The corn crop has a crony cartel
The Environmental Protection Agency has reduced the mandate for renewable fuels, but subsidies for ethanol, the worst crony capitalism program in the country, will continue.
The announcement last week by President Donald Trump’s EPA director, Scott Pruitt, reveals the difficulty in draining the Washington swamp. Republican politicians in the Midwest must appease corn farmers, who have become addicted to billions of dollars in government subsidies.
Congress mandated that U.S. refiners blend gasoline with renewable fuels in 2005, when oil prices were high and U.S. production was low. Battery-powered cars seemed like science fiction then, and phone apps for summoning rides were still on the drawing board.
Some experts were declaring that oil production was peaking and Midwest corn farmers were overproducing and needed a new market. Distilling corn into ethanol and reducing our dependence on foreign oil wasn’t a bad idea. Today 97 percent of the gasoline sold in the United States has some ethanol in it, according to the Department of Energy.
To encourage the development of new liquid fuels, such as cellulosic biofuel made from cornstalks and switchgrass, the federal Renewable Fuel Standard also required gasoline refiners to buy so-called advanced alternative fuels made from the nonedible parts of plants. Critics were complaining that making fuel from corn was driving
upfoodprices.
What made sense then now looks pretty foolish.
The U.S. has become the world’s second-largest oil producer, and the market is awash in crude. Chevrolet is selling a $35,000 all-electric car that can travel 200 miles on a single charge. And car sharing is expected to surpass auto ownership in the next 15 years. U.S. consumption of gasoline is forecast to go down, not up.
Pruitt said he was lowering the mandate to use advanced alternative fuels to volumes “consistent with market realities.” Instead of requiring the use of 322 million gallons of cellulosic biofuel in 2018, refiners will only have to buy 238 million gallons.
That’s a smart move by the EPA, because advanced biofuels are hard to make, expensive to buy and bad for the environment.
Humans have long known how to dissolve starches and sugars into water and make alcohol. But sugars and starches largely come from the parts of plants we eat. Using the stalks, leaves and cellulose to make ethanol is far more difficult, and it turns out, four times more expensive.
The Department of Energy subsidized most of the operating advanced biofuels plants in the United States with startup cash, and then Congress propped them up with the Renewable Fuel Standard.
Even that, though, is not enough. The Department of Energy gave Spanish multinational A ben goa a $132 million loan guarantee and a $97 million grant in 2014 to build an advanced bi o fuel plant in Kansas, but that plant is now shuttered.
The Advanced B io fuel Association said it was disappointed by Pruitt’ s announcement. But corn farmers don’ t have to worry too much, because Pruitt is still requiring refine rs to buy 15 billion gallons of conventional ethanol, the highest amount allowed underfederallaw.
Corn-based ethanol, though, is not much better.
The price of ethanol is significantly higher than gasoline. Farmers need to grow the corn and transport it to a distillery. The distillery consumes an enormous amount of energy and water, and the ethanol must then go to a refinery for blending with gasoline.
Supporters accurately point out that ethanol releases less carbon dioxide than gasoline when it is burned, but the manufacturingprocess produces much higher emissions than those released refining oil into gasoline, according to 2016 research by Universityof Michigan professor JohnDeCicco.
Researchersatthe University of Tennessee reviewed the entire U.S. ethanol program in 2015 and found that it did more harm than good, particularly in water contamination and soil erosion. Not to mention, ethanol can damage engines and hinder fuel efficiency.
The American Petroleum Institute welcomed Pruitt’s decision and rightfully called for Congress to end this $50 billion boondoggle by repealing the Renewable Fuel Standard entirely.
“The RFS mandate is bad for consumers, and it’s clear that the solution is for Congress to significantly reform this mandate,” said Frank
Macchiarola, director for downstream issues at the institute. “Members on both sides of the aisle agree this program is a failure, and we are stepping up our call for Congress to act.”
The problem is that corn farmers, especially in Iowa, have huge political influence. Trump promised Iowa Republicans that he would protect the ethanol mandates, and other Republicans can’t afford to appear antifarmer.
The swamp runneth over.
Chris Tomlinson is the Chronicle’s business columnist. chris. tomlinson@chron.com twitter.com/cltomlinson www.houstonchronicle.com/ author/chris-tomlinson