GoodFuels

The Politics of Ethanol

(This was published Friday, August 31, 2008 in The Ethanol Monitor)

As I reviewed the volumes of information we have gathered over the past 18 months, I couldn’t help but wonder how the ethanol industry survived the massive campaign against it and I can only conclude that strong political support has managed to beat back challenge after challenge designed to undermine and slow its evolution.

Now it comes down to two candidates and two parties, a decision which could bolster or weaken the industry for years to come. No matter how you slice it, this election is pivotal for the future of ethanol in the U.S.—and that includes corn-based and next generation fuels.

This is not about endorsing one candidate or another, but rather pointing out the differences between the two, how their visions contrast with respect to energy and America’s future, both from the standpoint of our addiction to oil and how the U.S., the leading polluter on the planet, should be taking the lead in reducing the potential impact of global warming.

In several instances over the past four years I have had the privilege to meet many in the ethanol industry, and when asked why I ever got involved in this field, my answer is always the same. I have been writing about energy of all types for longer than I care to remember. The oil and gas industries fascinated me simply because I quickly recognized the importance these commodities had to the well being and advancement of civilization, but how politically fractious they were and how nations would take up arms to protect their share of these precious resources.

Russia’s sudden invasion into Georgia recently, the latest in the Soviet Union and now Russia’s desire to control the resources of its presumed empire, is just the most recent reminder of how oil and gas power corrupts.

But my answer as to why I ever got involved with ethanol at all goes back to September 11, 2001. That changed everything and brought to the forefront that we could no longer depend on oil to fuel growth.

The single belief should be that the national security threat to dependable oil resources is not acceptable. From corruption in Nigeria to a semi-dictatorship in Venezuela, to Russian resource expansionist policies represent just a few of the challenges the oil dependent world faces in the years ahead. To the U.S., the threat of Islamic extremism centered in the oil capitols of the world may be more publicized, but no more dangerous than the many geopolitical issues that surround what is the thread that holds together the world’s economies.

More than any other reason, ethanol became a necessity, but it wasn’t always that way.

Ethanol has been around for many years yet I was not a believer 10 years ago. I had spent much of my adult life believing that oil would always be cheap. After all, it never seemed to keep up with inflation from a price standpoint and global warming was not at the forefront of environmental concerns. Meanwhile, there was a global expansion at work as industrialization was coming to undeveloped countries and the world’s appetite for oil grew. What a difference a few years makes.

Fast forward to 2004 and the second Bush term and we find a sudden and unexpected shift in U.S. policy to support a growing ethanol industry as a means to lessen our addiction to oil. The political game was now underway.

Challenges rose up overnight as opponents of ethanol, or as they framed the issue, a fuel taken from the food supply to fuel our greedy desire to drive our cars, leaving the world to simply accept the consequences of soaring food costs.

There are many that oppose ethanol because they simply oppose all government subsidies. There are those that oppose ethanol because it’s a competitor. Others question the economics and energy output of ethanol, but the loudest contingent of opponents mounted the campaign that ethanol—in all forms—was starving the world. Whether it was too much corn demand taking away grain supplies or the deforestation of the Amazon as demand for grazing lands grew due to crop expansion to feed the ethanol supply chain in Brazil, the end result was food prices out of reach for much of the developing world.

Naturally, there was exaggeration across the board, and somehow, despite all the anti-ethanol rhetoric, ethanol was chipping away at the consumption of oil. As Brazil accomplished in the last decade, the U.S. was finally doing something about oil dependence.

Just this week, U.S. Agriculture Secretary Ed Schafer says he believes ethanol is gradually winning a perception battle over whether ethanol is a good alternative fuel. Schafer says rising energy prices not ethanol production is mostly to blame for increased prices on any number of goods. He added that Texas (that unsuccessfully launched a challenge to the ethanol mandate) has realized the benefit of fuel price savings which greatly outweighed increased costs to the livestock industry.

Schafer also said the ethanol industry will be moving away from corn-based ethanol, and start using switchgrass and other sources of starch and consumers are beginning to understand the value of ethanol and are beginning to doubt arguments that it is to blame for soaring food prices. I’m not as confident as Secretary Schafer might be, but I do agree with him that next generation fuels are coming, and much faster than anyone might have predicted a few years ago.

Yet the changes, or as I call it—the evolution of the ethanol industry—is even more impressive. Per acre yields of corn are growing. The industry has improved the amount of ethanol from a bushel of corn and with the help of portions of the oil industry, has advanced the needed infrastructure to move, store and supply ethanol. Scientific advances to breaking down raw materials to yield starch will not only fuel the cellulosic boom that is coming, but make ethanol production of all forms, including corn-based, more efficient. Frankly, I’m amazed at the progress that has been made in such a short period of time, and despite what the critics say, without a lot of government help. Yes, without a lot of government help.

To launch a challenge to America’s dependence on oil one would expect that the cost would be in the many billions of dollars. Frankly, the investment by the government has fallen well short of a true campaign against oil dependency, instead spending the many billions of dollars to make sure oil flows and there is some stability in the region of the world that supplies about 40% of it.

We can debate the Iraq war forever and never arrive at a consensus as to why we fought it—history will eventually sort it out. More importantly, we must never again fight a war to protect the flow of oil.

With an eye to the future, John McCain hates all subsidies. In fact the last line of the economy section of the working draft of the Republican platform reads: “The U.S. government should end mandates for ethanol and let the free market work.”

I shudder when I read that simply because it could have been written by ExxonMobil. It also runs counter as to why ethanol has become a necessity in 2008. It also says the U.S. is not serious about confronting the dangers our dependence on oil presents. It is a statement that unravels all that has been done, undermines the tremendous private investment in next generation fuels and stands as a guarantee that our military will certainly be involved for years to come in protecting the flow of oil around the world.

The Democrats at this juncture seek to preserve the progress made to date and further the progress. There is much reference on both sides about plug-in hybrids, but the real goal should be ethanol-capable plug-in hybrids as we further distance ourselves from imported oil.

We can get caught up in all the arguments pro and con with respect to ethanol including emissions, the relatively small contribution to rising food prices and subsidies, but to me it has always been an issue of National Security.

Can we limit the influence of Hugo Chavez and his socialistic agenda? Can we reduce Iran’s growing and destabilizing influence in the Middle East? Can we lessen the threat of Russian ambitions over natural resources? The answer is simple and obvious. Lower oil prices and strip these threats of the revenue that supports their rise, and thus the threat they represent. That means conserve and replace oil where it is consumed. The last time I looked, the U.S. was still consuming about 25% of the world’s oil. We’ve created our own monster and it would be ludicrous to unravel the progress made to cut that number down.

As I peruse the usual blogs I find I have less and less patience for the stupid little arguments about a couple of miles per gallon. Frankly, from the standpoint of U.S. National Security, I wouldn’t care if ethanol got half the mileage of gasoline. I wouldn’t care if corn-based ethanol was responsible for 70% of the rise in food prices.

Just as the statement “it’s the economy stupid,” achieved notoriety, in this political season, the catch-phrase should be “it’s about National Security stupid.”