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DAVID KRUSE

By Staff | Feb 12, 2010

Advanced Biofuels must produce a 50 percent reduction in greenhouse gas compared to gasoline to be considered as a politically and regulatory correct, biofuel. Corn-based ethanol scores 52 percent. EPA uses a 20 percent GHG reduction threshold for corn-based biofuel in the Renewable Fuels Standard.

When they factor indirect land use, corn-based ethanol scores a 21 percent reduction. Corn-based ethanol passes just by the skin of its teeth.

Corn-based ethanol opponents will charge that the EPA back-figured the formulas to make it work. Ethanol proponents believe the EPA’s indirect land use models are bogus and corn-based ethanol actually scores much higher.

The crop for the corn-based ethanol RFS will be supplied by higher trendline yields, not from more acres when the new demand is fully absorbed.

The cellulosic ethanol industry is off to a slow start struggling with development. The logistical hurdles are formidable and require a lot of government subsidies to fund the gaps in economic justification. The government is going to have to pay farmers something to harvest cobs as commercially they can’t afford to pay enough to give farmers the incentive to deliver them.

I think they have to back down from the cellulosic portion of the RFS. I’ve always said that the only way there would be a successful cellulosic ethanol industry is if the corn-based ethanol industry thrived.

You have to have the infrastructure, including ethanol pipelines, to build the distribution base before investment in cellulosic ethanol is made. EPA needs to raise the blending cap to E-15.

The Obama Administration acted like it wanted to leap frog over corn-based ethanol to “next generation” biofuel and that’s not going to happen.

I was pretty vocal about the need for the Iowa legislature to follow Minnesota’s lead mandating ethanol fuel blends in this state. Iowa’s state GOP legislative leaders blocked past attempts at enacting an Iowa ethanol fuel standard. They were stung by my calling them obstructionists.

While they tried to justify opposition to an ethanol mandate fundamentally they had weak arguments so their primary opposition was political ideological as their fallback position. They primarily profess to oppose mandates.

We have a lot of mandates, everything from wearing seatbelts to allowing petroleum manufacturers to put whatever additives they desired, including MTBE poison, into our fuel. So their opposition to mandates is selective.

Consumers will buy what fuel they are sold. We can let petroleum distributors decide what that is or decide for ourselves. I once argued with then-GOP Iowa State Ag Secretary candidate, Mark Leonard about an E-10 standard and he said that “forcing” Iowans to use ethanol would send California the wrong message.

Well, California mandated ethanol in fuel and we didn’t. Somehow, they must have missed that message. Current Iowa Ag Secretary Bill Northey is a stronger Republican ideologue than he is an ethanol proponent, also opposing an Iowa RFS. Just 73 percent of motor fuel in Iowa contains ethanol. That’s embarrassing.

Here is the list of ethanol as a percent of fuel content compiled by the RFA: Minnesota, 100 percent; New Jersey, 100 percent; Connecticut, 100 percent; Delaware, 100 percent; Mississippi, 95 percent; Hawaii, 95 percent; D.C., 95 percent; Wisconsin, 95 percent; Oregon, 95 percent; North Dakota, 90 percent; South Dakota, 90 percent; Kansas, 90 percent; Illinois, 90 percent; Kentucky, 90 percent; Indiana, 90 percent; Michigan, 90 percent; Washington, 85 percent; Missouri, 85 percent; Ohio, 85 percent; New York, 85 percent; New Hampshire, 85 percent; Massachusettes, 85 percent; Pennsylvania, 80 percent; Tennesee, 80 percent; Georgia, 75 percent; South Carolina, 75 percent; Virginia, 75 percent; Colorado, 75 percent; and California, 75 percent.

Today, I can’t single out Republicans and blame them for the ideological opposition to ethanol use as some Democrats suffer from the same affliction. Here in Iowa, Republicans obstructed the early push for an ethanol standard, but in Wisconsin, Democrats blocked it.

Iowa State Senator Jack Kibbie has always been the strongest ethanol standard proponent. He is now president of the Iowa Senate so I would assume that if he thought that he could pass a state ethanol RFS, he would push the legislation. A year into Democratic control, they haven’t done anything. No change.

The ethanol industry has generated enormous income gains for farmers, boosted local economic development and increased farmland values, raising the tax base.

Economist John Urbanchuk studied the contribution of the ethanol industry to Iowa and gave it credit for 70,000 jobs, $11.5 billion in economic

Activity, which is 8 percent of GDP, $2.3 billion in household income and $532 million in state revenue.

The industry was the largest wealth generator Iowa had seen in decades, yet people don’t get it. It’s amazing.

I’ve correctly noted that this industry and the wealth created came about in spite of the lack of support of the Iowa legislature not because of it. If the Democrats don’t act, then they are obstructionists, too.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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