Ethanol follies

Kathleen Hartnett White:

As the U.S. House Energy and Commerce Committee considers the many fiascos caused by the federal Renewable Fuel Standard, let’s hope they deep-six the Domestic and Alternative Fuels Act (H.R.1959), co-sponsored by several conservative stalwarts from the Houston area typically more supportive of market dynamics than government mandates. The bill would add ethanol derived from natural gas under the renewable fuel standard established by the Energy Independence and Security Act of 2007.

A comprehensive congressional review of the renewable fuel mandates is welcome after almost six years of counterproductive consequences. Infamous for transforming corn — a staple among global food commodities — into an inefficient transportation fuel, the law is rooted in multiple miscalculations about the domestic fuel market and the viability of alternative fuels such as still commercially non-existent cellulosic biofuel. Unexpected in 2007, the historic upsurge in domestic oil and natural gas has brought the U.S. within sight of energy dominance in the global market. Corn ethanol deserves no credit for this stunning achievement.

Supporters of putting ethanol from natural gas under the renewable fuel dictate contend this fuel would relieve the pressure on corn, and avoid the escalating costs on refiners forced to comply with the continually expanding dictate. In 2007, Congress mistakenly assumed that gasoline demand, and thus oil imports, would steadily rise. Annual consumption, in fact, has significantly declined as a result of more fuel-efficient engines and slack economic growth.

With an annually increasing ethanol mandate but decreasing demand for gasoline, the renewable fuel mandate for corn ethanol approaches a “blend wall.” This is the point at which there is not enough gasoline in which to blend this year’s mandated volume of 13.8 billion gallons of corn ethanol and remain under a 10 percent blending rate. The Environmental Protection Agency approved blends up to 15 percent ethanol but the major automakers will not extend engine warranties above the 10 percent blend. Refiners also resist higher blends to avoid product liability claims for damaged engines.

Ethanol from natural gas will not avoid these pitfalls. When adjusted for energy content, ethanol from corn or natural gas is a less energy-efficient product than petroleum-based gasoline. What percentage of consumers would choose a fuel with over 30 percent less miles per gallon and with perhaps more emissions than conventional gasoline?
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If the government insist on adding ethanol to gas. getting it from natural gas will provide a less expensive alternative than the current use of corn.  While I agree with White that the mandate should be abolished, I think making it from natural gas is a way to avoid the diversion of food into fuel.