"The Green Option"-Part 1
Tuesday, September 12, 2006SUSIE GHARIB: In the Midwest these days, ethanol plants are sprouting like the summer corn crop. High gasoline prices and unrest in the Mideast are reviving the once sleepy ethanol industry. So tonight, Midwest bureau chief Diane Eastabrook begins a three-part series, examining ethanol`s potential impact on the energy industry and the economy. In part one of "The Green Option", we look at the debate over why some think this clean- burning fuel can help the U.S. kick its oil addiction.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: In America`s heartland a new gold rush is on. It`s the rush to convert corn into ethanol, a clean-burning fuel additive that some experts think could reduce the nation`s dependence on petroleum.
PHILIP FLYNN, ENERGY ANALYST, ALARON TRADING: As oil prices continue to stay high, the efficiencies with using ethanol are going to have a major impact and I think it`s one part of the entire energy solution.
EASTABROOK: Ethanol`s potential is creating new respect for the 30- year-old industry and sparking investor interest in the firms that makes the fuel.
GREGORY WEBB, VP, PUBLIC AFFAIRS, ARCHER DANIELS MIDLAND: In the last few months, there have been a lot of investors come to buy ADM as a result of the bio-fuel interest.
EASTABROOK: Sky high gasoline prices, bans on petroleum-based additives and a million new flexible fuel vehicles that will hit the nation`s highways this year are pumping up ethanol`s appeal. As a result, the amount of ethanol used in the United States is expected to increase more than 60 percent over the next six years to about 7.5 billion gallons. Demand for ethanol has sparked a building boom within the industry. There are currently more than 100 ethanol plants nationwide with 30 more under construction and even more on the drawing board. Aventine Renewable Energy produces in Pekin, Illinois produces about 150 million gallons of ethanol annually. An expansion at its home base and the planned construction of three more facilities will increase Aventine`s output five fold over the next few years. The company has even bigger plans beyond that.
RONALD MILLER, PRESIDENT & CEO, AVENTINE RENEWABLE ENERGY: The long- term goal is to be about a billion gallons of production and about two billion gallons of marketing at about the point we see a 10 billion gallon ethanol market.
EASTABROOK: But some experts are skeptical corn-based ethanol is a cure for high fuel prices and America`s addiction to oil.
HOWARD SIMONS, ENERGY ANALYST, BIANCO RESEARCH: I think in the energy market that ethanol is the methadone to crude oil`s heroin.
EASTABROOK: Simons doesn`t think ethanol makes sense in the short run because the U.S. can`t make enough of it to significantly offset gasoline consumption. America burns about 150 billion gallons of gasoline annually and its appetite for gas is growing. Simons estimates that ethanol will reduce U.S. oil consumption about 5 percent at the very most. Infrastructure is also a problem. Unlike gasoline, ethanol cannot be piped from production facilities in the Midwest to distributors in other parts of the country. It must be trucked and shipped and blended with gasoline in distribution facilities. That makes transporting ethanol both time consuming and expensive. Finding service stations that sell E-85 used in flexible fuel vehicles is also a problem. Most of the nation`s 180,000 stations sell gasoline that has a 10 percent blend of ethanol, but fewer than 800 stations sell fuel that is 85 percent ethanol. Simons doesn`t think ethanol makes sense in the long run either. He says the overall cost of growing corn, fertilizing it, harvesting it, distilling it into ethanol and then distributing the fuel makes ethanol a much less attractive alternative to oil.
SIMONS: International economics is based on what`s called competitive advantage. If you can buy something cheaper than you can make it, you`re better off buying it and regardless of whether we have to import that crude oil or not, it`s still cheaper than growing ethanol in the form of corn.
EASTABROOK: Ethanol producers admit their industry faces many challenges. It could take years to build capacity and build out infrastructure. Still they are confident ethanol can be a cleaner and perhaps more reliable energy alternative than petroleum. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Pekin, Illinois.
