The ethanol industry has changed so much in recent years that arguments in “End ethanol mandate” (Aug. 24 Eagle Editorial) were out of date or incorrect.
First, the U.S. ethanol industry stands on its own, with no federal taxpayer support. Contrast this to the century-old oil industry, which continues to receive billions of dollars per year in tax incentives, even while many of its local leaders proclaim the gospel of “free enterprise.”
Second, America’s economic prosperity was built on freedom of choice, open competition and cheap energy. Unfortunately, after more than 100 years of government support – ranging from tax benefits to wars in the Persian Gulf to protect the oil shipping lanes – entrenched oil interests apply their enormous power to restrict ethanol producers from getting to the consumer. The renewable fuel standard, signed into law in 2005 by President Bush, is not a mandate but a much-needed market-access tool for supplying up to 10 percent of the fuel blend. Without the RFS, consumers would face a de facto mandate – for 100 percent petroleum-derived gasoline. Until the RFS opened the door to a major expansion in ethanol supplies, many consumers who wanted choice had none.
Certainly the current drought is severe and affecting many parts of agriculture. However, the ethanol industry did not cause the drought, just as it did not cause $8-per-bushel corn prices.
Just as petroleum refiners upgrade crude oil into gasoline and other high-value products, so do ethanol plants, which essentially “refine” feed grains into valuable high proteins and oils, and convert the less valuable starch portion to high-octane, clean-burning fuel. U.S. ethanol production results in a net usage of corn at a rate of 16 to 20 percent of domestic corn production (not 40 percent, as the editorial indicated), according to research by companies such as Monsanto and ICM.
Imposing a domestic embargo on biofuels would eliminate options for agriculture and consumers. Last year there were an additional 1.3 billion bushels of corn contributed to the U.S. feed and food supply (compared with 2002 production) because the ethanol industry was a marketing choice for grain producers.
An Aug. 23 Bloomberg article had it right: “Ethanol, the best-performing energy commodity this year, is cheaper than gasoline, encouraging refiners to use the biofuel…. A 48 cent-per-gallon discount to gasoline provides companies including Exxon Mobil Corp. and Valero Energy Corp. an opportunity to profit by blending the corn-based additive into fuel, while easing prices at the pump for consumers. Marketers use ethanol as they look for the cheapest way to boost engine performance and reduce pollution.”
Someday when ethanol has achieved open access to consumers, the RFS can disappear, similar to what happened with ethanol’s tax incentives. However, until entrenched oil interests’ resistance is overcome, the RFS is needed.
For Kansas, we can think of no other domestic industry that transforms agricultural raw materials into high-quality feed, food and high-octane fuels while creating quality jobs and expanding tax bases.
The U.S. ethanol industry is an enormous success story of which we should all be proud. Now is not the time to turn back the clock and reverse all of the progress that has been made in expanding consumer choice, food production, energy security and economic activity.
The renewable fuel standard must stay in place.