Ethanol — Alive And Growing
Despite a difficult year, there is still plenty of growth opportunity left to drive the ethanol market for years to come.
November 3, 2009
This year, several ethanol facilities that had been idled have returned to production — some under new ownership and others because economic factors are once again favoring ethanol. The industry expects to produce 10.5 billion gallons of ethanol, setting another record and accounting for more than 8% of the nation's gasoline supply.
Changing Times, Steady Needs
Even as times have changed since the first drop of ethanol was produced, the reasons underpinning our need for renewable fuels remain.
Energy security remains a crucial concern for our country. In 2001, when terrorists attacked the World Trade Center and the Pentagon, the U.S. imported 4.3 billion barrels of petroleum, including 2 billion from OPEC nations. Last year, we imported 4.7 billion barrels, including 2.2 billion from OPEC nations, among them Mahmoud Ahmadinejad's Iran and Hugo Chavez' Venezuela.
Currently, domestic ethanol displaces more than 320 million barrels of imported oil a year, saving taxpayers some $16 billion annually. That's a start towards weaning America away from its addiction to imported oil from unfriendly governments in unstable parts of the world.
Similarly, ethanol serves another national purpose: Reducing pollution and greenhouse gas emissions. Last year, the production and use of 9 billion gallons of ethanol in the U.S. reduced carbon dioxide greenhouse gas emissions by approximately 14 million tons — the equivalent of removing 2.1 million cars from the road. That's another encouraging start towards another important goal.
Meanwhile, expanded ethanol production promotes a third great goal — economic growth that creates "green jobs." Many of the new plants are in rural areas or small factory towns where factories are closing down and Main Streets are fading away. Now, the ethanol industry is offering opportunities for growers to find markets for their crops and for workers to find good-paying jobs. Many of these positions are for professionals and technicians with training in biology, chemistry, mathematics, engineering, accounting, and business management, so that college graduates won't have to leave home.
On Capitol Hill
In Washington, many of the concerns ethanol production and use help address are at the top of the legislative agenda.
Because ethanol serves so many national goals, President Barack Obama has put USDA in charge of a program to promote the American biofuels industry, working with the Department of Energy and EPA. This Biofuels Interagency Working Group is helping to refinance ethanol and biodiesel factories that have been caught in the credit crunch. The working group is also seeking new ways to guarantee loans to build new biorefineries and to provide funding for producers of ethanol from cellulose and other sources.
Meanwhile, the ethanol industry is raising its voice on other important policy issues. Passed in 2007, the Renewable Fuel Standard continues to drive ethanol sales. This year, the standard requires the use of 11.1 billion gallons of renewable fuels — ethanol, biodiesel, and other advanced biofuels. That figure jumps to about 13 billion in 2009, about 14 billion in 2010, and about 15 billion in 2011. This will provide our industry with an unequivocal and growing demand base.
As the volumes of renewable fuel mandated by the standard continue to expand, we are bumping up against the "blend wall" — the requirement that every gallon of gasoline be blended with ethanol at a 90/10 ratio. At the Renewable Fuels Association, we are working with colleagues in the industry and decision makers in Washington, DC, to increase the amount of ethanol that can be blended in conventional gasoline. Based in part on conversations with Obama Administration officials, we believe that EPA has the authority to move immediately to ethanol blends of 12% or 13% without adverse impacts on automobiles or air quality.
Such a move can occur while EPA reviews the merits of a formal waiver allowing ethanol blends of 15% — "E15." It will provide gasoline refiners and marketers the flexibility to maximize ethanol blending while higher blend levels are explored and the infrastructure to dispense them is created.
As is often the case, the success of this industry has drawn the ire of industries that seek to maintain the status quo. Such a position is simply untenable, and the misinformation spread about ethanol must be met head on with the facts.
Often, we're told that producing ethanol from grains decreases food supplies and increases food prices. But the fact is: American growers are the most productive the world has ever known. Last year, even with the 34% increase in U.S. ethanol production, growers produced the second largest corn crop on record, increased exports, fed more livestock than ever, and increased the amount of corn leftover from the year before. This was done, not by plowing up every acre but by harnessing the power of innovation — increasing corn yields by 400% since World War II — while planting the same number of acres.
The harvest currently underway may be the largest ever. Again, this unprecedented productivity comes against a backdrop of steadily increasing ethanol production and use.
The second big lie is that increased ethanol production in the U.S. is causing land use change in Africa and South America. But deforestation changes in land use are being caused by illegal logging practices, cattle ranching, and subsistence farming, not by a growing market for biofuels. In fact, deforestation has decreased as ethanol production has increased over the past several years.
Fortunately, there are vast amounts of arable land available for agriculture throughout the world. As the Food and Agriculture Association of the United Nations has reported, there are 1.5 billion hectares of land used for arable and permanent crops — about 11% of the world's area. But there are 2.8 billion hectares of unused land suitable for agriculture — almost twice as much land as is currently being farmed.
As much as we must focus on the tasks at hand, America's ethanol producers are also setting their sights on the opportunities the future will hold.
Soon, there will be 3 billion cars on the road around the world, driving global oil consumption from 86 million to about 120 million barrels a day. The Earth doesn't have that much oil, so the world will need renewable biofuels.
We can meet rising worldwide demand with the next generation of ethanol. U.S. ethanol producers are rapidly developing and commercializing technologies that use new feedstocks in addition to grain. These feedstocks include wood chips, corn cobs, native grasses, and plain old garbage.
But, just as with any new generation, the new generation of ethanol needs an older generation before it. Grain ethanol gives rise to the companies, the infrastructure, the trained and skilled workforce, the markets, the vehicles, and even the public policies that are so essential for next-generation ethanol technologies. As President Obama has said, the "transition to (the next generation) will be successful only if the first-generation biofuels industry remains viable in the near term."
We can — and must — feed the world reliably and fuel our nation renewably. Together, American agriculture and the American ethanol industry are helping get the job done.
Dinneen is president of the Renewable Fuels Association, Washington, DC.