Electric Car Enthusiasts are Squaring Off with Ethanol Advocates

Lawmakers Consider Changing the Renewable Fuels Standard

by Ken Silverstein

Source: Energy Biz

While the special interests are at odds over ethanol mandates, party leaders are coming together to examine whether the so-called Renewable Fuels Standard should continue or be modified.

That’s the provision in a 2007 law that had laid out a plan to grow the use of ethanol -- one that critics say is skewing energy markets and one that supporters say is making transportation a cleaner venture and minimizing imports. Either way, key members of the House Energy Commerce Committee are now recognizing that their initial dream of graduating from corn-based ethanol to a more advanced form called cellulosic is behind schedule.

By continuing to force the increasing use of ethanol as a way to supplant foreign oil imports, the law might be fomenting an adverse reaction -- one that is creating a crop shortage and in turn, raising those prices. Ultimately, the law is intended to increase production of woody chips, municipal waste and switch grass, or cellulosic ethanol that will eventually replace corn-based ethanol.

“The Renewable Fuels Standard creates a pathway to fully developing our nation's renewable fuel technologies,” says Hugh Welsh, president of DSM North America, which is opening later this year a cellulosic ethanol facility in Iowa. He told this writer that, “These advanced biofuels will reduce America's dependence on oil and cut greenhouse gas emissions, while generating new investment, growth and jobs. Investments like those made by DSM and others in this new industry prove that the standard are working.”

The Energy Act of 2007 has attempted to expand ethanol use from a base of 6.5 billion gallons to 15 billion gallons by 2015 and 36 billion gallons by 2022. Part of that is to allow ethanol to comprise 10 percent of gasoline’s blend. The concern: Farmers are replacing other crops with corn, thereby creating shortages of other food products.

Ethanol producers say that they are not starving anyone, noting that the nation's corn crop is flourishing. Total acreage devoted to corn production is up 20 percent from previous years. World food shortages, they add, are the result of growing demand from developing countries -- not because more corn is now used to make ethanol.

Mandates Attacked

But the Renewable Fuels Standard is coming under increasing attack -- one that reached its pinnacle during last summer’s drought. As a result, some states have asked the U.S. Environmental Protection Agency to reduce or to suspend the corn-based ethanol requirement in gasoline; the cellulosic potential is slow to form.

“Ethanol would likely disappear from the market place absent federal subsidies and mandates,” says Sterling Burnett, senior fellow at the National Center for Policy Analysis, in a telephone interview. “Like so much of the federal pork bestowed upon special interests, ethanol is bad for the economy, bad for consumers and bad for the environment.”

Consider Colorado-based Range Fuels, which received a $76 million grant through the Bush administration in 2007: The cellulosic facility never reached its potential and just recently, it was forced to close its doors. Then there’s Iogen, which received some U.S. funds and which has been teaming with Royal Dutch Shell to build advanced ethanol facilities in both the United and Canada. But the enterprise has postponed all future plans.

Ethanol detractors add that by continuing the mandates -- and thus tilting the playing field -- Congress is just trying to placate the powerful agricultural lobby. They are also saying that the amount of energy it takes to convert corn to ethanol produces less power and more emissions than if oil is just refined and combusted. That is something, however, that is contradicted by other studies including one by the International Energy Agency in Paris.

The collection of groups opposed to furthering the mandates is diverse: Petroleum producers are the most vocal and argue that the abundance of tight oil and shale gas here in this country make such a standard unnecessary. Then there are the environmental groups, many of which say that the the conversion process is dirty and results in more carbon dioxide emissions.

The green movement goes on to say that increasing the fuel economy standards in all vehicles and developing cars and trucks that run on alternative fuels is the best way to end the oil crave. To that end, President Obama’s Environmental Protection Agency and Department of Transportation have written federal rules requiring vehicles to travel an average of 35.5 miles per gallon by 2016 and 42 miles per gallon by 2020. His administration is also funding the research for a next-generation auto sector.

The debate is not just about economics and technologies. It’s also about the prowess of two interest groups: the oil and farm lobbies. The interplay among all those dynamics will determine whether the standards are changed.

EnergyBiz Insider has been awarded the Gold for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been honored as one of MIN’s Most Intriguing People in Media.

Twitter: @Ken_Silverstein