Ethanols Backers Get Gassed Out
INVESTOR'S BUSINESS DAILY
Thursday, February 12, 2009
Energy: A fortune was spent on ethanol development last
year when gas prices were in the stratosphere. Now a lesson has been learned:
Worshiping the false god of ethanol carries a high price.
A funny thing happened on the way to all the green profits that were
supposed to be in the offing thanks to high prices at the gas pump.
As the New York Times reported this week, ethanol, "just recently a
savior" as the Times headline put it, has been found sorely lacking in its
much-touted miraculous powers to heal
Corn ethanol plants "are shutting down virtually every week." An
alternative energy trade group says at least 10 of the nation's 150 ethanol
firms have closed some 24 plants in three months, with a dozen other companies
in distress.
Little more than a year after the Democratic Congress passed legislation
launching a massive national effort to convert farm crops and agricultural wastes
into auto fuel, it's become clear that the production deadlines aimed at greenifying your local gas station can't and won't be met.
The many investors who were tripping all over themselves to finance biofuel plants last year are finding that going green can
mean losing lots of green.
Congress had a grand plan: It would double corn ethanol use by 2015. And by
2022, 21 billion gallons of ethanol and biofuels
would be made from formerly useless stuff, ranging from corn stubble to switchgrass to municipal waste.
But reality has hit like a ton of corn stalks. The inescapable facts are
that corn prices remain at a market-set high, and converting the corn
alternative cellulose into liquid fuel is prohibitively expensive.
And there are other problems. For one, corn ethanol gets worse mileage than
gasoline. For another, ethanol's corrosiveness means it can't be shipped
through regular pipelines like gasoline.
Faced with all this, investors betting on green seek a kind of biofuel breakthrough that would make it possible to
surmount the current obstacles to converting organic waste and food to ethanol.
And the federal government has matched their wagers.
Last year, the Department of Energy agreed to spend tens of millions of
dollars to see if a soil-based anaerobic bacterium classified as the "Q
Microbe," discovered some years ago in the Massachusetts woods by a
microbiologist at the University of Massachusetts-Amherst, can turn feedstocks like corn stover,
wheat straw and sorghum into ethanol.
Everything from food scraps, lumber waste, rice straw, yard trimmings, even
dumped furniture and debris from construction sites can become the raw material
of cellulosic ethanol, the DOE and the Department of
Agriculture have said. The problem is, no one has yet
used the process to make fuel that can compete with oil in either cost or
quantity.
After all the pain of those high gas prices of the recent past, the American
people would rather depend on what they know works: good old black gold. House
Natural Resources Committee Chairman Nick Rahall, D-W.Va.,
this week conceded the political realities when he declared that "the ship
has already sailed" in regard to drilling for new domestic oil.
Congress banned oil and natural gas exploration for 26 years over most of
the Outer Continental Shelf, but it let the ban expire last fall amid a public
outcry after oil prices peaked at $147 a barrel.
Will the Obama Administration now permit drilling?
The new president seems to be putting in place a foot-dragging exercise on his
campaign promise to provide drilling leases.
Interior Secretary Ken Salazar has announced fact-finding initiatives on
drilling by the Minerals Management Service and the U.S. Geological Survey, as
well as four regional meetings. Hand in hand with these moves are plans for
wind, wave and tidal energy offshore programs to accompany the drilling.
The new administration, meanwhile, is getting aggressive on the
environmentalist front, canceling 77 oil and gas leases near
Economic and national security alike demand less
dependence on foreign oil.
But energy alternatives must work. Nuclear power, hydrogen and our own oil
all look more hopeful than ethanol and magic microbes.