A maturing ethanol industry
Gov. Terry Branstad went to Washington last week trying to vanquish the Environmental Protection Agency and its ruling that the mandate for ethanol should not be increased by about 3 billion gallons to 18 billion gallons per year to be blended into regular, unleaded gasoline. The EPA decided not to expand the standard because America’s ethanol plants are cranking out all the fuel the nation can handle for the time being. EPA recommended a pause in the action.
Branstad and other Midwestern politicians — Democrat and Republican — are campaigning hard to expand the standard. They claim that doing anything otherwise will take the knees out of corn prices and cost thousands of jobs.
We have pointed out that the Center for Agriculture and Rural Development at Iowa State University projects that the EPA action could knock 25¢ off the price of a bushel of corn. Increasing exports might make up for that haircut.
Nobody is about to lose a job, either. Valero is lobbying against the increase in ethanol consumption though it owns several ethanol plants, including one at Albert City. Valero accepts the current level of production but says it cannot sell ethanol over what the market demands.
The market demands, essentially, that 10% of our motor vehicle fuel come in the form of ethanol. We are at that so-called “blend wall.” You cannot sell much E85 or even E15 right here in the heart of Corn Country, Storm Lake, Iowa. Only one outlet offers it locally.
When the Renewable Fuel Standard was created by Congress, legislators thought we could consume up to 20 billion gallons of ethanol per year. Fuel efficiency has increased and driving has decreased since then, lessening the demand for gasoline and ethanol.
Big Oil has worked so hard and so long and so furiously against renewable energy that you can appreciate the governor’s sensitivities. If you give them an inch, they will roll right over you. Iowans are convinced, within reason, that they must fight every step of the way and never give ground.
And so Branstad reminded President Obama that he campaigned as the renewable energy candidate and the best friend ethanol ever could have. So did George W. Bush. It worked. Each won Iowa.
We remember Obama saying in Circle Park, right to our face, that he was from Illinois and therefore loved ethanol as much as we did. He suggested that Hillary Clinton did not. It was that clear.
It was fair game for Branstad to remind Obama of his campaign.
We would note that it took Obama to ramp up what Bush started. To suggest that Obama would want to dismantle the ethanol regimen simply does not comport with the actual record. Both Bush and Obama did what they could to promote ethanol every step of the way.
Our concern is that by not expanding the ethanol standard we could stunt the development of advanced biofuels such as ethanol made from cellulose (switchgrass, corn stover, wood chips, etc.). The EPA is making accommodations for the continued expansion of advanced biofuels but it will eventually come at the expense of corn-based ethanol. That is as it should be. Corn is just a stepping stone on a long path to the future of renewable energy, just as oil will be seen someday as a stepping stone to a modern industrial society.
Eventually the newest advanced biorefineries will elbow out the least efficient and oldest corn ethanol distilleries. But that will take at least five more years, if not more.
Ethanol is not the encompassing answer to the Iowa corn grower. China is much more important to his future than the Renewable Fuels Standard. Plus, you have to wonder if chasing higher corn-per-acre numbers for the sake of ethanol is worth it when you consider land costs, soil erosion and rapidly increasing input (chemical) costs.
There is no question that ethanol has supported commodity prices. It also has helped ease our dependence on foreign fossil fuels.
At some point corn ethanol must stand on its own, a free-market acolyte would profess. The same people who worship at the altar of unfettered markets (those who would oppose a mandatory acreage reduction program for soil conservation, say) believe that something so clunky as the federal government could administer the workings of the energy market. If we are to establish government mandates for corn ethanol, then possibly we should be creating a carbon trading market fueled by government incentive. Of course, President Obama suggested that right alongside support for the expansion of corn and cellulosic ethanol. The free market folks, guided by the energy industry, quickly snuffed out that atomic notion.