THE ETHANOL DEBATE: Producers battle campaign against ethanol

By MARVIN BAKER, Staff Writer, mbaker@minotdailynews.com
FALKIRK – Critics of the ethanol industry continue to hammer away on the alternative motor fuel as having a negative effect on the economy, despite gasoline prices reaching new records almost daily. At the same time, demand for ethanol across North Dakota and the nation continues to increase as motorists try to offset skyrocketing gas prices.


Most of the rhetoric, and now a multi-million advertising campaign from the National Grocers Association, blames ethanol for the rising cost of food. Corn, they say, is the culprit because ethanol demand has driven the commodity to unprecedented price levels.


However, Jeff Zueger, the general manager of Blue Flint Ethanol near Falkirk, believes the topic isn’t really debatable since the rise in food prices has absolutely nothing to do with ethanol.


“Anybody who thinks ethanol is the trigger for food prices is extremely misinformed,” Zueger said. “There may be a small role related to overall world food demands. But for us to point to ethanol is missing the point.”


Instead, there are any


number of reasons that have driven the cost of crude oil and oil products to historic levels, according to Zueger. That, in turn, causes food prices to increase because petrol fuel is needed to transport goods to their destinations, often times halfway across the nation.


“If anything, ethanol brings the cost down,” Zueger said. “Fuel is one of the biggest contributors. Fuel costs are significantly affecting this push.”


Zueger quoted a recent Merrill Lynch report suggesting ethanol usage across the United States in the past year has consistently kept the price of gasoline 15-20 percent lower. If 10 percent alcohol wasn’t blended with 46 percent of the nation’s gasoline, the price of gas would now be beyond the $4-per-gallon mark.


Tom Lilja, the executive director of the North Dakota Corn Growers Association, strongly agrees with Zueger. As long as he has been in his position, which is nearly a year, he has been saying energy prices are driving any rise in the cost of food.


According to Lilja, it takes fuel to plant the crop. Then it takes fuel to harvest the crop and process it. It also takes fuel to transport the processed food from point A to point B. And fuel is expensive. Diesel is now up to $4.50 a gallon in some locations, so it’s no wonder food prices are rising.


“The National Grocers Association is spending $5 million on an ad campaign targeting ethanol,” Lilja said. “Why they are not addressing the shipping costs is maddening.”


Representatives of the National Grocers Association didn’t return phone calls or emails seeking comment about the ad campaign.


Instead of food vs. fuel, Zueger said there are numerous logical reasons why food prices have increased, all of which are totally unrelated to ethanol.


He said the populations of India and China are a growing concern. Demand for non-staple foods is moving at an unprecedented rate. Rice is no longer the only grain sold in those countries.


China and India are partially responsible for a global demand on petrol fuel that has helped drive the price of crude oil past the $120-per-barrel mark. Zueger said crude oil is a core component of pricing and it drives just about everything.


In addition, he said a weak U.S. dollar isn’t helping matters. It now takes more money to buy oil than it did a year ago because the dollar has dropped in value against many currencies. If the dollar was worth its value two years ago, crude oil would be trading right now at $80 per barrel instead of $120.


“How do you make the dollar stronger?” Zueger said. “Pulling the plug on ethanol isn’t the answer.”


He said 60 percent of the nation’s oil supply is imported from countries that don’t want to send it to the United States anyway. Those nations, which make up the Organization of Petroleum Exporting Countries (OPEC), essentially have an energy stranglehold on the United States. Consuming ethanol is one way to break free of that dependence.


Still another reason food prices may be higher is because of lackadaisical stock performance, according to Zueger. If stocks don’t perform the way they should, we, as a nation, put our stock in commodities, which affects the price.


“Many have no intention of taking delivery,” Zueger said. “It’s all on paper and it adds to the volatility.”


But ethanol brings value to the nation and Zueger said more people should embrace it, because it’s environmentally friendly, it’s renewable, it gets the nation away from dependence on foreign oil and it’s less expensive.


“If you look at this plant, we’re building infrastructure and creating jobs instead of sending money overseas,” Zueger said. “When you think about small communities getting a plant like this, it’s great for society and culture. Our intent is to grow the economy and add value to a renewable product.”


He said ethanol is something the United States can grow and export instead of bickering about something like the 5 cents worth of corn used in a box of corn flakes being too expensive.


And, according to Lilja, the argument that corn supplies are falling short is not valid.


He said fertilization, drought and disease tolerant varieties and much higher yields have created surplus on the same amount of acreage used in the 1940s.


In fact, national production last year reached 13.1 billion bushels, the largest crop in U.S. history, according to the National Corn Growers Association. The average yield was 151.1 bushels per acre, the second highest in history.


In 2007, 22 percent of the nation’s corn was used for ethanol production, according to the U.S. Department of Agriculture. Another 42 percent was used for feed, 17 percent was exported and 9 percent was earmarked for domestic use. A total of 10 percent was considered surplus.


Lilja estimated that 10 percent of more than 13 billion bushels could feed a lot of people.


In addition, USDA statistics suggest that in 1944, 85 million corn acres were harvested in the United States. The price was $1.03 per bushel and the yield was 33 bushels per acre.


In 2007, 85 million corn acres were harvested. The price was $3.04 per bushel and the yield was 151 bushels per acre, representing a 364 percent increase in yield.


“Farmers have created an additional 3.1 billion bushels of corn annually on the same amount of acreage and this additional supply is the same amount that is being consumed for ethanol,” Lilja said. “U.S. trend line yields will be approaching 190 bushels per acre in the next 15 years with coming drought tolerant hybrids and other biotechnology advances.”


Lilja said there is one key element about ethanol that the public isn’t being told and that’s how much money is saved in subsidies by using corn for ethanol.


National Farm Bureau statistics show that up to $5 billion in ethanol tax credits have saved U.S. taxpayers as much as $21 billion in lower subsidies to farmers and less money to hostile foreign governments by purchasing less foreign oil.


According to Zueger, efficiency in ethanol production has run parallel with the increased corn production efficiency, thus more ethanol is produced from a bushel of corn using less energy.


He said there is a big focus on optimizing production methods, thus less corn, water and labor are actually used today to produce a gallon of ethanol than three years ago.


“Efficiencies are getting better every year,” Zueger said. “It’s too early to say it doesn’t work. Of course it works. The focus should be on how do we make it better.”


Zueger called alcohol a superior fuel to gasoline and suggested that is why race-car drivers are using it. He suggested auto manufacturers will produce more vehicles capable of burning the 105 octane, 85 percent alcohol fuel as the demand grows.


“The problem is we’re using it in vehicles designed to burn gasoline,” Zueger said. “We have to increase compression and set the engine up to take advantage of the fuel. We’ve made it safe, but it’s certainly not optimized.”


He suggested motorists be aware of a number of kits on the market to convert traditional engines into flex fuel vehicles, those that will allow burning of gasoline and/or E-85. He said none are EPA approved so it is a buyer beware situation.


But E-85 isn’t necessarily the silver bullet in fixing our nation’s dependence on foreign oil. Zueger said tests have shown that a 30 percent blend of alcohol to gasoline actually gives the best fuel consumption ratio.


“The blends continually come back to E-30,” Zueger said. “It’s fuel efficient and it appears to be the optimum blend. The EPA hasn’t approved it yet so we have a lot of work to do.”


Zueger also answered skeptics who claim that ethanol is actually a pollutor. He said a blend like E-85 emits 75 percent less pollution than gasoline.


“One of the things we forgot is we grew the ethanol industry to reduce emissions,” Zueger said. “We’ve forgotten that ethanol does that. We got rid of a harmful pollutant in MTBE with its air and water hazard and added a renewable fuel additive.”


Zueger isn’t going to change course on production just because of all the food vs. fuel talk. Instead, new technology is regularly added to Blue Flint Ethanol to make it a more productive plant in central North Dakota.


He said the ethanol industry needs to grow across the state and nation but the growth has to be managed properly so the infrastructure is properly placed.


“It would be a tragedy to make changes to an industry we’ve just figured out,” Zueger said. “We can optimize it and add fuel to the nation.”