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Future of Ethanol Production Questioned


Jan 27, 2017


The December 29th Edition of the Washington Report circulated by the National Chicken Council documented a decline in the price of ethanol from a peak of $2.50 per gallon in 2011 to $1.50 in 2016.  Over this period, ethanol production increased from approximately 13.5 billion gallons to 15.5 billion gallons with a relatively slow rate of increase from 2010 onwards.


The volume of ethanol produced each year is mandated by the Renewable Fuels Standard established by the Environmental Protection Agency in accordance with the Energy Independence and Security Act of 2007.  The Energy Policy Act of 2005 required production of 36 billion gallons of renewable fuels by 2022 with the anticipation that 21 billion gallons of the total would be derived from feedstock other than corn. This anticipation is a false hope despite billions disbursed in subsidies and grants for research and pilot plants.

For the past three years, the volume of production as mandated by the RFS has exceeded the practical limit of ten percent addition (effectively dilution) to gasoline requiring export of surplus production.  This was not the intent of the 2005 Energy Policy Act which established the biofuels program to contribute to energy independence.  During the past ten years, improvements in extraction of oil and gas have increased the supply of fuel reducing imports of foreign oil.  The viability of the ethanol industry depends on mandates and subsidies and would evaporate under a less generous Administration and Congress.

Prospects for corn-based ethanol do not appear to be bright notwithstanding 2016 pre-election rhetoric by both Presidential candidates.  The nominations of Scott Pruitt to head the Environmental Protection Agency and Governor Rick Perry of Texas as the nominee for Secretary of Energy suggest a bias to fossil fuel away from grain-based ethanol.  The influence of Carl Icahn as a special advisor to the President-elect on regulations will also mitigate against corn-based energy production.  Advanced biofuels from feedstocks such as biomass have not advanced in accordance with predictions made in 2005 due to technical complexity and cost.

Virtually all ethanol produced at the present time requires diversion of 33 percent of a 15.2 billion bushel corn harvest to production facilities operated by “legal moonshiners”. The fermentation process requires vast quantities of water and releases carbon dioxide which is either released into the atmosphere or sequestered underground. Claims that fuel ethanol is “environmentally friendly” have been refuted and the process is not sustainable.

Despite the hype and claims by lobbyists engaged by the Renewable Fuel Association, the biofuels program benefits corn farmers, ethanol refiners and corn-state politicians. Anyone who eats or drives pays an indirect tax to support an unsustainable program generated in haste, cloaked in patriotism and which has generated a momentum difficult to reverse. Disposing of this sacred cow will require considerable political capital but should be incorporated into the proposed Washington “swamp-draining” project.