Amid rising oil prices, makers of corn-based ethanol crank up output

LOS ANGELES — Corn-based ethanol is the renewable fuel environmentalists love to hate. But as turmoil in the Middle East and North Africa has sent oil prices soaring, U.S.-made ethanol is making a comeback.

Plants mothballed during the economic downturn are reopening. Domestic ethanol production hit record levels last year, topping 13.2 billion gallons, according to the Renewable Fuels Association in Washington. Oil companies, including Valero Energy, Sunoco and Marathon Oil, that snapped up facilities when the industry hit a rough patch a few years ago are looking to expand.

The recovery can be seen in Stockton, Calif., where a once-shuttered factory is now thundering to life. Train cars laden with Midwestern corn arrive daily to feed the grinding mills and steaming pipes that distill the grain into the gasoline substitute. For the plant's owner, Pacific Ethanol, which weathered bankruptcy and is slowly reviving three of its plants, it's a whiff of vindication.

"Ethanol is an important part of the country's energy picture these days," said Neil Koehler, chief executive of the Sacramento, Calif., firm.

That's largely because of Uncle Sam. Concerned about U.S. reliance on foreign oil, federal lawmakers mandated that the nation quadruple its use of biofuels to 36 billion gallons annually by 2022 from 2008 levels. Corn-based ethanol is assured a 15-billion-gallon share of that market. Plus it's heavily subsidized. The federal government gives producers a 45-cent-a-gallon tax credit. A number of states provide subsidies, as well.

The liquid is blended into almost every gallon of unleaded gasoline sold in the United States and accounts for about 10 percent of the fuel that motorists pump into their cars. That percentage is set to rise as the U.S. Environmental Protection Agency recently approved the use of blends of up to 15 percent ethanol for newer vehicles.

That's good news for the ethanol industry with oil now topping $105 a barrel and motorists experiencing sticker shock at the pump.

But whether corn ethanol is good for the planet, U.S. taxpayers, the global food supply — or even an automobile's engine — is a matter of intense debate.

Some scientists have concluded that growing corn, harvesting and distilling it, and trucking it to refineries causes as much environmental damage as burning oil. Many environmentalists want taxpayer subsidies devoted to developing next-generation biofuels rather than supporting big agribusiness and the oil companies that now operate ethanol plants.

Budget hawks also want to end ethanol subsidies at a time when commodities prices are rising and the U.S. budget deficit is ballooning. An estimated 35 percent of the U.S. corn crop will be devoted to ethanol this year, a figure that makes some agricultural and global food policy analysts uneasy.

Speaking at an Agriculture Department conference in February, former President Bill Clinton warned about the need to strike a balance between farming for food and biofuels, given political instability in parts of the developing world.

"We have to become energy-independent. We don't want to do it at the expense of food riots," Clinton said.

Auto manufacturers are concerned, as well. They're suing the EPA to stop sales of the 15 percent ethanol blend, known as E-15, which they said would confuse consumers and damage older vehicles. Ethanol industry officials said E-15 pumps would be clearly marked, so consumers would not be misled.

Amid rising oil prices, makers of corn-based ethanol crank up output 03/07/11 [Last modified: Monday, March 7, 2011 7:05pm]

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