Alan Guebert

Farm and Food File for the week beginning Sunday, Nov. 12, 2006

Ethanol policy not all politics

In the run-up to the Nov. 7 election, any candidate worth a baby-kissing pucker instantly, enthusiastically and repeatedly took the ethanol pledge.
"If elected, I, (insert your name as it appears on ballot here), do solemnly swear to preserve, protect and defend $2 gasoline, $3 corn and $4 ethanol so help me E-85." Or something like that.
Few candidates, however, either knew enough or spoke candidly enough to admit that ethanol--in fact, all biofuels combined--are the longest of shots to ever put more than a dent in America's 140-billion-gallons-a-year gasoline addiction or $360-billion-a-year-imported-oil tab.
Unlike the pols, Tad Patzek, a chemical engineer at the University of California, Berkeley, has no political ambitions or inhibitions. His view on ethanol is scathing and his take on politicians promoting it hovers between contemptuous and beneath contempt.
Patzek isn't a Berkeley bomb thrower. He was born, raised and educated in Poland, or about as far right of the Left Coast as one can get. Nor is he an ivory tower egghead. Before arriving at Cal, Patzek was an engineer with Shell Oil in Houston.
As an oil industry refugee, Patzek knows the energy sector like you know your fields. That background and his current research at Cal has led him to several inconvenient truths about ethanol. Truths like:
--Inflating car tires to their proper pressure today will have more impact on U.S. energy independence now than using 7.5 billion gals. of ethanol in 2012.
--If Congress raised car and SUV per gallon mileage (something it hasn't done since the 1970s) by 3 to 5 miles, total gasoline savings would dwarf "all possible biofuel production from all sources of biomass available in the U.S."
--And, if the average wholesale price of ethanol is $2.94 per gal., as it was in late May, current federal, state and local subsidies when combined with farm program payments, raises its true cost to $3.84.
"Ethanol will never be a solution to America's energy problem," Patzek told an October gathering of ag and research professionals, "and it is near-lunacy to promote it as such."
But next to God, country and the local high school basketball team, farmers and politicians hold ethanol sacred. And the election will encourage Congress and the White House to move it even closer to sainthood because Nov. 7 was very good to ethanol.
During the campaign, Collin Peterson, the Minnesota Democrat likely to become chairman of the House Ag Committee, often endorsed a biofuels title--read: separate language and new cash--in the 2007 Farm Bill to push biofuels.
The Senate's approach, regardless of which party is in control next January, will be similar with one glitch. Indiana Sen. Richard Lugar, currently the Committee's second-ranking Republican and its former chairman, wants to rejigger ethanol subsidies to better reflect today's crude oil market.
In one, tiny concession to Patzek, Lugar recognizes that ethanol subsidies put in place 25 years ago to encourage production are distorting today's well-established biofuel market--especially so given today's tall crude prices.
For example, Purdue University calculates that if crude oil is $70 per barrel and corn is $3.15 per bu., the federal ethanol subsidy of 51-cents per gallon puts a sweet $1.40 per bu. of pure profit into the pockets of ethanol blenders.
Lugar wants to eliminate this windfall in favor of a scaled subsidy. According to his plan, ethanol blenders would receive no federal subsidy if crude tops $45 per barrel. Should prices drop below that mark, however, a sliding subsidy--5-cents per gal. for every $1 under $45--would kick in to ensure expanding ethanol production and usage.
The change, coupled with new subsidies for more flex-fuel cars, more E-85 pumps and higher mileage standards, encourages Lugar to foresee America producing100 billion gal. of biofuels, mostly ethanol, by 2025.
"That's pure madness," reckons Patzek. "Even if we have the technology for that goal, and we don't," he says, "where are you going to get the biomass for such production?"
Oh.
"Yes, oh," Patzek notes. "Ethanol isn't all politics; it's some science, too."

© 2006 ag comm