29-11-05
The ethanol business, once perceived as an industry kept alive mostly by
government support, is becoming more viable amid worries of a global oil crunch.
Innovation and investment are transforming the process of turning corn kernels
into auto fuel, making it the leading near-term alternative to petroleum for the
nation's 225 mm cars and trucks.
"The industry is growing out of its gourd," Ralph Groschen, a marketing
specialist for the Minnesota Department of Agriculture, told. Ten years ago, he
said, "people were saying, 'What if we get these plants built and the ethanol
market goes away?' Now they're saying, 'What if we get these plants built, and
the ethanol market doesn't grow as fast as it's supposed to?'"
In Little Falls, a cooperative is spending $ 8 mm to make ethanol by burning
scrap wood instead of natural gas, which is more expensive. Agribusiness giant
Archer Daniels Midland Co. is building a plant that will make five times as much
of the gasoline additive as a typical operation. In Canada and Louisiana, corn
stalks, trees and leaves are being tested to see if ethanol might come from
sources besides the corn that is now its mainstay.
Ethanol plants that have long relied on a 51-cent per gallon excise tax credit
to keep in business are becoming competitive and profitable. At the same time,
producers are installing technologies to burn less natural gas in the production
of the alternative fuel and cut emissions of global warming pollutants -- a step
that could muffle critics of ethanol.
Ethanol plants, which have been concentrated in the Midwest farm states, are
spreading to California, Texas and upstate New York. More companies are getting
in on the action, joining tens of thousands of farmers who own shares in ethanol
co-ops. Even an investment firm owned by Microsoft Chairman Bill Gates has
invested $ 84 mm into Pacific Ethanol Inc., which is planning to build five West
Coast plants.
The industry's growth looks to benefit from further favourable government
policy. A mandate in the energy bill President Bush signed last summer all but
guarantees the industry will double its annual capacity in the next five to
seven years, to more than 7.5 bn gallons. That's after the industry already
doubled in the past four years, according to Bob Dineen, president of the
Renewable Fuels Association.
Nationwide, 93 ethanol plants are making ethanol and another 23 are under
construction. Minnesota, the third-leading ethanol-producing state, has 15
operating plants that can make up to 523.6 mm gallons of ethanol annually, and
two more are on the way.
Helping ethanol's cause are the work of crusaders for energy independence like
former CIA director James Woolsey and former national security adviser Robert
McFarlane, who have embraced the alternative fuel. They envision a
gas-and-electric hybrid car that runs on E-85, a gasoline blend that is 85 %
ethanol. Another reason is the decline of the methanol-based fuel additive MTBE,
which 25 states have banned because it pollutes drinking water supplies.
Some hurdles remain to ethanol's wider acceptance. Today, ethanol accounts
for less than 3 % of the fuel from gas pumps, and only a tiny percentage of gas
stations offer E-85. Currently, Minnesota is the only state with a 10-% ethanol
mandate for gasoline, though similar mandates are planned in Montana and Hawaii.
Rep. Gil Gutknecht, R-Minn., has proposed a 10 % nationwide ethanol mandate by
2010. To meet that demand, the industry would have to quadruple in size.
Congress is considering several other measures that aim to make ethanol a more
integral part of US energy supply. They would prod automakers to make only
flexible fuel vehicles by 2016, and offer tax credits for the installation of
E-85 pumps.
Source: Star Tribune