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Ethanol: Here to stay in one form or another

While our customers nationwide face potential engine problems from corn-based ethanol at level E-10, never mind the anticipated E-15, the debates, lawsuits and arguments roll on. Surprisingly, the latest comes from Sens. Dianne Feinstein, D-Calif., and Tom Coburn, R-Okla., who have discovered that the $6 billion federal subsidy to the ethanol industry isn’t such a good idea!

Feinstein nailed it when she explained: “Ethanol is the only industry that benefits from a triple crown of government intervention. Its use is mandated by federal law, it is protected by tariffs, and companies are paid by the federal government to use it."

Right on, senator! Oh, you left out a lot of other points . . . like, the bone headedness of making fuel that’s now consuming 41 percent of an important food source (corn); or the fact that all the push for corn ethanol was based solely on politics and self-interests, not on science. Indeed, the push for E-15 is clearly that, too. Why even Al Gore has reportedly apologized for his own years of support of the ethanol industry. He has admitted: “I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.”

Still, ethanol refiners enjoy a 45 cents/gal. tax credit. Moreover, they’re protected by another 54 cents/gal. import tariff against cheaper sugar-based ethanol from places like Brazil and elsewhere. But whether or not Congress eliminates the ethanol subsidy, along with possibly other farm subsidies in the pending budget battles, won’t change the federal mandate for steady increases in the use of ethanol. That’s because cellulosic ethanol is on the horizon.

Dubbed ethanol’s “second generation,” cellulosic ethanol can be made from such materials as grasses, weeds, wood chips and algae. In essence, fibrous cellulose is found in the walls of plants and enzymes are used to break it down. Once broken down into sugar, it can be fermented into cellulosic ethanol.

The major hurdle to cellulose ethanol production has been that the cost of enzymes to break down cellulose is nearly 10 times more than corn. But, there’s already some new processes announced that reduce the amount of the enzymes needed. And, with millions of research dollars pouring into this area, and if subsidies to corn ethanol get chopped, cellulose ethanol is cannot be that far down the road. As evidence, Valero Energy has already signed up to buy 40 million gallons from a new plant in Michigan in 2013.

Whether all this is good news or not is hard to assess. But it seems several conclusions can be drawn. First, given the current federal budget-cutting climate, there appears a real possibility that subsidies to corn ethanol production will be cut or phased out. Second, if that happens, or even if it doesn’t, the cellulosic ethanol development effort is now expected to put the pedal to the metal. Third, cellulosic ethanol will eventually put an end to the “food for fuel” debacle that corn ethanol has created.

Finally, regardless of the success of any current lawsuits such as the one National Marine Manufacturers has joined against the Environmental Protection Agency over authority to grant a waiver for E-15, it appears inevitable that we’re going to be dealing with ethanol well into the future. How our industry opts to deal with that going forward is a dialogue that should be happening.

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