Loading…
Tuesday, September 16, 2014
Current Weather
Loading Current Weather....
Published: Sunday, 5/7/2006

Critics doubt benefit of ethanol gas blend

BY JON CHAVEZ
BLADE BUSINESS WRITER
Brian Angerer fills up his pickup at the Sterling Store on Alexis Road with the fuel mix. Brian Angerer fills up his pickup at the Sterling Store on Alexis Road with the fuel mix.
Enlarge

For sheer engine performance, no fuel on the market today burns hotter than ethanol.

But its sizzling 113 octane rating isn't why the clear, corn-distilled liquid is white hot.

First used in America 180 years ago, subject to tax during the Civil War, and filling auto gas tanks as early as 1896, ethyl alcohol is the new rising star and investment buzzword for a nation gone cranky over $70-a-barrel foreign oil and $3-a-gallon gas pump prices.

"Who knew? If we knew it was going to be this big, we'd have gotten into ethanol a long time ago," said Jeff Ehlert, president of Great Lakes Ethanol LLC, which is building an $80 million ethanol plant near Blissfield, Mich.

Ethanol is not a certain problem solver.

Some studies contend the cost of making it outweighs its benefits. At least one economist says the diversion of corn from livestock could result in higher meat prices at the grocery. Others point out that ethanol gets poorer mileage than gasoline and that a limited number of service stations carry it.

But the gee-whiz fuel has exploded as an early favorite this summer, and particularly the E85 variety that has 85 per-cent ethanol and 15 percent gasoline, which typically costs 30 cents to $1 less a gallon than regular gas.

Now, the fuel that used to be side income for farmers and another additive for gasoline refiners has become part of the national energy policy.

A federal law in August mandated ethanol production by 2012 to be 7.5 billion gallons, or nearly twice current levels.

The fuel's biggest allure, and the source of its great hype, is its billing as a cure for U.S. oil dependence and environmental woes.

In the new federal Energy Policy Act, which took effect in August, a 10-cent-a-gallon tax credit was established to provide help to small ethanol producers and farmers.

The law, touted by President Bush, also provides $85 million in loans and grants for new ethanol ventures.

Ethanol is already in 40 percent of the nation's gasoline supply, with gasoline wholesalers getting a federal subsidy of 51 cents per gallon of ethanol used for creating gasohol - a mix that is 10 percent ethanol and 90 percent gasoline.

Raising that percentage or producing more E85 gasoline would help lower oil imports.

"It's correct that ethanol does displace some petroleum," said biofuels economist Tony Radich of the U.S. Department of Energy.

Americans used 140 billion gallons of gasoline last year, and to replace even 10 percent of all gasoline, the nation would need 14 billion gallons of ethanol, or more than treble current production.

Ethanol is clean burning and cuts greenhouse gases by 18 to 29 percent a gallon, according to the U.S. Office of Energy Efficiency and Renewable Energy.

However, its biggest selling point might be the price of corn versus the price of crude oil. Wholesale costs to produce ethanol is about 52 cents less than the wholesale cost of gasoline, which is $2.08 per gallon.

At metro Toledo's only E85 station, a Sterling store on Alexis Road, the alternative fuel sold Friday for $2.39 a gallon versus $2.69 for regular gas.

That difference has attracted Brian Angerer, a sergeant in the Monroe County Sheriff's Office. He makes a weekly trip to fill his 2005 Nissan Titan truck with E85.

When the station first offered the fuel in September, it was $1.04 less than gas, which was about $2.89 a gallon then.

"Unless people get it for the environmental reasons," he said, "I don't know if the price you're paying at the gas pump is going to draw people in."

A 50-to-70-cent price spread is needed, experts say, to lure buyers. But Professor Severin Borenstein of the University of California-Berkeley's Energy Institute said ethanol prices typically rise and fall with gas prices.

He expects gas prices to be within 20 cents to 30 cents of $3 a gallon all summer, with ethanol about 50 cents less.

Toledoan Kami Rowe's flex-fuel vehicle - a 2005 Trail Blazer - can use gas or E85, but she paid more for regular gas at Sterling recently because her husband tried the ethanol blend and didn't get good mileage.

It gets as much as a third less mileage than gasoline, Mr. Radich said. But another Toledo customer said his tracking shows it to be about a fifth less, and General Motors claims it is about a fourth less.

It depends a bit on driving habits, according to GM. But in theory, it could mean people are filling up more often, spending more money ultimately than buying regular gas, and perhaps not greatly reducing usage of foreign oil.

Though mileage drops, performance increases with ethanol.

Saab's 9-5 Aero BioPower, sold only in Sweden for now, takes advantage of E85 using a turbocharger, boosting the vehicle's 150 horsepower to 180. "When the pedal needs to go to the metal, we have 20 percent more power," Saab spokesman Jan Willem-Vester said.

Relatively few vehicles are equipped to handle E85. About 6 million vehicles on U.S. roads today, out of 231 million, can use it. Nearly 50 models, dating to 1998, are equipped to handle the fuel, which is corrosive and damages a standard fuel system.

The U.S. auto industry is providing more flexible fuel vehicles. This year, GM expects to sell 400,000 such vehicles, Ford 250,000, and DaimlerChrysler 250,000. Chrysler recently committed to building 500,000 flex-fuel vehicles by 2008.

Dick Bage, president of MedCorp Inc. ambulance service of Toledo, tried to cut fuel costs recently by using E85 on a dozen Ford Econoline vans, but the experiment failed. He said he could not get clear information from Ford whether the fuel would work, and the engines malfunctioned repeatedly.

A 2002 federal study found that of all E85-capable vehicles, only 1 percent used the alternative fuel. That may be due partly to a lack of E85 stations - just 650 nationwide.

Most of the stations are in the Midwest, but that is changing quickly.

Ethanol production nationwide totaled about 3.9 billion gallons last year, most of which went to refiners for a 10 percent blend in gasoline.

The oil industry has decided to use ethanol to replace methyl tertiary butyl ether, an additive found to contaminate ground water, and that move prompted federal officials to warn that "ethanol supplies are expected to remain tight this summer."

The oil industry used 155,000 barrels of the additive MTBE each day, but only 25,000 barrels a day of replacement ethanol will be available through June.

Ethanol has its critics.

Ben Lieberman, a senior policy analyst at the conservative Heritage Foundation, has argued that the federal subsidy of 51 cents a gallon be lifted so that ethanol can stand on its own. "In terms of pork per gallon, nothing gets as much as ethanol," he said.

Last week, he wrote, "All things considered, ethanol not only adds several cents per gallon to the price of gas, it does little, on balance, to reduce fossil fuel use." His organization argues that, rather than promote ethanol, the government should allow oil drilling in the Arctic National Wildlife Refuge and encourage more domestic refinery production.

But the ethanol refining industry has taken off. Five years ago, 56 ethanol plants existed and five were under construction in the United States. This year, there are 97 plants, 35 under construction, and 9 being expanded.

Plans for another 150 plants have been announced in the past year, including one in Dunkirk, Ind., by The Andersons Inc., a suburban Toledo company whose $226 million investment in two other ethanol plants has helped propel its stock from about $30 a share to more than $110.

Mr. Ehlert of Great Lakes Ethanol said the fuss over the fuel has brought in a new deep-pocketed investor, Global Ethanol, of Brisbane, Australia, that will allow the Riga Township, Mich., plant near Blissfield to expand production quickly after its planned opening in December.

"We figured we'd get this plant up and running and take the profits and build one or two more," he said. "We just never figured it would happen this fast; we figured three or four years down the road at least."

As U.S. demand for ethanol increases, some experts question the effects and whether it is worth pursuing.

Because of its corrosive properties, critics contend, ethanol cannot be shipped by pipeline from one region of the country to another, requiring trucking and thus increasing transportation costs.

The cost of transporting 5.1 billion gallons of ethanol will be about 8 cents a gallon compared with 1.5 cents for gasoline shipped by pipeline or 2 to 4 cents for gas shipped by tanker, two government reports estimated.

The Andersons of Maumee is moving quickly to obtain stainless steel tanker cars to transport ethanol stocks by rail, which the company projects will eventually be as cheap as pipeline transport as the ethanol industry grows, said Gary Smith, company treasurer. The railcar industry expects to have built 13,000 such tank cars by the end of the year.

Growing more corn to meet the ethanol demand will test farmers' production ability.

But Matt Roberts, an agricultural economist at Ohio State University, said the United States easily could grow 4.8 billion bushels of corn annually, which would produce 12 billion gallons of ethanol.

Genetic advances could increase corn yields, but there may be limiting factors, such as fertilizer prices or crop diseases, he said. And with less feed corn for beef, hogs, and poultry, prices people pay at the store for meat could jump.

"Could it make beef prices rise? Yes, probably by about 5 percent, but it's not the kind of increase that will threaten quality," Mr. Roberts said. Such price increases for meat could be higher, said Wallace Tyner, an agricultural economist at Purdue University in Indiana. Plus, the diversion of feed corn to ethanol plants would result in fewer exports of the crop, thereby raising the U.S. trade deficit, he said.

Others suggest ethanol costs more to make than it's worth.

David Pimental, a researcher at Cornell University, has done three studies that show it takes more units of energy to make ethanol than the fuel provides. Five other researchers have done studies and agree.

Thirteen other studies, including one paid for by the Department of Energy, show the opposite.

A federally funded study by Argonne National Laboratory in Illinois found it takes less energy to make ethanol than it provides. For regular gas, however, it takes more energy to make it than it provides, the study found.

Bruce Dale, a biofuels researcher and professor at Michigan State University, said ethanol from corn isn't ideal. The bigger payoff, he said, is ethanol distilled from cellulose-based material, such as wood chips, grasses, and other biomass materials.

But cost-effective technology for that process is at least five years away, experts say.

"It's funny. Our organization has been around 25 years, and suddenly, we're an overnight success," said Matt Hartwig, spokesman for the ethanol industry's Renewable Fuels Association.

"But all this attention is important. It's creating a floor from which our industry can grow."

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.



Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. If a comment violates these standards or our privacy statement or visitor's agreement, click the "X" in the upper right corner of the comment box to report abuse. To post comments, you must be a Facebook member. To find out more, please visit the FAQ.

Points of Interest