After $100 Million, Exxon Backs Off Algae as Fuel

[wercal]

27. Ethanol

It used to enjoy the Volumetric Ethanol Excise Tax Credit, until this year I believe. Here is a link about it, from the ethanol industry:

http://www.ethanolproducer.com/articles/9765/ending-the-century-of-subsidies

And, underlying all corn production in this country is a baseline of agricultural subsidy that will not go away soon.

So it is subsidized...and it can be argued that oil drilling is subsidized through below market rate leases of federal lands...so they are both in the same boat - subsidized. Ethanol does not stand unique among its peer fuels as unsubsidized at all.

Corn left in silos? For starters, not all corn can be used for ethanol...but that's a different story. To me it isn't a matter of acreage available for food production...its a matter of water available for corn production. Much on Kansas and Nebraska rely on a very finite underground water resource for irrigation, which diminishes every year. Some water rights were involuntarily forfeited last year. We need to have a conversation about the issues surrounding planting more and more land in corn...and if we don't have it, mother nature will eventually force our hand.

And the water isn't just involved in the growing of corn...it is an important part of the ethanol production process. I was part of an application for water right to build an ethanol plant...and we didn't get it.

You made an interesting statement about reducing handouts to farmers for growing nothing. There was a short film on PBS a few years ago, where two college kids go to Iowa, lease an acre of land, borrow equipment, lose money on their crop, and get paid for their loss through a government insurance program. They interviewed some high ranking official in Iowa about corn subsidies...and he made the exact same point tha you did. The argument is, why pay farmers to not grow food when you can do the opposite - pay them to actually grow food. It sounds good in theory...although it ignores one purpose of leaving lands fallow. Its not just to avoid radical price drops...its also to avoid Dustbowl 2.0.

I live in Kansas. I tried to get zoning and water right for an ethanol plant...right before the bottom fell out of the industry. We were in for a tough fight anyway, but market conditions put a solid stop to our plans. And that's where we sit today - once ethanol production reachd any type of scale, the price of corn went up, and the margins are too dangerously thin for another plant to get built anywhere around me.

I want ethanol to work - I really do. An, I believe blending 5% into fuels 'takes the edge off' of the impact of mideast politics on fuel prices. And having an infrastructure in place that could offset an oil embargo for instance, would be great insurance. But, there is a cost. We realistically should be taking land out of corn production on Kansas - not the reverse (for water reasons). And the region really has not enjoyed great profit from ethanol. It does not easily transport in pipelines, and is primarily trucked...meaning that the vast majority of ethanol produced in my state will be consumed in my state - its not like its being sold to a worldwide market. The only positive impact we have had is the higher corn prices in general, for our sales of the dry grain product abroad.

Here in Kansas, it has been a mixed bag of success and failure. The successes consist of 4 megaplants, which are not at all coop owned. The owners of these facilities are now in the process of trying to buy failed smaller plants (mostly coop) for pennies on the dollar, to open back up.

Ethanol will continue to be a presence here...but its boom days are over (one of the large plants is actually name 'bonanza' as an homage to the boom days). And it certainly won't be scaled up to any degree in the near future.