Wednesday, January 17, 2007

Senate Hearing On Agriculture & Biofuels Production

Jan 10: The Senate Committee on Agriculture, Nutrition & Forestry, Chaired by Senator Tom Harkin, (D-IA) held a hearing entitled, Agriculture and rural America's role in enhancing national energy security. Witnesses representing the following organizations testified at the hearing: Resources for the Future; US Department of Agriculture; 25 x25 Steering Committee; National Renewable Energy Laboratory; Aventine Renewable Energy Holdings, LLC & Renewable Fuels Association; Strategic Energy Institute; National Pork Producers Council & Iowa Pork Producers Association; The Minnesota Project; and the American Forage and Grassland Council.

Providing an industry overview, RFA testimony indicated that the current ethanol industry consists of 110 biorefineries located in 19 different states with the capacity to process more than 1.8 billion bushels of grain into 5.3 billion gallons of high octane, clean burning motor fuel, and more than 12 million metric tons of livestock and poultry feed. The 5.3 billion gallons of ethanol produced in 2006 resulted in the following impacts: Added $41.1 billion to gross output; Created 160,231 jobs in all sectors of the economy; Increased economic activity and new jobs from ethanol increased household income by $6.7 billion, money that flows directly into consumers’ pockets; Contributed $2.7 billion of tax revenue for the Federal government and $2.3 billion for State and Local governments; and, Reduced oil imports by 170 million barrels of oil, valued at $11.2 billion. There are currently 73 biorefineries under construction. With eight existing biorefineries expanding, the industry expects more than 6 billion gallons of new production capacity to be in operation by the end of 2009.

The National Corn Growers Association (NCGA) projects that by 2015, corn growers will produce 15 billion bushels of grain. According to the NCGA analysis, this will allow a portion of that crop to be processed into 15 billion gallons of ethanol without significantly disrupting other markets for corn. In fact, many analysts are predicting an additional 10 million acres of corn will be planted this spring, providing enough corn from those additional acres to produce more than 4 billion gallons of ethanol while still meeting the needs of all corn markets, including feed and export markets. RFA said, "While there are indeed limits to what we will be able to produce from grain, cellulose ethanol production will augment, not replace, grain-based ethanol. Ethanol from cellulose will dramatically expand the types and amount of available material for ethanol production, and ultimately dramatically expand ethanol supplies."

There are now more than 1,000 E-85 refueling stations across the country, more than doubling in number since the passage of EPAct. Today there are approximately 6 million flexible fuel vehicles (FFVs) on the road capable of using E-85, a mix of 85% ethanol and 15% gasoline. Those six million FFVs represent less than 3% of the total U.S. motor vehicle fleet of more than 200 million vehicles. Clearly, U.S. auto manufacturers have made a significant commitment to FFV technology, and their commitment is increasing. Ford, General Motors and DaimlerChrysler have made significant strides in producing and promoting FFVs.

On the cautionary side, the Minnesota Project testified that, "We must design the policies that simultaneously meet objectives for energy, the environment, and rural prosperity. If we do it right, we can continue food production and expand the pool of biomass feedstocks in a way that achieves all of those objectives at the same time. On the other hand, if we do it wrong, we may find that environmental tragedy and rural decline will overwhelm the hopes of renewable energy and create a backlash against the ethanol industry and farmers. We stand at the crossroads and must steer the change in the proper direction.

"Environmental Benefits of Biomass To be specific, I’m talking about opening the door for agriculture production of cellulosic biomass on a major scale. We need to shift the policy focus from annual crops, with attendant soil tillage, chemical use, erosion and habitat loss – to perennial crops, with the opportunity for building up soil quality with no soil disturbance, few chemicals, and managed habitat. Switchgrass is not the only feedstock; different cellulosic materials appropriate to every region of the country might include prairie grass mixtures, alfalfa hay, and woody crops like poplar trees, willow, and hazelnuts. Perennial energy crops are the best bet for cleaning up the nation’s water quality and shrinking the Dead Zone in the Mississippi River Gulf of Mexico. If done right, cellulose production could be an excellent way to restore wildlife habitat for hunters, birdwatchers, and fishermen..."

(In a related matter)...

Grain Needed For Ethanol Is "Vastly Underestimated"

Jan 4: Lester Brown at the Earth Policy Institute in the latest Eco-Economy Update says that the distillery demand for grain to fuel cars is "vastly underestimated" and the world may be facing the highest grain prices in history. According to the update, investment in fuel ethanol distilleries has soared since the late-2005 oil price hikes, but data collection in this fast-changing sector has fallen behind. Because of inadequate data collection on the number of new plants under construction, the quantity of grain that will be needed for fuel ethanol distilleries has been vastly understated. Brown says, "Farmers, feeders, food processors, ethanol investors, and grain-importing countries are basing decisions on incomplete data."

The Update indicates, "The U.S. Department of Agriculture (USDA) projects that distilleries will require only 60 million tons of corn from the 2008 harvest. But here at the Earth Policy Institute (EPI), we estimate that distilleries will need 139 million tons -- more than twice as much. If the EPI estimate is at all close to the mark, the emerging competition between cars and people for grain will likely drive world grain prices to levels never seen before. The key questions are: How high will grain prices rise? When will the crunch come? And what will be the worldwide effect of rising food prices?

According to the EPI compilation, the 116 plants in production on December 31, 2006, were using 53 million tons of grain per year, while the 79 plants under construction -- mostly larger facilities -- will use 51 million tons of grain when they come online. Expansions of 11 existing plants will use another 8 million tons of grain (1 ton of corn = 39.4 bushels = 110 gallons of ethanol). In addition, easily 200 ethanol plants were in the planning stage at the end of 2006. The grain it takes to fill a 25-gallon tank with ethanol just once will feed one person for a whole year. Converting the entire U.S. grain harvest to ethanol would satisfy only 16 percent of U.S. auto fuel needs.

Brown says, "The competition for grain between the world’s 800 million motorists who want to maintain their mobility and its 2 billion poorest people who are simply trying to survive is emerging as an epic issue. Soaring food prices could lead to urban food riots in scores of lower-income countries that rely on grain imports, such as Indonesia, Egypt, Algeria, Nigeria, and Mexico. The resulting political instability could in turn disrupt global economic progress, directly affecting all countries."

Access the Agricultural hearing website for links to all testimony (click here). Access the complete Eco-Economy update (click here). Access a separate data document listing plants and information by state and extensive tables and calculations (click here). [*Energy]