of little practical potential.

Regardless of the rhetoric, U.S. ethanol production has grown 40-fold over the last quarter-century and is poised for future expansion.

So if you're not already pouring corn into your car, you may be doing so in the next few years.

Though ethanol is common throughout the Midwest, it's a relative newcomer in New England. But it's likely on the way.

"Eventually, all of New England will be using gasoline with ethanol in it," predicted Paul O'Connell, executive director of the New England Service Station and Automotive Repair Association.

Connecticut, for example, joined a growing list of states that have banned the fuel additive MTBE, which the U.S. Environmental Protection Agency has deemed a "potential human carcinogen at high doses."

Since ethanol can be used in place of MTBE as a fuel oxygenate, Connecticut used almost 205 million gallons of ethanol-blended gas in 2003, according to the Federal Highway Administration.

Massachusetts, which still allows MTBE in its gasoline, used 10.4 million gallons of ethanol-blended fuel in 2003, the most recent data available from the Federal Highway Administration.

Ethanol-blended fuel must be labeled as such under Massachusetts law.

Part of what's driving the increase in ethanol usage is a growing demand for alternative fuels, said Gregory Webb, ADM vice president of public affairs.

At about 25 percent of domestic production, ADM is the largest player in the American ethanol market.

This summer's sticker shock at the gas pumps left many people looking for other options, Webb reasoned.

"After Hurricane Katrina," Webb said, "it was amazing to me to suddenly find a lot of advocates for alternative-fuel development."

But increased ethanol usage doesn't necessarily equal lower gas prices.

It's consumer value, proponents say, by extending the existing supply and adding leverage against oil prices.

"If we use 10 billion more gallons of ethanol, that's 10 billion more gallons of bargaining power," said Ron Lamberty, market development director at the American Coalition for Ethanol. "Any addition of fuel into the marketplace is going to help."

So without a significant difference in price, does the public share his ethanol enthusiasm?

Maybe not, O'Connell said.

"The motorist is indifferent," he said. "They don't care."

Ethanol plants are currently clustered across the Midwest, close to the source of the corn. As of last year, an acre of corn could produce about 280 gallons of ethanol, Webb said.

But as ethanol use spreads, the plants could be built closer to the large population centers of both coasts.

"As ethanol grows," Webb said, "they could say, 'Let's put the plant where the consumption will be.'"

There are two methods of ethanol production: wet or dry.

Dry milling involves carting the corn to the plant, grinding it up, then allowing it to ferment a few hours. The starches are then separated to yield ethanol, livestock feed and carbon dioxide.

Wet milling -- a costlier process -- involves steeping the kernels in water before processing. In addition to ethanol, this method also produces corn syrup, corn oil and high-protein livestock feed.

Proponents tout several benefits of ethanol use.

First, ethanol helps fuel burn cleaner by reducing carbon monoxide emissions in car exhaust. And as an oxygenate, it can replace the fuel additive MTBE, which almost 20 states have banned.

Ethanol enthusiasts further reason that the product helps reduce the nation's dependence on foreign oil.

Most ethanol-blended fuel is a blend of 90 percent fossil fuel and 10 percent ethanol. So, Webb reasoned, that can help stretch supplies and retard price increases. However, Webb said ethanol is currently priced against crude oil, so increased usage doesn't necessarily translate into savings at the gas pump.

And, of course, farmers benefit as well from increased demand for their corn.

According to the American Coalition for Ethanol, the price of corn increases between 5 and 10 cents per bushel near ethanol processing plants. And if ethanol production doubles under goals laid out in recent federal legislation, it could mean up to $4 billion in net farm income by 2012.

About half the nation's ethanol production comes from small, farmer-owned ethanol cooperatives, funneling more money back into rural America, according to the ACE.

But many are still not enamored with ethanol.

"Anything that can't compete in the market isn't economically sensible," said Jerry Taylor, a senior fellow at the Cato Institute, a think tank in Washington, D.C.

Ethanol producers receive a variety of subsidies from the federal government to make their product profitable, Taylor said. Without those subsidies, he continued, there would be no ethanol industry.

Ethanol's growing prominence on the national stage may come in part from the electoral college, he said.

In the last presidential election, for example, the Upper Midwest voted for John Kerry while Bush claimed the Great Plains. So as presidential hopefuls traverse these political battlegrounds, Taylor said, Republicans and Democrats both recognize the importance of the farm vote.

So ethanol makes for good politics, too.

"Farm states tend to be swing states," Taylor said. "The main commodity (candidates) use for support is agriculture subsidies."

And, finally, an increased price tag on corn has a ripple effect on everything from cereal to beef, he reasoned.

"Do you grow corn?" Taylor asked. "No? Then you lose because you're paying more for corn products."

The one thing that both sides in the ethanol argument can agree on is that more and more corn will likely make its way from field to fuel.

There are currently 93 plants producing ethanol across the country -- and 31 more in construction, said ACE spokeswoman Kristin Brekke.

"We've never seen that many under construction before," she said. "People seem to be excited about ethanol."

Some, yes. But not everyone.

"The ethanol program will probably expand like a flesh-eating virus," Taylor said. "We'll have an ethanol program until the sun burns out."

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To see more of the Cape Cod Times, or to subscribe to the newspaper, go to http://www.capecodonline.com/cctimes.

Copyright (c) 2005, Cape Cod Times, Hyannis, Mass.

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ADM,

Source: Cape Cod Times

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