"Reviving the Economy"-Is Ethanol Out of Gas?
Friday, July 17, 2009SUSIE GHARIB: Not long ago, ethanol was considered the miracle cure for the nation`s energy problems. Companies were booming thanks to easy money and a government mandate to blend ethanol into the nation`s gasoline supply. But now many firms are scrambling just to stay in business. As we continue our look at "Reviving the Economy," Dana Bate reports the ethanol industry appears to be running on empty.
DANA BATE, NIGHTLY BUSINESS REPORT CORRESPONDENT: These corn fields were once touted as the future to our energy independence. Companies sprung up around the country to produce corn-based ethanol, hoping it would fuel their bottom lines. But the industry has hit the skids. At least 10 producers have filed for bankruptcy this year. Plans to build new plants have been shelved. Sales of E-85 blends have dipped. Environmental policy expert Ken Green says the economics of ethanol have come home to roost.
KEN GREEN, RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE: At the end of the day, it`s only competitive with gasoline when gasoline is very expensive and gas doesn`t stay expensive for very long. And so once the economics of it really worked their way through the system and everybody went, wow, I`m not going to make any money off of this, that was part of the collapse.
BATE: The other part was the economic crisis. Bob Dineen heads the Renewable Fuels Association. He says like many industries, ethanol has had a tough year, but things are improving.
BOB DINNEEN, PRESIDENT, RENEWABLE FUELS ASSOCIATION: You see plants that had to shut down temporarily coming back online. You see profitability returning to the industry. We`re still dealing with volatility in energy markets and a difficult road ahead, but we`re getting through it.
BATE: The U.S. ethanol industry has enough capacity to produce 15 billion gallons of ethanol this year -- far more than the nation can use. Then there`s the issue of environmental impact. Recent studies have shown the production of corn-based ethanol might actually increase greenhouse gas emissions, not reduce them. So a move on Capitol Hill to make companies pay for their carbon emissions could cut into profits.
GREEN: You`re going to add to their business burden, not make it easier on them.
BATE: Environmentalists like Tim Telleen-Lawton of Environment America say we can`t just focus on gasoline substitutes.
TIM TELLEEN-LAWTON, GLOBAL WARMING ADVOCATE, ENVIRONMENT AMERICA: We increase the efficiency of cars. We can reduce the amount that we relying on cars by using better public transit. We can use more electricity from clean sources like wind and solar power, such as through plug-in hybrids.
BATE: The future for the corn-based ethanol industry is murky. But having those firms in place now gives the industry a headstart toward developing ethanol from other plant sources. The question is whether scientists can develop that fuel on a commercial scale fast enough. Dana Bate, NIGHTLY BUSINESS REPORT, Washington
