Ethanol industry awaits fed decision

12/01/2009 12:00 AM

12/01/2009 12:06 AM

The federal government is expected to announce today whether it will raise the cap on ethanol allowed in a gallon of gasoline.

The announcement on whether to move from 10 percent to 15 percent could have a major impact on the once-booming — but now stagnant — ethanol industry.

The ethanol industry produces about 12 billion gallons of ethanol today. That's enough for 80 percent of all gasoline in the U.S., a blend called E10.

By moving to a 15 percent blend, or E15, ethanol production could grow to 16 billion to 17 billion gallons, said Greg Krissek, director of government affairs for ICM, the Colwich-based designer, builder and manager of ethanol plants.

If mothballed ethanol plants are reactivated and ones under construction come on line, the industry would need to add enough capacity for 4 billion to 5 billion more gallons, Krissek said.

The industry says raising the limit would create 140,000 jobs, including some at ICM. The company has cut its work force by more than half in the past 18 months.

It would also help the government reach its own goals. In 2007, Congress mandated increasing levels of ethanol use to 36 billion gallons by 2022.

By staying at E10, that goal becomes virtually impossible, Krissek said.

The industry would remain stalled, at least for the near future, he said. The worldwide recession has cut gasoline consumption and kept a lid on gas prices, which reduces interest in ethanol.

It will also likely kill innovation, Krissek said, such as the long-sought move to make ethanol from cellulose, such as wood chips and crop waste, rather than from corn and sorghum.

Cellulosic ethanol has not yet been developed to the point it is commercially viable.

Because the technology is new, cellulosic ethanol will be more expensive than corn ethanol, at first. In a tight market, the more expensive cellulosic simply won't be made, he said.

"It will put the development of cellulosic plants back years," Krissek said.

The request to increase the blend has met resistance from some engine makers who say more ethanol may hurt their products, and from people philosophically opposed to subsidizing industries.

In pushing for the EPA to approve the request, U.S. Agriculture Secretary Tom Vilsack has said higher blends are safe for engines.

Ethanol was also blamed by many for driving up the price of corn to record levels in 2007 and 2008, although ethanol supporters say there is little connection between the two.

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