Commentary Questions Need for Ethanol Tariff

Cindy Zimmerman Ethanol, Government

An editorial in the Wall Street Journal this week entitled “What’s Wrong With Free Trade In Biofuels?” questions the need for tariffs on low cost ethanol from Brazil if we are really serious about energy security in this country. As Hollman W. Jenkins words it – “The U.S. imposes a 54-cent-a-gallon tariff on Brazilian ethanol, to discourage competition with domestic ethanol, which receives a 54-cent subsidy from taxpayers. … This should lay bare the fraud that what’s going here has anything to do with energy security. It has only to do with the agricultural lobby masquerading its interests behind foolish and misleading rhetoric about energy security.”
I would suspect that the tariff is likely to go away at some point, assuming that someday a World Trade Agreement will be reached. In the meantime, I will make a couple of points in support of the tariff in the short term.
First of all, as anyone knows, Brazil has access to an abundance of cheap labor – due mainly to the fact that they don’t have the stringent labor laws that we do here in the United States. No requirements for workers comp, unemployment, health insurance, etc. That is one of the main reasons they can produce ethanol so cheaply. So, the tariff is a way of “leveling the playing field” – at least for now. It’s one of the major reasons we have a tariff on Brazilian orange juice, for example.
Second, the point is made that we are talking about energy SECURITY. That would mean trying to have most of our energy come from sources here in our own country. Why would we want to transfer our energy dependence from the Middle East to some other country because they produce alternative fuel cheaper than we do? Doesn’t make any sense to me. It does make sense to help the domestic industry grow with reasonable subsidies and such – but I think there should at the same time be a plan to wean from that assistance once the industry gets old enough.
People can complain about farm subsidies all they want, but the fact is that our country without question has the safest, most abundant and most affordable food supply in the entire world. And that is very much due to the fact that we have helped to support our farmers so that our country would not have to rely on other countries for our food supply – in other words, so we would have “food security.” The portion of the national budget that goes to “farm subsidies” is less than one half of one percent. Even within the USDA budget, only about 22 percent goes to farm and commodity programs, while 56 percent goes to domestic food assistance programs – and most of the rest to conservation, forestry, research and rural development. (source: USDA) The pay off is that we spend less than ten percent of our disposable personal income on food – an incredible bargain by anyone’s standards. Maybe with a little bit of subsidizing the same thing can be done for energy.

Ethanol, Government

Midwest Poised To Become Next Middle East

Cindy Zimmerman Ethanol

ICM An Associated Press story with a Kansas dateline is getting some good pick-up around the country. The article focuses on the ethanol distribution business and it mentions numerous big companies in the ethanol business including Colwich, Kan.-based ICM Inc., the nation’s largest designer of ethanol plants. The article notes that a small group of fuel distributors and ethanol barons stand to make a mint shipping the alternative fuel from the Midwest, where it’s made, to major urban markets on both coasts. In other words, as this ethanol business grows, the Midwest stands to become the next Middle East – holding a pretty big piece of the production pie. Let’s face it, the vast majority of the 95 ethanol plants currently in operation are located in the Midwest. There’s only a handful of mostly small facilities located outside of the corn belt, with a few more planned. Even taking those into account, total non-Midwest ethanol production capacity is about five percent of the nearly 6.5 billion gallons per year estimated for the country as a whole (source: RFA) So, point being, even once the industry starts using more sources other than corn to make ethanol – the majority of the plants will still be located here in the nation’s mid section, giving a great boost to our rural economies. Not a bad thing in my book.

Ethanol

First Corn Oil Extraction System Order Placed

Cindy Zimmerman Ethanol

VeridiumGlacial Lakes Glacial Lakes Energy of South Dakota has become the first ethanol production company to put in an order for Veridium’s patent-pending Corn Oil Extraction System. According to a Business Wire release, a manually controlled system is up and running today at Glacial Lakes’ Watertown, South Dakota ethanol production facility, where it is extracting corn oil now at a rate of about 0.8 million gallons per year. This rate will be increased to between 1.2 to 1.5 million gallons per year in the immediate term after Veridium installs additional technology in the system.
The release quotes Tom Branhan, chief executive officer of Glacial Lakes Energy as saying, “I have been a believer of this technology and have actively supported its development from the very first day it was introduced to me by David Winsness and his team. Veridium’s technology allows to significantly increase our profitability and I am proud to say that Glacial Lakes is the first ethanol producer to install Veridium’s Corn Oil Extraction System(TM).”

Ethanol

Veridium/Mean Green Deal to Make Biodiesel from Corn Oil

Cindy Zimmerman Biodiesel, Ethanol

Veridium Mean Green The marriage of Veridium Corporation and Mean Green Biofuels announced earlier this month (see previous post) is now resulting in the former selling corn oil to the latter to make into biodiesel. Quite frankly, not being a big business reporter, it’s all complicated corporate manuevering to me – but here’s the link to today’s press release that explains it for those who understand that kind of stuff. Near as I can figure it, parent company GreenShift arranged the marriage of these two baby companies to trade off the technology and by-products of the ethanol and biodiesel business. Okay, so that’s the simplified version – for simple people like me. It is complicated, but I know the bottom line is there is some really cool stuff going on with these companies that is going to result in more ethanol/biodiesel joint ventures in the future.

Biodiesel, Ethanol

Blogging Ain’t Easy

Cindy Zimmerman Biodiesel, Ethanol

The Renewable Fuels Association found out just how time-consuming blogging can be this week during the National Ethanol Conference in Vegas. Sure, it looks easy – but to do it right, you really need to put A LOT of time into it. Trust me. This is the only ZimmComm blog that I take responsibility for and that’s more than enough for me.

My dear husband and business partner spends the better part of his working moments feeding the blog monsters he has created. If you never checked out his coverage of the recent National Biodiesel Conference, you should – just to see how good he really is. He posted audio, video, pictures, text and covered every major event at that meeting BY HIMSELF. It can mean doing some logistical gymnastics, but he just keeps getting better.

This week he has been in Des Moines covering a Pioneer media event – next week he will be heading to Anaheim for the corn and soybean growers Commodity Classic. Fortunately, he will be getting some help there in the form of two college interns. Monsanto decided to pay for a couple of ag journalism majors to attend the Classic to get some hands-on media experience and they have been gracious enough to let them learn how to do some intense “new media” coverage from a master.

Anyway – back to the RFA conference blog – which my husband would argue is not really a blog, but whatever – cheers to Matt Hartwig for his learning experience. We suspected he would find it was a bit more difficult than he thought to try and juggle that along with his regular responsibilities as communications director. Hey Matt – if you want to book us for next year’s conference – we’re available.

Biodiesel, Ethanol

Johanns Shows Ethanol Industry the Money

Cindy Zimmerman Ethanol, Government

Johanns at RFA The Bush administration made good on its promise of more funding for domestic bio-fuels today with announcements of loans, grants and cost-sharing. During his appearance at the National Ethanol Conference in Las Vegas today, Agriculture Secretary Mike Johanns announced the availability of $176.5 million in loan guarantees and almost $11.4 million in grants to support investments in renewable energy and energy efficiency improvements by agricultural producers and small businesses. Johanns also highlighted that Energy Secretary Samuel W. Bodman today announced $160 million in cost-shared funding over three years to construct up to three biorefineries in the United States. Here are links to the USDA press release on the funding and USDA audio from an interview with Johanns about the announcement and ethanol in general.

Ethanol, Government

Pioneer Developing Corn Traits To Increase Ethanol Yield

Chuck Zimmerman Agribusiness, Audio, Ethanol, Production

Bill KuhnWhile Cindy is holding down the fort, I’m attending the Pioneer Hi-Bred, “Science of Solutions” media event in Johnston, IA. In the first interview I conducted ethanol came up. I was speaking with Bill Kuhn, Pioneer Research Director. Bill mentioned ethanol and I asked him how Pioneer is developing corn varieties that have traits that would increase ethanol production on a per bushel basis.

You can hear an excerpt of my interview with Bill here: Listen To MP3 File Bill Kuhn Interview Excerpt (2:01 MP3 File)

Agribusiness, Audio, Ethanol, Production

Laid Off NREL Workers Get Jobs Back

Cindy Zimmerman Government, Research

Bush at NREL It was awkward, to say the least, that in the midst of President Bush promoting the need for more research into alternative domestic fuels, funding was cut for the National Renewable Energy Lab in Golden, CO. So, before the president made his appearance at the NREL today, some 32 workers who were just laid off two weeks ago were given their jobs back. Needless to say, it was going to look bad for the president to show up there and talk about the important work they are doing and how he wanted to put more money into this research when they had just had their budget cut by $28 million dollars. Kind of hard to explain, but the president did attempt to do so by blaming it on a budget mix-up.
I recognize that there has been some interesting — let me say — mixed signals when it comes to funding. The issue, of course, is whether or not good intentions are met with actual dollars spent. Part of the issue we face, unfortunately, is that there are sometimes decisions made, but as a result of the appropriations process, the money may not end up where it was supposed to have gone. I was talking to Dan (NREL director Dr. Dan Arvizu) about our mutual desire to clear up any discrepancies in funding, and I think we’ve cleaned up those discrepancies. My message to those who work here is we want you to know how important your work is; we appreciate what you’re doing; and we expect you to keep going it and we want to help you keep doing it.
(Read all of the president’s remarks here)
I just thought the whole thing was kind of amusingly ironic. I had been sent a link to this December 20 article in the Rocky Mountain News about the layoffs at NREL, right after the president’s State of the Union speech, but I forgot about it until now. Thanks to my friend Erick in Nebraska for sending me that article.
The AP wire article on the President’s NREL visit today also headlines the budget story. It notes that only $5 millon of the $28 million shortfall was restored to the lab to rehire the workers, leaving $23 million still short. That, according to the article has “forced delays in research subcontracted to universities and companies.”

Government, Research

“Ethanol Has Arrived”

Cindy Zimmerman Ethanol

RFA The 11th Annual National Ethanol Conference officially got underway in Las Vegas this morning with RFA President Bob Dineen’s “State of the Industry” address.
My friends, ethanol has arrived…
In 2005, the U.S. ethanol industry contributed more than $32 billion to Gross Domestic Output, $5 billion to household income, nearly $2 billion to federal taxes, $1.6 billion to state and local taxes, added $6 billion to net farm income, increased average corn prices about 35¢ per bushel, and was responsible for more than 153,000 jobs in all sectors of the economy.

The full text of Dineen’s speech is available on the RFA website. As of 5:30 pm Central time, that’s about all that was posted on the conference “blog” but RFA’s communications guy Matt Hartwig promises there will be more “sights and sounds” to come.
Released at the conference today was a new report on the “Contribution of the Ethanol Industry to the Economy of the United States,” also available in PDF form from the RFA website link above. That report is the source for Dineen’s opening remarks. The report notes that the ethanol industry is one of the most significant success stories in American manufacturing over the past quarter-century. From a cottage industry that produced 175 million gallons in 1980, the American ethanol industry has grown to include 95 manufacturing facilities with an annual capacity of almost 4.3 billion gallons.
The report forecasts that “assuming an average capacity utilization rate of 95 percent, ethanol production is
projected to top 9.8 billion gallons by 2015.”
While interest is high in using other sources besides corn to make ethanol, the report says corn is “expected to remain the predominant feedstock, although its share likely will decline modestly by 2015” from the current 90 percent to about 86.5 percent.
The ethanol industry also is making significant improvements in yields. Based on improved technology and new plant designs, and reports of yields from new plants, we expect average ethanol yields to increase from the current level of 2.75 gallons per bushel to nearly 3 gallons per bushel by 2015. When this is taken into consideration, we project total corn utilized for ethanol production to increase from 1,586 million bushels this season to nearly 3 billion bushels by 2015.
Other speakers at the ethanol conference today included EPA Administrator Steve Johnson and Exxon Mobile Vice President Dan Nelson. Tomorrow will include Ag Secretary Mike Johanns and the governors of Kansas and Nebraska.
Hope to bring you more, but I have to get it from RFA to give it to you since I am stuck here at home while the boss is out in the field. If Chuck was blogging that event, I guarentee you would know everything that happened there today by now! Young Matt at RFA is still new to this blogging thing, but at least he’s trying. Gotta give him credit for that.

Ethanol

Bush Talks Energy In Wisconsin

Cindy Zimmerman Ethanol, Government

Bush Energy Speech Energy is the theme of presidential appearances around the country this week, as promised in the President’s Saturday radio address. He started off today in Milwaukee, Wisconsin at Johnson Controls. Much of the president’s remarks focused on investment in new energy technology, such as what is being done at Johnson Controls, especially developing new batteries for hybrid vehicles – advanced lithium ion batteries that are now used in cell phones and laptops. These batteries are lighter, they are more powerful, and they can be recharged quickly. Using new lithium ion batteries, engineers will be able to design the next generation of hybrid vehicles, called plug-in hybrids, that can be recharged through a standard electrical outlet.
President Bush also discussed ethanol, which he noted can be used in hybrid vehicles.
Now, we’re on the edge of advancing additional ethanol production. New technology is going to make it possible to produce ethanol from wood chips and stalks and switch grass, and other natural materials. Researchers at the Energy Department tell me we’re five or six years away from breakthroughs in being able to produce fuels from those waste products. In other words, we’re beginning to — we’re coming up with a way to make something out of nothing. And this is important because it’s — economics are such that it’s important to have your ethanol-producing factories or plants close to where the product is grown.
That’s why E85 has spread throughout the Midwest, that’s where you’re growing the corn. Pretty soon, you know, if you’re able to grow switch grass and convert that into ethanol, then you’re going to have availability for ethanol in other parts of the country. I mean, there’s a lot of stuff that gets thrown away that may be converted into fuel, but it’s not just located in one part of the country — it’s located around the country. And one of the goals is to make sure that ethanol is widespread. If we want to affect our consumption of oil, we want ethanol to be readily available for consumers outside certain parts of the — certain regions of the country.
And so we proposed spending $150 million for government and private research into these homegrown fuels. It’s an important initiative. We want to provide our consumers with reasonable, cost-effective ways to help us become less dependent on foreign sources of oil.

The third alternative vehicle fuel discussed by the president was hydrogen. When hydrogen is used in a device called a fuel cell, it can deliver enough electricity that could power a car that emits pure water instead of exhaust fumes. It’s an exciting new technology. We’re a ways down the road from bringing it to fruition, but we are spending $1.2 billion over five years to research this important opportunity.
Also noteworthy were the president’s remarks about natural gas and coal. Coal has the potential to reduce our reliance on natural gas. The problem is we’ve got to make sure that we can keep our commitment to the environment. Coal requires investment to make sure that we don’t pollute our air. And that’s the conundrum, that’s the difficulty with coal. This country is — I told you we’ve reduced our air pollution by 50 percent, in spite of the fact that our economy has grown substantially. We want to continue that commitment.
Lots, lots more good stuff in the president’s address today – read it all here on the White House website. Go to the Johnson Controls website if you want to watch the archived webcast.
It’s very notable that he is not taking a “one-size-fits-all” approach to this goal of reducing our dependence on foreign oil – it’s going to take a combination of different domestic energy sources, lots of research and serious commitment on everyone’s part to both finding alternatives and conserving energy whenever possible.
Tuesday, Bush will visit the National Renewable Energy Laboratory in Colorado to talk more about getting domestic fuel in the pipeline as fast as possible.

Ethanol, Government