Days of
Promise Fade for Ethanol
Daniel Acker for The New York Times
Corn storage at the
ethanol plant in Macon, Mo., which stopped operating in January.
Officials have vowed to reopen it, and it is undergoing renovations.
More Photos »
Published: March 16, 2013
MACON, Mo. — Five years ago, rural America was giddy
for ethanol.
Backed by government subsidies and mandates,
hundreds of ethanol plants rose among the golden fields of the Corn
Belt, bringing jobs and business to small towns, providing farmers with
a new market for their crops and generating billions of dollars in
revenue for the producers of this corn-based fuel blend.
Those days of promise and prosperity are
vanishing.
Nearly 10 percent of the nation’s ethanol
plants have stopped production over the past year, in part because the
drought that has ravaged much of the nation’s crops pushed commodity
prices so high that ethanol has become too expensive to produce.
A dip in gasoline consumption has compounded
the industry’s problem by reducing the demand for ethanol.
The situation has left the fate of dozens of
ethanol plants hanging in the balance and has unsettled communities that
once prospered from this biofuel.
“It’s a more somber mood,” said Todd Sneller,
the administrator of the Nebraska
Ethanol Board. “The growth opportunity that existed some years ago
is still out there in theory, but the reality that it’s going to take an
awful lot of time, money and political battles to realize that
opportunity” is causing consternation.
Thousands of barrels of ethanol now sit in
storage because there is not enough gasoline in the market to blend it
with — and blends calling for a higher percentage of ethanol have yet to
catch on widely in the marketplace. Advanced
biofuels from waste like corn stalks and wood chips have also yet to
reach commercial-level production as some had predicted they would by
now.
Referring to the plants that have been idled,
Eric Lee, a commodities expert at Citibank, said: “Is that going to be
temporary or permanent? It’s hard to say.”
Not only do the plants employ residents of
these small communities, but they also provide a market for farmers to
sell their crops and buy grain to feed their livestock. They attract a
steady flow of trucks whose drivers use truck stops and patronize other
local businesses. Contractors visiting the plants stay in local hotels.
And the plants hold large accounts with local banks.
“It’s been quite an ordeal, honestly,” Mayor
Christopher Jackson of Walhalla, N.D., said of the closing of an Archer
Daniels Midland ethanol plant there last April.
About a dozen families who had moved to
Walhalla, a town of about 1,000, to work at the plant have left, he
said. Many of the 61 people who worked there have since found new jobs,
but the salary and benefits are not nearly as good, he said. Mr. Jackson
manages his family’s bar in town, and he said Friday end-of-week
gatherings did not happen as much because people had less to spend.
“It’s been hard on every business up and down
Main Street,” he said. “I don’t know that people realized how big of an
impact that plant closing had on the community. Now we’re a year into
it; everybody’s feeling the pinch.”
Congress set out to create an ethanol industry
that would produce enough to make up 10 percent of every gallon of gas
pumped into a car, but the lawmakers assumed that demand for fuel would
grow. Instead, it has shrunk to 8.7 million barrels a day from 9.7
million in 2007, said Larry Goldstein, an economist and a director of
the Energy Policy Research Foundation.
And with corporate average fuel economy rules now in place to
double the number of miles that the average car gets per gallon by
2025, “you know we’re on a trend,” he added.
As the gasoline market got smaller, so did the
amount of ethanol it could absorb, because most service stations are set
up to sell fuel with an ethanol content of only up to 10 percent.
Owners’ manuals of most cars call for fuel blends of no more than 10
percent ethanol. The industry calls this the “blend wall,” and it has
won Environmental Protection Agency approval for some cars to run on
blends of up to 15 percent, but thus far that fuel has not caught on
with consumers.
Millions of cars are “flex-fuel vehicles” and
can run on blends of up to 85 percent, known as e85, but that fuel is
not popular and is not even widely offered outside a few corn-producing
states.
But the ethanol producers were encouraged to
build because the federal government had mandated that refiners use
their product, and it established a tax credit of 45 cents per gallon of
ethanol. The tax credit was allowed to expire on Dec. 31, 2011, but not
before it had stimulated construction of ethanol plants.
The value of ethanol has also sagged. Its
price is created in part by the price of the gasoline it displaces, and
gasoline prices have been relatively modest for the past few months.
Mr. Sneller and others in the industry remain
optimistic that technological innovations and sound public policy will
keep the industry afloat.
Indeed, people here in Macon, in northeastern
Missouri, are not as grim about the future of their plant, which is
operated and partly owned by POET, an
ethanol producer with more than two dozen plants nationwide. The plant
has vowed to reopen, and it has retained all 44 of its employees to do
maintenance work as it undergoes more than $13 million worth of
renovations that it hopes will make it more efficient and able to
produce ethanol more cost-effectively.
Signs of transition are evident at the plant.
The growling factory motors, pumps and boilers are silent. But a sweet,
acidic smell lingers, and signs of construction are everywhere: skid
loaders sitting on fresh dirt, wooden planks cut for frames and dusty
corners sectioned off with orange cones.
The plant, which President Obama visited three
years ago, is adding equipment to allow it to produce corn oil that will
provide additional income. It is also instituting technology that can
produce ethanol without having to use heat, a move that will save on
energy costs.
With the new technology, operators hope they
will produce an extra three-tenths of a gallon of ethanol per bushel of
corn.
Residents also understand why the plant halted
operations.
The drought was particularly brutal here last
year, leaving farmers with little to no corn. Don Mutter, who farms in
nearby Cairo, said he produced about 25,000 bushels of corn last year,
just 5.5 percent of his usual yield. Without corn nearby to purchase,
the plant had to spend extra to haul it in from elsewhere. For several
months it was operating at a loss. It ceased operations at the end of
January.
“We are going to start back up, this year most
likely,” said Steve Burnett, who has been the manager since the plant
opened in 2000.
For the people around here, ethanol is
invaluable. The plant had been buying 16.5 million bushels of corn per
year and producing 46 million gallons of ethanol.
Before the plant opened, Mr. Mutter, one of
more than 300 investors in a company that owns a majority of the plant,
used to sow about 300 acres of corn each year. Now he plants 2,500
acres. His investment in the plant has paid off fivefold, he said. His
farming business grew so much that he was able to buy seven semis and
start a trucking company.
“It was the greatest thing for around here,”
he said of the plant.
© 2013 The New York
Times Company
http://www.nytimes.com/2013/03/17/us/17ethanol.html?_r=1&
|