Ethanol industry poised for more growth as efficiency debate continues
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By ART HOVEY / Lincoln Journal Star
YORK — After four years of wrangling, Congress has passed an Energy Policy Act that could trigger another major expansion in Nebraska's ethanol industry.
President George W. Bush is scheduled to sign the 10-day-old legislation in ceremonies tomorrow (Monday) at the Department of Energy's Sandia National Laboratories, scene of renewable fuels research near Albuquerque, New Mexico.
In order to meet an annual goal of 7.5 billion gallons of ethanol in the national fuel pipeline by 2012, "the industry has to almost double over the next six to seven years," said Steve Sorum of the Nebraska Ethanol Board.
In many respects, Nebraska is in prominent position to take advantage of strategies meant to make the nation less dependent on foreign oil.
Its 550 million gallons of annual ethanol production already put the state third, behind Illinois and Iowa, in that category.
It has ample supplies of corn protected from drought by irrigation, relatively cheap electricity, and a water supply that remains the envy of many other Great Plains states.
It has the third most feedlot cattle in the United States to eat the dry distillers grain that has become an important byproduct of ethanol production.
In communities as close to Lincoln as Adams, Wahoo and Fairmont, it has pending ethanol projects that could get the nudge they need from the energy bill.
There are about a dozen pending plant investments statewide now, said Todd Sneller, also of the Nebraska Ethanol Board. "If we're talking about another 12 plants, that's probably another billion dollars," Sneller said.
Banks are now more likely to back projects that typically cost $75 million for a medium-sized, 50 million-gallon plant.
"I think the financial community will be much more willing to lend money to these projects that they were waiting, with everybody else, to see what happens" in Congress, Sorum said.
There is at least one limiting factor in Nebraska. That's the loss of the 18-cent, fuel-tax credit that the state had been using to attract ethanol plants for more than a decade.
It expired last year amid widespread concern in the Legislature about how the state was going to cover the multi-million-dollar cost of credit payments to plants already in place and others that might expand from the small-scale pilot plants they built to qualify for credits before the deadline.
Most other Midwestern states still have ethanol incentives similar to the 18-cent credit Nebraska used to take advantage of Clean Air Act amendments in the early 1990s, when six of the state's 11 ethanol plants were built.
Despite the cheerleading in Nebraska for ethanol, not everybody is convinced that grain-based fuel is an answer to shrinking petroleum supplies.
David Pimentel of Cornell University in New York and Tad Patzek of the University of California, Berkeley recently updated joint research that continues to show that there is a net energy loss of 29 percent for every gallon of ethanol production.
Reached for comment in Ithaca, New York, Pimentel was clearly not impressed by the prominent role Congress gave ethanol as a part of the future energy mix.
Apart from what he sees as telling research on the energy conversion, "the money is going to Archer Daniels Midland and Cargill," he said. "These are the big producers. And then they give some to the politicians."
Meanwhile, the benefits reaching farmers, through the higher prices that go with the corn-ethanol connection, are as little as 2 cents a bushel, Pimentel said.
A prominent ethanol critic from the early years of the industry, he conceded that the energy conversions have improved with better ethanol technology.
But he said they would never reach positive territory as long as proper attention was paid to the fuel, fertilizer and other energy sources consumed to grow the corn.
Is there any way to get to a net energy gain from a cornfield?
"If you raise the corn, by hand, yes," he said, "and if you till the land all by hand, yes."
Sorum and Brian Wilcox of the Nebraska Public Power District office in Columbus, are not part of the Pimentel fan club. They portrayed him as a distinctly minority voice.
"There's been 11 different studies performed within the last several years," said Wilcox, also part of the leadership of the American Coalition for Ethanol, "and all 11 of those show a net positive energy balance for energy from grain."
Pimentel and his California partner are "the only ones of all their peers that show a negative," he added.
Sorum and Wilcox also said that neither electricity nor petroleum surpass a 1:1 energy ratio, either, if all secondary costs are taken into account.
Sorum said electricity delivers about a 50 percent return on energy consumed, "but electricity is not held to that standard."
Sorum also disputed Pimentel's assertions about ADM and Cargill being the only big beneficiaries of ethanol action in Congress.
He put ADM's market share, including an 85 million gallon plant at Columbus, at 25-30 percent and said farmer-owned cooperatives account for more than half of the ethanol capacity added in the last 25 years.
Donis Petersan, an economist at NPPD's Columbus office, said there's no arguing the economic benefits that go to rural communities that host ethanol plants.
In constructing a $60 million plant, for example, "we'd expect to see total economic activity in that area to be in the range of $70 million to $80 million."
The spin-off effects of a plant that employs 33 people typically mean jobs for 110 people in transportation, agriculture and other aspects of local economies, Petersan said.
Far removed from the center of the ethanol economy, Pimentel has very different ideas for a responsible energy strategy.
"I'd put conservation at the top of the line," he said. "We should be getting SUVs and pickup trucks under the mileage restrictions that we have. And we ought to put a mandate on Detroit and elsewhere to increase the efficiency of other automobiles."
Emphasizing ethanol won't do much to delay the rude awakening that awaits an energy-hungry nation confronting fast-shrinking energy resources, he said.
"That's why I think it's dumb for us to be importing oil to produce ethanol — and that's what it amounts to."
Reach Art Hovey at 523-4949 or at ahovey@alltel.net.
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