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Greens, Big Oil Debate Ethanol Benefits

The long-negotiated energy bill has stalled in Congress for now, but the politically contentious issue of the fuel additive ethanol (search) is far from dead.

Ethanol, manufactured primarily from corn, has become the darling of Midwestern lawmakers who say it increases fuel efficiency in automobiles and helps gasoline burn more cleanly.

Critics, including some environmentalists and government watchdogs, call the proposal to double the ethanol requirement for gasoline in the comprehensive energy legislation nothing more than a "boondoggle."

"If ethanol were an economically intelligent investment, you would not need to subsidize it from stem to stern,"said Jerry Taylor, the Cato Institute's (search) director of natural-resource studies. "The real reason we have it is because politicians use it as a promise that they can do something to increase corn prices, and small farmers are willing to believe this."

Ethanol is an oxygenate, derived from corn oil, that can be added to gasoline. Its proponents say it helps gasoline burn more efficiently with less pollution, and does a better job than the often-used fuel additive MTBE, which has been found to cause a host of environmental problems.

Politically, ethanol is very popular, largely because it is a critical issue for Midwestern farmers who find it difficult to survive on the government cash doled out to make up for the low agricultural prices. President Bush and Democratic front-runner Howard Dean have both lined up behind the ethanol program.

"We ought to make sure that we use ethanol from corn,"Bush told an audience in Columbus, Ohio, last month. "We ought to use our technology and know-how to grow our way out of dependence on foreign sources of energy."

Last month before an audience of farmers in Iowa, the first caucus state in the nation, Dean announced a renewable-energy plan that would put greater reliance on both wind energy and ethanol. Dean would require that ethanol, along with other biofuels, constitute 10 percent of American motor fuels.

Other politicians, including Sen. Dianne Feinstein (search), D-Calif., a leading critic of the ethanol provision in the energy bill, charged that the Bush and Dean plans were little more than pandering to special interests and offered no benefit to most Americans.

Feinstein spokesman Scott Gerber said the senator was concerned that increased use of ethanol "will increase costs at the pump." Gerber added that using ethanol made no fiscal sense because it requires a lot of energy to produce and transport, especially to California, which has significant oil- and gas-processing facilities.

Proponents of ethanol say those who rejected the environmental benefits were misinformed.

"The people who are arguing about ethanol really don't have the facts," said Ron Lamberty, executive director of the American Coalition for Ethanol (search), which represents a range of supporters, including rural electric cooperatives, ethanol producers and grain cooperatives.

Lamberty said adding ethanol to gasoline increases its octane (search) rating. It also decreases American reliance on non-renewable natural resources by requiring less petroleum and eliminating the need for MTBE, which is made from natural gas.

"What we need as a country is some other sources of energy so we are not at the mercy of some of the most unstable regions of the world," Lamberty said.

Lamberty also rejected the criticism that ethanol should be rethought because it has to be subsidized, saying that oil is also subsidized.

"We don't apologize for the fact that ethanol is taxed lower," Lamberty said. "We're not over in the Middle East because were trying to get Persian rugs. We've got a large Defense Department present in the Persian Gulf so we can bring fuel back at a low price."

Critics say that as oxygenates (search ) go, ethanol is better than MTBE — but also that neither additive is necessary in cars with new, efficient engines.

Under ideal conditions, they add, gasoline already burns completely and cleanly, and while ethanol may have seasonal environmental advantages, it is highly doubtful whether it can have a positive overall impact on the environment.

"Ethanol's main virtue from an environmental point of view is that it's an oxygenate," said the Cato Institute's Taylor, "but with computerized engines now, we don't need oxygenates ... so whatever case there was for ethanol disappeared long ago."

Taylor added that ethanol "increases other pollutants."

The American Petroleum Institute (search) backed the energy bill, which requires the doubling of ethanol production to 5 billion gallons annually by 2012, but it is skeptical about any benefits ethanol might offer.

"All cars since 1994 have oxygen centers on them and they adjust the mixture, thus they don't ... need oxygenates of any type," said API spokesman Edwards Murphy. Murphy said the environmental impact of ethanol would be insignificant and it would not help fuel efficiency.

The oil industry said it prefers MTBE over ethanol, but with states starting to ban the former, the industry backed the energy bill, which gives oil producers and refiners immunity from dozens of lawsuits seeking billions of dollars to clean up water supplies polluted by MTBE.

Environmental groups, generally supportive of renewable fuels, have mixed feelings about ethanol.

"We're supportive basically of ethanol," said Ken Cook, president of the Environmental Working Group (search). But to really knock out air pollution, lawmakers should pursue initiatives that promote better mass transit and more fuel-efficient cars, he added.

"Ethanol is no boon for either energy or the environment, and it ain't renewable," said Dan Becker, director for the Sierra Club's (search) global-warming and energy program. "The problem is that in order to cultivate it, transport it and cook it into ethanol, you need to use so much fossil fuel that it is difficult to make the case that it is a renewable fuel."

Most government ethanol subsidies end up going to large intermediaries such as Archer Daniels Midland, an Ohio-based international agribusiness giant.

"It doesn't even help farmers," Becker said, describing the program as "a massive boondoggle."