Ethanol Wins Big in Energy Policy

The war on terrorism has renewed America's interest in decreasing its dependence on the Middle East for oil, and the disruptions caused by Hurricane Katrina have reinforced the need to diversify the nation's energy sector. As a result, the U.S. is about to become the world's leading producer and consumer of renewable fuels. Broad energy legislation passed by Congress in July will require petroleum refiners to blend 7.5 billion gal of ethanol into gasoline by 2012, nearly double the current amount.

"America is addicted to foreign oil, and the first step toward recovery is to admit there's a problem," says Robert Dinneen, president of the Renewable Fuels Association (RFA), which represents about 95% of U.S. ethanol producers. "This legislation does that and more." The U.S. spends $300 million a day for imported oil, an annual cost of more than $100 billion. The energy bill's renewable fuels standard alone will reduce foreign oil dependency by 5%, according to Dinneen.

Corn-based ethanol is usually blended directly into gasoline to boost octane and reduce tailpipe emissions of toxic chemicals. Production began to rise in the early 1990s after Congress amended the Clean Air Act to require that gasoline sold in urban areas with unhealthy levels of carbon monoxide contain at least 2% oxygen. In the past five years, ethanol output jumped more than 50% as California, New York, and at least 17 other states banned the use of ethanol's chief competitor, methyl tert-butyl ether (MTBE), a petroleum-based oxygenate that has been found to contaminate drinking water because of leaking underground gasoline tanks.

The ethanol industry believes that the new federal mandate will spur about $6 billion in investments in production capacity across the country, create more than 200,000 jobs, and displace over 2 billion barrels of imported crude oil. While no new oil refineries have been built in the U.S. in nearly three decades, 88 ethanol plants have been built during this period, with the capacity to produce 3.9 billion gal annually. A record 3.4 billion gal of ethanol was produced in the U.S. last year, an increase of 21% from 2003, according to RFA.

Currently, ethanol is only a small part of the nation's energy portfolio. The new renewable fuels standard, which sets a national minimum usage requirement, begins at 4 billion gal in 2006. But with the nation's demand for gasoline reaching upward of 140 billion gal, there is much room for growth, which is why people in the industry see the 7.5 billion-gal requirement "as a floor, not a ceiling," says Leon Corzine, president of the National Corn Growers Association (NCGA). The amount of corn required to double ethanol production over the next seven years "doesn't even use up the increase in corn production we're going to see over this same time frame," he says.

Ethanol supporters say the certainty provided by the renewable fuels standard gives investors and farmers confidence in the industry's future. Sixteen new plants and two major expansions are now under construction, with a combined additional annual capacity of nearly 1 billion gal, equal to about 65,000 bbl a day. "The ethanol industry has been growing rapidly, and we're ready to meet the challenge of achieving the 7.5 billion gal goal," says Bernie Punt, president of the Iowa Renewable Fuels Association. "This is an indication that there will be a stable market for bio-based fuels." Iowa leads the nation in ethanol production, accounting for one-quarter of the nationwide total.

If crude oil prices remain at record high levels, "we could be producing and using a couple billion gallons more ethanol beyond what is called for by the renewable fuels standard," adds RFA Communications Director Monte Shaw. Based on the industry's growth pattern over the past four years, he says ethanol production should be "well above" 7.5 billion gal in 2012. "We've already been building capacity at a rate faster than what is required under the standard, and that was done during a period of uncertainty," Shaw notes. "So I don't think there's any question in anyone's mind that we have the capability of producing the ethanol and getting it to our customers. This industry is really going to step up and hopefully become an even more important supplier of clean octane to the petroleum industry from coast to coast."

LAST MONTH, Abengoa Bioenergy Corp. completed a 15 million-gal-per-year expansion to its ethanol plant in Portales, N.M., doubling the facility's capacity. "Given the national commitment to ethanol in the energy bill, we'll be seeing dozens of events like this one all over rural America in the coming years," Dinneen remarks. "By focusing on renewable fuels, we've set a new course for energy policy and significantly widened the role American agriculture plays."

Not everybody thinks the new policy is headed in the right direction. Some critics continue to question the efficiency of ethanol, claiming that the biofuel has a "net negative" energy balance. "In terms of renewable fuels, ethanol is the worst solution," declares Tad W. Patzek, professor of civil and environmental engineering at the University of California, Berkeley. "It has the highest energy cost with the least benefit."

For two years, Patzek has analyzed the energy dynamics of ethanol, which in the U.S. is mostly distilled from corn in a dry milling process. The corn is ground into flour and slurried with water to form a "mash," and then enzymes are added to convert the starch to dextrose. The mash is processed in a high-temperature cooker to reduce bacteria, then transferred after cooling to fermenters where yeast is added and the conversion of sugar to ethanol and carbon dioxide begins. After fermentation, which takes about 40 to 50 hours, the resulting "beer" is transferred to distillation columns where the ethanol is separated from the remaining "stillage." The ethanol is concentrated to 190 proof using conventional distillation and then dehydrated to 200 proof in a molecular sieve system. The anhydrous ethanol is blended with about 5% denaturant to render it undrinkable and then is shipped to gasoline terminals or retailers.

Although the technology sounds "green," Patzek says this is because many scientists do not look at the total picture. He believes that the amount of fossil energy used to produce ethanol far exceeds the consumable energy in the end product. To determine the energy balance of ethanol, Patzek and students in his civil engineering class analyzed the amount of energy required to grow corn and convert it into the biofuel. They concluded that burning ethanol as a gasoline additive actually results in a net energy loss of 65%.

Patzek claims that studies showing a net energy gain from ethanol do not take into account the amount of energy stored in the corn. "Corn is not 'free energy,' " he remarks. "To grow the corn, you've used up soil and water. We must also account for the disposal of wastewater polluted by nitrogen and phosphate fertilizers, as well as by pesticides and herbicides." He also notes that ethanol is highly corrosive and cannot be transported over the existing system of gasoline pipelines. As a result, it must be moved by truck or rail, adding to the final cost of the fuel.

Most recently, Patzek and Cornell University ecology professor emeritus David Pimentel published a study in the scientific journal Natural Resources Research (2005, 14, 65) that also found that turning corn and other crops into fuel uses much more energy than the resulting ethanol produces. The study concluded that making a gallon of ethanol from corn requires about 29% more energy from fossil fuels than a gallon of ethanol can provide. The researchers found that producing ethanol from switch grass requires 45% more energy than the ethanol provides, and ethanol from wood biomass requires 57% more energy. Among the costs considered in measuring energy input were the production of pesticides and fertilizer, the operation of farm machinery and irrigation, and the fermentation and distillation of ethanol from the water mix.

"There just is no energy benefit to using plant biomass for liquid fuel. These strategies are not sustainable," says Pimentel, who has been a persistent critic of ethanol since 1979, when he chaired an Energy Department advisory panel that examined the viability of fuel ethanol. Since then, he has written more than 20 technical articles on ethanol, and his conclusion has remained constant: Ethanol requires far more energy to produce than it yields as a transportation fuel.

"The U.S. desperately needs a liquid fuel replacement for oil in the near future, but producing ethanol from plant biomass is going down the wrong road because you need more energy to produce these fuels than you get from the combustion of these products," Pimentel declares. He says the government spends more than $3 billion a year in subsidies that help make ethanol production profitable for large agribusiness firms. "Most of us wouldn't mind paying a premium for a homegrown fuel that's truly efficient, environmentally friendly, and renewable," the Cornell scientist says. "But ethanol from corn is none of those."

Ethanol advocates maintain that Patzek and Pimentel's research is based on flawed data about obsolete farming and production practices, and they suggest the university professors may have a hidden political agenda. "This new study is just the latest regurgitation of Pimentel's research from 1979," says Ron Lamberty, vice president of market development for the South Dakota-based American Coalition for Ethanol. "Twenty years ago their information may have been correct, but today it couldn't be more wrong."

"Tad Patzek is not a disinterested third party in this debate," Lamberty says. Patzek is a member of the Society of Petroleum Engineers, was a researcher and engineer at Shell Oil from 1983 to 1990, and established the UC Oil Consortium in 1994. "It shouldn't be shocking that someone with such a background in the oil industry would come out opposed to ethanol as a viable alternative to oil."

NCGA's Corzine says Pimentel and Patzek are the only researchers since 1995 who have found ethanol to have a negative energy balance. Every other ethanol study conducted over the past decade found net energy gains of at least 25%, he notes.

For example, the Department of Agriculture disputes the energy calculations in the Patzek-Pimentel study. In its most recent life-cycle analysis published in 2004, USDA concluded that ethanol has a highly positive energy balance, containing 67% more energy than is used to grow, harvest, and refine the grain and to transport the ethanol to gasoline terminals for distribution. For every 100 Btu of energy used to manufacture ethanol, 167 Btu of ethanol are produced, according to the study.

Hosein Shapouri, a USDA economist, says studies that claim ethanol consumes more energy than it produces fail to take into account the impact that new, more efficient production technologies have had on the industry. In the fuel debate, he says, it is often overlooked that "the net energy balance for all fossil fuels is negative." Calculations can be done showing that gasoline contains 20% less usable energy than is consumed in the process of making it, according to Shapouri.

Pimentel, who refers to ethanol production as "subsidized food burning," argues that the USDA study does not consider the energy it takes to maintain farm machinery and irrigate fields. "If I had omitted as many different inputs as USDA did, I could have achieved a positive energy balance, too," he remarks.

In March, a study by the Energy Department's Argonne National Laboratory concluded that ethanol generates 35% more energy than it takes to produce. A summary of the study says some researchers fail to accurately account for solar energy in calculating ethanol's energy balance. "Some of the confusion arises over the fact that some of the total energy used in the production of ethanol is 'free' solar energy used to grow the corn in the first place," DOE states. "We believe [this study] has laid to rest some long-held misunderstandings about ethanol and its important role in reducing America's reliance on imported oil. In terms of key energy and environmental benefits, cornstarch ethanol comes out clearly ahead of petroleum-based fuels."

ETHANOL ADVOCATES point out that the Pimentel-Patzek study was highly publicized in July while lawmakers were negotiating a final energy bill, resolving differences between the measures passed earlier by the House and Senate. The House bill called for the use of 5 billion gal of ethanol a year by 2012, while the Senate sought to establish an 8 billion-gal-per-year mandate. "It was very well-calculated," says S. Richard Tolman, executive vice president and chief executive officer of NCGA. "You can tie this right to the oil industry," he asserts. "They've put millions of dollars into trying to squash ethanol. The oil industry put this out to discredit the renewable fuels industry." He notes that oil refiners wanted to limit the renewable fuels standard to 5 billion gal, while ethanol proponents urged Congress to adopt the 8 billion-gal figure.

The petroleum industry has argued that a requirement for more than 5 billion gal of ethanol would increase the costs of making and shipping gasoline. "It will drive up costs, have a minimal effect on petroleum imports, and force ethanol into areas where it is uneconomical to be used," warns Edward H. Murphy, director of refining and marketing at the American Petroleum Institute. Tolman acknowledges that ethanol will never replace all oil, "but it is, and will continue to be, part of the solution to lowering our dependence on foreign oil and lowering the price for gasoline."

Patzek dismisses the criticism of his biofuels studies, as well as the charge that he is a tool of the oil industry. He says his analysis is based on "many of the same numbers and inputs" that went into the USDA and Argonne studies. And he says the oil industry has neither funded nor influenced his research. Each scientific argument should be judged on its own merits, not on the affiliation of the person who makes it, Patzek says. "Otherwise, no one from the Agriculture Department or the corn growers association should ever speak publicly about corn or ethanol," he says. "USDA distributed $131 billion in agricultural subsidies between 1995 and 2003 ($37.4 billion to corn growers), plus an estimated $24 billion this year, and the members of NCGA have been receiving most of these subsidies," Patzek says.

He also points out that ethanol producers have benefited greatly from tax incentives for decades. For example, to encourage oil refiners to use the biofuel, current law provides for a partial federal excise tax exemption of 51 cents per gal for ethanol blended into gasoline. As a result, "petroleum blenders" receive a tax credit of 5.1 cents per gal for fuel blended with 10% ethanol. Last year, Congress passed legislation extending the effective date of the tax credit through 2010. "By labeling me a 'petroleum engineer,' the ethanol lobby seeks to distract me and others from focusing on the real issues we are trying to sort out," Patzek says.

Bruce E. Dale, a professor of chemical engineering at Michigan State University, says the whole concept of net energy balance is irrelevant and should be discarded. "Our focus needs to be on finding replacements for crude oil, and the debate over net energy will mislead us into making irrational choices," he remarks. "What counts is whether we can displace imported oil, and ethanol certainly does so. Ethanol is now, and will be in the future, an important contributor to reducing our petroleum addiction."