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Bush's Call for Alternative Fuels Could Give Indiana, Ethanol a Boost

Posted on: Thursday, 2 February 2006, 15:00 CST

By Dan McFeely, The Indianapolis Star

Feb. 2--President Bush's call for weaning Americans off foreign oil has been made by previous presidents. And Indiana is far behind other Corn Belt states when it comes to ethanol production.

Still, President Bush's message was welcomed by many across a state where farmers earn most of their money -- an estimated $1.45 billion annually -- from the production of corn, the main ingredient in ethanol.

"I think it is great news for Indiana," said Chris Novak, executive director of the Indiana Corn Growers Association. "The research and the investment . . . whatever the source, is likely to come from agriculture. Whether it's wood chips or cornstalks, we know our farms can be energy providers of the future."

Ethanol is the key ingredient of E85, which is 85 percent grain alcohol and 15 percent gasoline.

On Wednesday, E85 was selling for 20 cents less per gallon than regular unleaded gas at Indiana stations.

"We are doing pretty good with it," said Donna Hotseller, manager of Joe's Junction gas station on Kentucky Avenue, the only station in Indianapolis to sell E85. "Everyone is just not aware of it yet. But we get several calls a day."

Joe's Junction sells about 200 gallons of E85 per day. On Wednesday, customers were paying $2.09 a gallon, compared with $2.29 for regular unleaded.

Indiana has 21 gas stations with retail E85 pumps, according to the state, including one station that opened in Tippecanoe County on Wednesday. State grants have been awarded to 11 more stations that will sell E85 and expect to open in the spring.

Last May, there were no E85 pumps in Indiana. By the time all 32 stations are up and running, Indiana will rank fifth in the nation in the number of pumps, behind Minnesota (198), Illinois (104), South Dakota (39) and Iowa (34).

"It's a savings if you got a car or a truck that can handle it," Hotseller said.

To run E85, you need what is called a flexible-fuel vehicle. While these were rare in the past, flexible-fuel engines are becoming more popular, even though some new car buyers are not even aware they have such an option.

"There is a lot of confusion. People are seeing the difference in cost at the pump and they are calling us to see if they have the proper vehicle for it," said Pat Dunn, general manager of Tom Wood Ford, which had 380 vehicles on its lot at 96th Street and Keystone Avenue on Wednesday, 15 percent of which are flex-fuel.

"I have noticed a large increase in customer interest since last summer, when we hit $3 a gallon in gasoline," Dunn said. "I think it's definitely going to continue to grow because ethanol burns cleaner, it is less expensive, and there is no difference in vehicle performance."

Indiana's ethanol entrepreneurs are banking on the promise that more cars will be built with the capacity to burn E85.

"I think, as a country, renewable fuels will reduce our dependence on foreign oil and our need to project a military presence over there," said Keith Gibson, general manager for Iroquois Bio-Energy Co., an ethanol plant under construction in Rensselaer. "We will be making ethanol from corn we buy here. It's kind of an everybody-wins situation in Indiana."

Iroquois broke ground last summer and should be open by mid-December. The plant, employing 34 people, expects to produce more than 40 million gallons of ethanol per year, purchasing corn from Hoosier farmers.

The United States produced more than 4.3 billions gallons of ethanol in 2005. There are 95 ethanol plants today across the country, compared with just 50 in 1999, and 31 more are under construction, according to industry sources.

"Ethanol plants are very profitable. And they are subsidized (through state grants)," said Purdue University agricultural economics Professor Wally Tyner. "It's a good investment. You can pay one off in four to five years."

In Indiana, the only plant that is operational is New Energy Corp. in South Bend. The president of that company could not be reached Wednesday.

While Indiana is a leader in corn production -- fifth in the nation -- the state has fallen behind others in the production of ethanol. According to the Renewable Fuels Association, Iowa has 27 facilities, Minnesota has 16 and Nebraska 14 -- a shortcoming that has not gone unnoticed by Gov. Mitch Daniels' administration.

"Yes, Indiana has been behind because there has not been an emphasis on bio-fuels here in the past," said Lt. Gov. Becky Skillman. "Within the last year, we have had six ethanol and two bio-diesel manufacturing facilities that have been announced; some are already under construction. Ten other facilities are in some phase of development.

"Do we need more plants? Sure, but it needs to be deliberate and manageable growth."

A key ingredient will be America's desire and ability to wean itself off foreign oil. President Bush wants to replace up to 75 percent of current Middle East oil imports with alternative fuels by 2025. Tyner said that is an ambitious goal.

"We get about 20 percent of our oil from the Middle East, so we'd be replacing about 15 percent of our oil (under this scenario). In terms of gasoline, that's 20 billion gallons," Tyner said.

By 2012, the renewable fuel industry has a benchmark goal of producing 7.5 billion gallons of alternative fuel. Under Bush's timeline, that production would have to nearly triple.

"That's a huge order," Tyner said. "And he wants it to be done in part with cellulose materials, but we are still a far cry away from (that). Research is needed in this area."

Cellulose materials include any plant material hay, wood chips, corn straw, switch grass -- a lot of which Tyner said is currently wasted.

Efforts are also under way to develop the use of more bio-diesel fuel, which is made from soybeans. Indiana is the No. 4 producer of soybeans in America.

For now, however, most of the attention remains on ethanol and corn.

Corn farmers are closely watching state Senate Bill 353, which is designed to help make alternative fuels more available in Indiana. The bill would require the state's economic development agency to work with automobile manufacturers to improve awareness and labeling. It also would require companies to include the locations of E85 stations in updates of global positioning navigation software. The bill also contains several economic enticements in the form of grants and tax credits for the sale and use of E85.

The legislation, in Skillman's view, would ensure Indiana stays ahead of the curve.

"Indiana is committed to reducing the nation's reliance on foreign oil and becoming the global leader in the production, development and use of bio-fuels," Skillman said in an email Wednesday. "A year ago we did not have any public E85 pumps in Indiana. As of today, we have 21. This is great news for Hoosier motorists, Hoosier farmers and the environment."

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Copyright (c) 2006, The Indianapolis Star

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Source: The Indianapolis Star

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