How Will the U.S. Feed the Ethanol Appetite?

Pork ^ | November 02, 2006 | Marlys Miller

[thackney]

One could argue that there was a shortage of corn before this year's harvest even began. As of Oct. 1, 105 ethanol plants dotted the U.S. landscape, with a combined ethanol production capacity of 5 billion gallons.

The Renewable Fuels Association tells us there are 42 more plants under construction and 7 plant expansions underway. Those efforts will add 3 billion gallons to the U.S. ethanol production capacity. Looking further down the road, there are more than 300 business proposals for additional ethanol plants. If those are built, it would add more than 20 billion gallons of ethanol.

Keith Collins, USDA chief economist, says in 2010 90 million acres of corn will be needed to fulfill ethanol, livestock and export demands. He says corn prices would need to be in the $3.10 to $3.20 range to attract that many acres to corn. Corn futures for 2007 are pushing close to those levels, indicating that the price signals have begun to entice a substantial increase in corn acreage. "But where will that acreage come from?" asks Chad Hart, Iowa State researcher.

"The last time this country planted more than 90 million acres of corn was in 1944. In 1932, over 113 million corn acres were planted," he notes. "In that year, Texas was the sixth largest and Georgia was the tenth largest corn producing state, with nearly 10 million corn acres between them. So a historical analysis would indicate the possible return of corn acreage in the Southeast and Great Plains."

But the prospects for more corn acres in the Southeast and western Great Plains is much lower today. Large amounts of land planted to corn during those earlier decades is no longer in agricultural production. In 2006, Georgia corn producers planted 280,000 acres and Texas had 1.75 million acres. Total cropland in Georgia is now less than 5 million acres.

Due to population and land use, the upper Midwest and the eastern Great Plains are the mostly likely candidates for expansion, says Hart.

One potential pool of acreage is in the Conservation Reserve Program. However, it appears that only 7.7 million acres are scheduled for release, much of which is more better suited for wheat than corn. "So while some CRP land can be brought into corn production in the short term, CRP acreage will only be part of the shift," he notes.

The most likely source of new corn acreage will come from shifts in crop rotation from soybeans to corn. That raises the question of whether the two-year rotation between corn and soybeans will disappear -- which also will reduce annual yields. Hart believes a three-year rotation -- two years of corn followed by one year of soybeans-- could surface.

"Given the crude oil price outlook for the next several years, ethanol’s expansion is apt to continue for some time," says Hart.

As Collins points out, ethanol plants can compete for corn even at record high corn prices. Other corn users, such as livestock producers, other processors and the export market will feel the pinch. Certainly more corn acreage will be found, where that will occur, whether it will be enough, and what else will be displaced, is a long and evolving scenario.

[Law is not justice but process]

This discussion reminds me a bit of the opposition to nuclear energy in the 70's and 80's. Everyone was afraid of piles of nuclear waste and the possibility of another Chernobyl. Sure, those are bad things, but by not switching to nuclear power, we just caused the expansion of coal and natural gas use. The waste of coal and gas generated power cannot be put in one place to look at (and be looked after), but was mostly put into the atmosphere. Out of sight, out of mind. France, of all places, took a much more enlightened approach to nuclear energy and now safely produces 80% of their electricity in nuclear plants. Had we gone down the same track in 1979, maybe Global Warming would not be such an issue (I said maybe).

If energy independence is the only goal, then maybe paying $3 or $4 a gallon for domestic ethanol (after all subsidies and externalities are counted) will be a good thing. If economic growth is the only issue, then $1.50 a gallon African ethanol should be better than oil or domestic biofuels (if it exists, of course). If the environment is the primary issue, then we should ban all power not generated by nuclear, wind, solar, or hydroelectric plants (maybe we could drive electric cars or use hydrolytically produced hydrogen).

Personally, the experience with nuclear power makes me hesitant to allow the government to make that choice. After all, to avoid a mountain full of nuclear waste in Nevada, they filled the global atmosphere with the CO2 that so many insist will be our doom. If we must end the use of fossil fuels (either because of Global Warming or because they run out), then let the market decide which energy source takes over. Government is good at stopping problems when they come up, but they are lousy at forseeing them before they happen.

[thackney]

There is a problem with using ethanol from Brazil because it uses sugar...and gets into some weird trade issues.

Last year, we imported about 66 million gallons of ethanol from Brazil, out of 193 million gallons of total ethanol imports. Sounds like a lot, but U.S. ethanol plants produced 3,904 million gallons in 2005.

We actually import more Brazilian alcohol via the Caribbean – 103 million gallons from Jamaica, Costa Rica, El Salvador and Trinidad last year. Under U.S. tax law, dehydrating Brazilian ethanol in those countries to remove the last three percent of water content makes it “local” ethanol eligible for duty-free access to our market.

We’re still importing Brazilian ethanol – and so what? http://www.iowafarmbureau.com/programs/commodity/information/060517.pdf

[thackney]

The show-stopper is ERORI, or energy return on energy investment. That killed the embryonic shale oil industry in the early 80s. If the ERORI is negative, no amount of financial sleight-of-hand can change the fact that we would be consuming more energy than could be produced.

Seebach: Shell's ingenious approach to oil shale is pretty slick

They don't need subsidies; the process should be commercially feasible with world oil prices at $30 a barrel. The energy balance is favorable; under a conservative life-cycle analysis, it should yield 3.5 units of energy for every 1 unit used in production. The process recovers about 10 times as much oil as mining the rock and crushing and cooking it at the surface, and it's a more desirable grade. Reclamation is easier because the only thing that comes to the surface is the oil you want.

[razved]

Shell stated that they will not make a decision for a commercial operation until 2010. While somebody may have
used a 3.5-1 ERORI, that seems inconsistent with the quoted statement below (10/24/06). Production of major quantities at a practical rate will require energy and water. The rate at which the raw product seeps out of the soil will also
be an important factor.

"John Hofmeister, the head of Royal Dutch Shell's U.S. unit, and other officials have been encouraged for the past year since they concluded that the oil-shale technology was viable, said Jill Davis, a project spokeswoman.

"We know the technology works," Davis said, after Hofmeister's remarks to Bloomberg News. "The thing is we have to determine whether it works on a commercial scale."

The decision to invest in oil-shale production probably will be made "no earlier" than 2010, she added."

[thackney]

Shell has been working this process as a pilot project at their Mahogany facility in Colorado for 2 decades. This is not a theoritical or calculated value but a measured one. They have been waiting for more than a year for BLM to give approval to develop a larger facility.

[theBuckwheat]

>>
The show-stopper is ERORI, or energy return on energy investment. That killed the embryonic shale oil industry
<<

While I am sympathetic to this point, in economic terms, it is meaningless. Here is why. What counts is not the valuing the fuel in terms of BTUs or pure energy, but as measured in monetary terms. We are taking energy in worthless forms and converting it into valuable forms.

This is the very reason that the dollar value per BTU or Calorie is often so far different for natural gas, coal and gasoline. Indeed, the coal being scooped out by the dragline has a monetary value that is but a fraction of the monetary value of the diesel fuel the dragline uses.

Sewage sludge is very rich in hydrocarbons, but it has a negative value because there are no real commercial conversion facilities to turn it into biodiesel. Municipalities must pay to haul it off or otherwise safely dispose of it.

We are throwing quite a few Quads (1 Quad = 1 quadrillion BTU) worth of hydrocarbons away every year in the form of sludge, animal processing waste, sawdust, cattle manure, etc, yet we don't fret about that. We fret about our imported oil even as we drive past the sewage plant.

So what if it takes 1000 BTUs worth of sewage sludge to convert down to 100 BTUs of biodiesel? If the capital and operating costs of a conversion facility are not too high, it will be economically efficient to convert sludge (or coal, or shale, or even turkey offal) no matter how wasteful it is from a pure energy basis.

[theBuckwheat]

I wish people would be careful when they throw around the worry about a water shortage. This is just silly. The issue is not the supply of water, but the cost.

After all, I can ship a liter of bottled water from Fiji almost anywhere in the developed world overnight via FedEx for less than $100. You can have all the water you need, if you are willing to pay for it.

I live just a few miles from the Mississippi River, which flows here at the speed of a medium jogger and is about 1/2 mile wide and 30-40 feet deep. This is maybe a dozen million gallons a second that we let flush downhill to the Gulf day and night. If water was so "short" here in the midwest, we would dam the river and build a pipeline to where it was needed. But, water is not yet that valuable, or conversely, water is not that "short" anywhere near here.

Indeed, water is so plentiful that the debate about river management right now is how long the "barge season" should be. That term implies that the dams upstream in the Dakotas are opened to raise the water level down here so that barges can be moved up and down the river with towboats. We let millions of extra gallons every second run in the river so we can save some money using barges instead of trucks.

So, is there a water shortage? It is just ROFL silly to claim there is. There is only water that costs more than some people want to pay. If an ethanol plant needs water, then it should pay what it costs. Further, government must price water to include all the costs. If that is too much, then the plant shouldn't be built.

[Mr. Lucky]

I'm familiar with an ethanol plant under development in central Indiana. It, and the associated grain handling facilities, will sit on 260 acres. In that part of Indiana, 260 acres of land can be expected to receive just under 300,000,00 gallons of rainfall per year. No aquifer is depleted, no government has to supply water.

[jas3]

The farmers are going to get the subsidies whether there is ethanol or not, it is just a matter of whether they will be paid to grow or to not grow. With the GOP you just get something for the money.

Unfortunately I don't want the something being proffered to me. All I want is gasoline, which is a much better and less expensive fuel than ethanol.

jas3

[P-40]

All I want is gasoline, which is a much better and less expensive fuel than ethanol.

What does gasoline cost and what does ethanol cost. Note the price at the pump is not a reflection of reality.

[jas3]

What does gasoline cost and what does ethanol cost. Note the price at the pump is not a reflection of reality.

Removing the effect of tax subsidies on both, ethanol is about twice as expensive as gasoline per mile driven.

jas3

[P-40]

ethanol is about twice as expensive as gasoline per mile driven.

What did 9/11 cost?

[jas3]

What did 9/11 cost?

What does the sun weigh? How much tea is there in China? I can think of plenty of other completely irrelevant questions that also have nothing to do with whether or not ethanol is a taxpayer financed ripoff to buy the votes of corn farmers....which IT IS!!!

jas3

[P-40]

I can think of plenty of other completely irrelevant questions

Gasoline comes from oil, much of which comes from some rather non-good places. Ethanol comes from corn, America corn. Not too many terrorists in Iowa.

[jas3]

Gasoline comes from oil, much of which comes from some rather non-good places. Ethanol comes from corn, America corn. Not too many terrorists in Iowa.

Which is also irrelevant since if 100% US farmland were planted with corn, the United States would still require oil from non-US sources.

Your argument that ethanol is good policy is laughable. Even if it did make sense, we should import it from Brazil where it is made from sugarcane. No terrorist in Brazil either, and no subsidies for US corn farmers.

jas3

[P-40]

Your argument that ethanol is good policy is laughable.

You don't know enough to bother with.

[jas3]

You don't know enough to bother with.

Actually I possess an enormous depth of knowledge on ethanol and very many energy related issues. However based on your previous posts, my guess is that your opinions are as poorly formed as your sentence structure.

jas3

[P-40]

I possess an enormous depth of knowledge on ethanol and very many energy related issues.

No...you don't.

[jas3]

I possess an enormous depth of knowledge on ethanol and very many energy related issues.

No...you don't.

Would you care to compare resumes and experience? I work in the energy industry full time. I've evaluated ethanol production facilities for a private equity group. I've reviewed the thermodynamics of ethanol production in great detail. And you? Let me guess...you grow corn and are looking for another reason to suck on the teat of Uncle Sam at the expense of your fellow Americans.

jas3

[stboz]

Ethanol is a scam. Butanol might be, but at least it is better than EtOH. (Ethanol to you non-chemists.)