Grow it and they will come
Renewable fuel has it critics, but it's gaining support
If there's one issue on which farm groups agree, it's renewable fuel. And aggies are applauding the Energy Security Act of 2005, signed into law this summer. The legislation contains a Renewable Fuels Standard that calls for a minimum of 7.5 billion gallons of ethanol and biodiesel to be used across the nation by 2012. By the end of this year, the U.S. ethanol industry is expected to have the capacity to produce 4 billion gallons of ethanol annually. The Am-erican Coalition for Ethanol (ACE) points out that with the nation's demand for gasoline reaching upwards of 140 billion gallons, there's incredible room for growth in the use and production of ethanol.

As well, the new bill extends a biodiesel tax incentive through 2008. The excise tax credit provides an incentive for fuel distributors to blend biodiesel into petroleum diesel fuel and to help reduce costs to consumers. According to the National Biodiesel Board, the credit amounts to a dollar per gallon for agri-biodiesel, such as that made from soybean oil, and 50 cents per gallon for biodiesel made from recycled cooking oil.

The sweeping legislation addresses a wide array of energy needs and includes a two-year tax credit extension for companies that produce wind power, which also figures to be good news for the Port of Duluth. A recent news brief in USA Today pointed out that "the growth of wind power means more business at the Port of Duluth, which is becoming an important shipping hub for European-made turbines bound for the Upper Midwest, Great Plains and Canada."

Renewable energy is probably the most promising area of agriculture as energy prices seem to reach new highs every day. Add in the growing resentment of being dependent upon overseas oil for a fuel that's going to run out some day, and the adverse health/environmental effects of petroleum emissions, and I don't see why anyone (outside of OPEC and Big Oil) can argue against renewable fuels.

Still, there are critics. Questions about production efficiency _ does it take more energy to make ethanol than the energy produced by ethanol? _ still creep up, most recently in a paper by two professors from Cornell and the University of California Berkeley. The American Coalition for Ethanol (ACE) describes it as a rehash of 25-year-old data that is politically motivated _ the Berkeley author is a former Shell Oil consultant and is director of an oil industry consortium. USDA's most recent numbers indicate that the corn-to-ethanol process provides a net energy gain of at least 67 percent, according to ACE.

Critics are also fond of pointing to tax subsidies that help support renewable fuels. "But they never seem to mention the tax subsidies and oil depletion allowances that benefit the oil industry," says Mark Hamerlinck, communications manager for the Minnesota Corn Growers Association. Environmental think-tank estimates of the true cost of gasoline range from 32 cents to more than $10 per gallon over the current pump price, if oil industry subsidies were factored in. (Oil depletion allowances are tax deductions from gross income allowed investors in exhaustible commodities.)

Some critics also wonder about the cost of grain: Won't that affect the competitiveness of corn-based ethanol and soybean-based biodiesel? But Mr. Hamerlink points out that ethanol makers use price risk management strategies in procuring feedstocks, just like other businesses that buy raw commodities (like oil) for processing. "Actually, the price of a bushel of corn has very little to do with the price of ethanol," he says, "and increasingly, you're going to see the price of ethanol follow more closely with the price of oil, since it has intrinsic value as an oil substitute."

Mike Youngerberg, field services director with the Minnesota Soybean Council, says as well that the price of soybeans would have less effect on the price of biodiesel than one might think. For one thing, vegetable oils are often substitutable, and many of today's biodiesel plants have can switch from one oil to another. He also points out that as the processing capabilities of renewable fuels improve, so will the oil content of future crop varieties bred and used for this purpose.

Tim Radermacher, marketing specialist with the North Dakota Soybean Council, points out that one of the biggest costs of biodiesel today is, ironically, transportation _ the cost to ship biodiesel from a manufacturing plant to fuel distribution points. In North Dakota, the nearest biodiesel processing plant currently is about 500 miles away. But blueprints are being drawn for biodiesel plants in the northern region, and as the origin of processed supply becomes closer, the cost of the product will decline, making biodiesel that much more attractive to users.

Tracy Sayler is an ag writer based near Fargo, N.D.