Ethanol Industry Is Losing Clout In Congress as Food Prices Climb

The stalling ethanol industry wants Congress to mandate greater use of the biofuel. But many of the industry's former friends have turned against it amid soaring prices for corn and other grains.

Congress gave a big boost to ethanol in 2005, when it mandated that oil refiners blend 7.5 billion gallons of renewable fuels such as ethanol into the nation's gasoline supply by 2012. The farm lobby was united behind ethanol as a way to strengthen rural economies. Environmental groups backed it as a way to fight global warming and lessen the nation's dependence on foreign oil. Even the petroleum industry was supportive.

Since then, dozens of ethanol plants have sprouted around the country, turning corn into fuel. The rise of the industry has helped to boost grain prices and create jobs in farm states.

But ethanol production today is close to reaching the 7.5-billion-gallon level in the 2005 law. Oversupply has forced down prices and driven some ethanol producers into trouble. Producers and corn farmers are lobbying hard for Congress to boost the requirement anew to ensure that demand can soak up the rising production.

Without new legislation, there will be a "natural barrier to growth in the industry," says Eric Washburn, legislative counsel for the American Coalition for Ethanol, a trade group based in Sioux Falls, S.D.

In June, the Senate passed a bill increasing the mandate for renewable-fuels use to 36 billion gallons by 2022, with 15 billion gallons coming from corn-based ethanol. A House bill would leave the current goal in place. Lawmakers in both houses are preparing to work on reconciling the bills, though the timing isn't clear.

Opposition to the ethanol industry's goals has grown significantly stiffer. The so-called barnyard lobby -- representing the meat, livestock and poultry industries -- says high corn prices are hurting its profits. The price of corn-based animal feed has increased about 60% since 2005, according to the U.S. Department of Agriculture.

"Our single biggest priority is for Congress to reject a new renewable-fuels mandate," says Jesse Sevcik, vice president of legislative affairs at the American Meat Institute, a meat and poultry trade association.

Other groups that were originally sympathetic to ethanol are drifting away. They fear that the fuel's advantages are outweighed by the rise in corn prices, which they say increases the cost of foods ranging from steak to cereal. "Many policy makers were seduced by ethanol," says Cal Dooley, president of the Grocery Manufacturers Association. He opposes increasing federal support for ethanol.

The Agriculture Department says consumers can expect to pay as much as 4.5% more for groceries and restaurant meals this year over last, up from a 2.4% rise the year before.

The Renewable Fuels Association, the Washington-based ethanol trade group, disputes that ethanol is the chief culprit for rising food prices. It says higher energy costs are more to blame. The acting agriculture secretary, Chuck Connor, told the association last week that "clearly ethanol demand is having an impact" on food-price inflation, but the impact isn't as dire as some suggest.

The spreading coalition against new ethanol mandates includes the American Petroleum Institute, representing the oil industry. It says it supports ethanol but prefers a market-driven approach, rather than one driven by the government. Some petroleum refiners say ethanol prices are low enough now that they would consider buying the fuel on their own, without mandates.

The institute is finding common ground with environmental groups that usually battle the oil industry. Some environmentalists say unchecked growth in ethanol production could lead to soil erosion and degradation of wildlife habitats as more land is turned over to corn production.

"We've certainly had discussions" with the oil lobby, says Jim Presswood, a lobbyist for the Natural Resources Defense Council. Mr. Presswood notes that his organization has also talked with food and livestock groups to search for common ground.

Charles Stenholm, a former Democratic congressman from Texas who was influential in agriculture policy, is now a lobbyist in Washington. His clients include pork, dairy and oil interests, according to lobbying records. They all agree, he says, that "you need to let the market be the biggest determinant for ethanol."

Ethanol proponents say that isn't realistic for the short term. Most oil-and-gas pipelines aren't designed to distribute ethanol. Gasoline stations have been slow to install ethanol storage tanks and so-called E85 pumps, which pump an 85% ethanol blend instead of the more common 10% mix of ethanol and gasoline.

Matt Hartwig, spokesman for the Renewable Fuels Association, says ethanol is "still a young and developing industry." The government needs to keep supporting it, he says, if Americans want to "sniff the dream" of commercializing cellulosic ethanol, which can be made from materials including wood or switchgrass.

Write to Lauren Etter at lauren.etter@wsj.com1

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... and that's all there is to it. About 1/3 of the national corn crop now goes into the fuel industry. News Flash: CORN IS FOOD. By diverting so much foodstock into fuel, we just decreased the supply of food, thus increasing the price.

In comparison, we could be growing switch grass, which is a better source of ethanol, is not food, and can be grown on land that doesn't support corn anyway. Since switch grass was the SENSIBLE OPTION, of course, we avoided it almost entirely. Why? Because we're just stupid.

We took the easy way out (i.e. using foodstocks) and naturally we're just going to suffer more for it. The entire point of the matter was that a few ethanol producers could get rich, or at least speculated on getting rich (note that Wall Street never makes the distinction). Now we're stuck with higher food prices, a poor (i.e. half-assed) showing of ethanol in our fuel stocks, and now due to over-speculation ethanol producers are overextended and have problems maintaining profits.

Does America even HAVE an education system? Sometimes, it seems not, due to examples of national economic policy like ethanol.

Ethanol is gay! Besides all the corn, the other big hog is how much water an ethanol plant consumes. It's approximately 3 gallons of water for 1 gallon of ethanol produced, meaning a 100 million gallon a year ethanol plant would need 300 million gallons of fresh water. Not much water out west or down south. Add to that the fuel economy sucks on ethanol, the stuff is corrosive in pipelines, and adds to other forms of air / water pollution. No wonder Europe rejects ethanol as a savior!

I don't know what the answer is, but I'm turned on how fast electric motors can go in cars and what torque they are getting. Compared to an internal combustion engine where 85% of the energy produced is wasted in the form of heat (not used in movement) - electric motors can deliver an 85% return on energy to movement.

What strikes me is that Tesla Motors Co. are doing 0 to 60 in 3 seconds in some models going up to 170 mph with a 100 mile range and 0 to 60 in 4 seconds up to 130 mph with a 250 mile range with conventional batteries. I'm also encouraged how GM can take the 2009 Volt and have a small compustion engine run at same speed, when needed, to power an alternator to re-charge it's batteries. The electric motor used to power the vehicle is hooked to the gas pedal, hence the combustion engine can operate at one speed geared towards maximizing the return on the alternator. Throw in braking advancements on charging batteries, dual transmissions that can switch to highway to city environments, eliminating fluid tune-ups (oil changes, radiator, etc.), newer batteries that can now recharge 80% in 15 minutes, conventional batteries lasing over 100,000 miles in recharge life, and this thing starts to develop some legs.

I think the biggest technology advancement is going to be energy storage in batteries and ways to recharge them both in transit and stationary environments. Sounds crazy, but the industry of energy storage can expand outside the transportation environment, hence greater R&D resources.

Imagine having a normal looking vehicle as a commute vehicle or grocery getter that you never have to fuel up - all you have to do is park it in your garage at night. Same technology could be used for lawn tractors and mowers, no more waking up early when the neighbor decides to cut the grass after breakfest.

Pretty exciting stuff. I wonder if Gore will claim he invented this stuff as well?

Keep in mind we pay farmers not to plant crops in this country. Stop paying farmers not to plant crops and let the market place sort it out. Also if we didn't divert some of the corn we plant into ethanol, it would just wind up feeding live stock, an extremely inefficient way to get food on American tables.

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