Peering ahead at the worst possible outcomes of Obamacare five
years from now, imagine that individuals were being fined by the
Department of Health and Human Services for failing to buy health
insurance — even though insurance companies have withdrawn from
the market and aren’t offering it anymore! Would that be fair?
Well, it’s exactly what’s happening right now as the
Environmental Protection Agency penalizes oil companies for failing
to buy non-existent cellulosic ethanol.
Ah, ethanol. What market atrocity hasn’t yet been
committed in pursuit of the idea that we should power our cars from
farmland rather than taking the fossilized stuff out of the
ground?
In case you haven’t noticed, the 30-year-old program for
subsidizing ethanol production through tax credits has expired.
Congress let it to happen over the Christmas holidays while
hassling over how to fund the federal government for fiscal 2012.
Republicans (minus a few farm state members) have long condemned
the program while Democrats, who usually hail it as a triumph of
the Carter Administration, finally decided it wasn’t worth
defending anymore. This means the tax credit for ethanol — which
started at 3 cents per gallon and eventually rose to 54 cents — is
now off the books. Also gone is the 46-cents-per-gallon tariff on
imported ethanol to protect the domestic industry.
Does that mean we’re back to reality? Unfortunately, no.
Still in place are the mandates adopted
when the Bush Administration set phantasmagorical goals for ethanol
production, particularly cellulosic
ethanol, which brings us to our original subject.
The ethanol that we’ve been putting in our gas tanks for
the last 20 years is made from corn seeds. The sugars and starches
in the grain break down under heat and can be easily fermented into
alcohol. We’ve been doing it since Neanderthal days (the Cave Men
had a version of beer), so it’s not too complicated. The problem is
that the seeds make up only 15 percent of the corn plant. The rest
is cellulose, the much tougher molecules that give the plant its
structure and do not break down so easily. It can be accomplished
with chemical enzymes or by evaporating everything and then
combining it back to liquid ethanol, but both methods are far too
expensive and energy intensive.
So the preferred techniques are biological. There are
bacteria in the guts of cows and termites that break down cellulose
but they are highly adapted and have trouble living outside their
native environment. Only in 2010 did someone genetically engineer a
strain of yeast that can do the same thing. But that is getting way
ahead of the story.
Drawing on only 15 percent of the plant, we are now
processing an incredible 40 percent of
the 12 billion bushels grown on 400,000 farms into fuel ethanol.
The entire world crop is only 25 billion bushels, which means that
one out of five bushels worldwide is going into American
automobiles. This has crimped the world food supply and set off
riots in places as diverse as Mexico and Southeast Asia. The UN
Food and Agricultural Organization regularly condemns ethanol as a
“crime against humanity” but no one in this country pays much
attention.
Always on the horizon of this effort, however, has been
the vision that we will one day be able to process the remaining 85
percent of the plant — the cellulose — into a usable fuel as
well. Then we wouldn’t have to be taking food out of people’s
mouths.
Unfortunately, while it’s been accomplished here and there
in the laboratory, no one has ever been able to scale the process
up to a commercial level. Nor is there any assurance that anyone
ever will. People have been trying to domesticate morel mushrooms
for centuries without any success. Somewhere around 2005, however,
the environmental movement and its tagalongs in the Bush
Administration came upon the perfect solution — government
mandates!
“America is addicted to oil,” President George Bush, Jr.,
pronounced in his 2006 State of the Union address, even mentioning
the magic word “switchgrass,” which serves as a shibboleth among
renewable energy enthusiasts. Switchgrass is a fast-growing weed
that sprouts anywhere and could provide enough feedstock to replace
significant portions of our domestic oil — if anybody ever figures
out how to ferment it. Charging straight ahead, however, Congress
adopted the 2007 Energy Independence and Security Act, which
mandated the consumption of 100 million
gallons of cellulosic ethanol in 2010, 250 million by
2011, and 500 million in 2022 at a time when no one had ever
mastered the technology. To make sure it happened, the bill added a
$2 billion Department of Energy program to fund manufacturing
plants. The Department of Agriculture kicked in another $1.6
billion. You say you want technological progress? Put things in the
hands of the government.
The first company to take advantage was Range Fuels, a
Colorado company that broke ground in November 2007 in Soberton,
Georgia, promising to generate 100 million gallons of ethanol a
year out of pine-logging wastes. Before it even built the plant,
Range Fuels won the 2008 North American Fuels Technology Innovation
Award for Green Excellence. Full operation was promised by
2009.
By 2010, Range had received a $50 million grant from the
Department of Energy with another $26 million promised when it
produced its first gallon. The State of Georgia contributed another
$6 million and the Department of Agriculture added an $80 million
loan guarantee from the U.S. Biorefinery Assistance Program. Still,
Range had not produced a single gallon of ethanol. In January 2011
Range finally opened the factory to produce one 200-gallon
run of methanol — which can’t be
used in cars — and then closed down, saying the plant didn’t work.
That single run allowed it to collect the last $26 million, so that
Range was able to reimburse its investors while leaving taxpayers
holding the bag. It was a bigger scandal than Solyndra, although no
one noticed at the time.
By this time the EPA had scaled the 100-million gallon
mandate down 6.6 million, yet even that wasn’t available. Cello
Energy, an Alabama company with similar ambitious, also gave up on
the process after receiving government money. There was no
cellulosic ethanol to be had anywhere. Still, the mandates remained
in place and so the EPA decided to enforce them anyway. It required
several major oil companies to buy $6.8 million worth of “credits”
for future cellulosic ethanol on the presumption that one day they
will be able to cash them in. At this point, the higher the EPA
raises the mandates, the more they can collect from the oil
companies.
Is anyone in the government or environmental community
repentant or even discouraged by any of this? Hardly. Cathy
Milbourn, of the EPA, said the quotas were still “reasonably
attainable” and that by maintaining them “we avoid a situation
where real cellulosic biofuel production exceeds the mandated
volume.” Try to figure that one out. Retired Vice
Admiral Dennis V. McGinn, who serves with the American Council on
Renewable Energy, added: “I am absolutely convinced from a national
security perspective and an economic perspective that the renewable
fuel standard, writ large, is the right thing to do.”
So that’s what it’s like when the government decides to
run the renewable fuel industry. Just imagine what it’s going to be
like when it’s running health care.
