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By Robert Rapier on Nov 26, 2010 with 130 responses

Taxpayer Subsidized Ethanol Exports May Bite Industry in the Future

Ulterior Motives Behind the Ethanol Pipeline?

Ethanol producers in the Midwest have lobbied for support to build a pipeline to ship their ethanol to the East Coast. As I have argued, given that the market for ethanol is nowhere close to being saturated in the Midwest (a large E85 market in the Midwest could consume all of the ethanol produced there), it would seem to be a better allocation of resources to build up the E85 market rather than try to export ethanol from the Midwest.

However, some have claimed that the real reason ethanol producers want the pipeline is so they can export ethanol out of the country. They argued that U.S. taxpayers would end up subsidizing ethanol exports (as we previously subsidized biodiesel exports). I thought this was unlikely, as the VEETC is given to the oil companies for blending ethanol into gasoline domestically. Thus, ethanol that is exported wouldn’t qualify for the VEETC.

A Biodiesel-Like Loophole

Turns out there is a loophole.

According to a report in the Financial Times (subscription req’d), U.S.-produced ethanol is being exported out of the country in record volumes. Citing government trade data, the report found that 251 million gallons of ethanol were exported in the first nine months of the year. However, this figure does not account for ethanol blended with gasoline — which the blenders receive a $0.45 per gallon federal tax credit for — and the much smaller European ethanol industry is quite upset about this creating an uneven playing field:

Companies that blend US ethanol with petrol may claim the credit even if the fuel is shipped overseas. Blends of up to 90 per cent ethanol imported in Europe also enjoy customs duties that are €60-€70 lower than the €102 per cu m duty on purer “denatured” ethanol, says Christoph Berg, managing director at consultant F.O. Licht in Hamburg. The US ethanol trade data mask additional volumes hidden in petrol blends.

“There is increasing trade from the US to Europe which is using domestically produced ethanol and blends this ethanol with gasoline, thus being eligible for the [US] tax credit and also being eligible for lower import duties in the European Union. This of course makes quite a profitable operation,” says Mr Berg.

Traders acknowledged using the credit for ethanol blends before it leaves the US. “If the [credit] is not there, the demand for product stays. It just means there are higher prices,” said a senior executive at one US exporter.

In addition to exporting record volumes of ethanol, the byproduct from the ethanol production process, Dried Distillers Grains with Solubles (DDGS), is also being exported in record volumes. It had been predicted that the U.S. market would saturate long before the RFS schedule was phased in, so ethanol producers are left with export markets as an only option.

One thing to note is that in their assessments of the energy balance of corn ethanol, USDA studies presume fairly local usage of both the ethanol and the DDGS. If the export market grows for ethanol and DDGS, so will the energy inputs that need to be accounted for. It is hard to imagine that ethanol produced in Nebraska by irrigated water drawn from the Ogallala Aquifer could possibly have a favorable energy balance if that ethanol is shipped to Europe. And if taxpayers are subsidizing that, they are getting a raw deal. But for now, this kind of practice will hide behind USDA studies that looked at very different conditions to come up with a favorable energy balance — as if that applied uniformly across the industry.

Pointing Fingers

The ethanol lobby blames government regulations:

Washington has been subsidizing corn-based ethanol for decades in an attempt to make the price of domestic fuel competitive with foreign oil.

Under that logic, exporting ethanol may seem odd. Why not just import less oil?

That’s a good question, with a deceptive answer provided by the Renewable Fuels Association (RFA):

The problem is, government regulations strictly limit how much ethanol can be used in gasoline.

The industry would rather use all the ethanol at home, but pointed to the government’s rules currently prohibiting higher amounts of ethanol in gasoline.

“We’d love to not have to export a drop, ” said Matt Hartwig, a spokesman for the Renewable Fuels Association. “But that just isn’t the case.”

So let’s get this straight. The same government that created your expanding markets in the first place through subsidies and mandates — it is now their fault you can’t grow your markets at home because they won’t increase the mandates? Let me suggest an alternate strategy. Develop an entrepreneurial attitude, get busy growing your market, and stop crying to the government all the time.

There is of course no rule in place limiting how much ethanol they can sell domestically. In fact, if they can grow the E85 market, they could sell every drop of ethanol they can hope to make for the next 10 years right in the Midwest where most of the ethanol is produced. (See E85 Case Study: Iowa). So why don’t they get busy working on that, instead of complaining that it’s the government’s fault? I have argued this case many times (e.g., here); that the best long-term strategy for the ethanol industry would be a Midwest-oriented E85 market. There is no reason — if they can keep their price competitive — that E85 couldn’t become the favored fuel in the Midwest. But the RFA seems determined that their long-term strategy will be to continue relying on the government to create, protect, and grow their markets.

Subsidizing Saudi

The biggest irony is perhaps that some of these ethanol exports, according to the article, are being sent to places like Saudi Arabia and the United Arab Emirates. It is possible that some of our tax dollars are being used to subsidize fuel purchases by Saudi Arabia. So the same people who have long complained that military spending in the Mideast is a hidden oil subsidy are potentially using tax dollars to sell their product to the Mideast at a discount.

One justification the ethanol lobby often gives for keeping the VEETC is that it helps to reduce oil imports. If taxpayers are spending $0.45 to subsidize a gallon of ethanol, and that ethanol is shipped to Saudi Arabia — just what did the taxpayer get for their money? Certainly not reduced oil imports.

Learning From the Biodiesel Debacle

While the articles I have seen don’t prove that we are subsidizing ethanol exports with the VEETC –they just say that the loophole is there that would allow it– based on the quotes from one US exporter and a European consultant, and the fact that the ethanol industry has not refuted those claims, I think it is likely that the credit is being collected on exported ethanol blends.

In any case, if that loophole isn’t closed, European governments will likely react the same way they did to the subsidized biodiesel the U.S. was shipping to Europe: They put anti-dumping duties on biodiesel coming from the U.S., and put the brakes on the practice. That set the biodiesel industry back immensely, because it had grown rapidly to capture that export market. If the ethanol industry continues to grow their export markets — on the back of the U.S. taxpayer — they will suffer the same fate as the biodiesel industry: Halting of the practice on the EU side and an immediate drop in demand for their product.

  1. By moiety on November 26, 2010 at 3:28 am

    Ethanol imports into Europe must increase if we want to meet the biofuel directive. Below gives the picture from 2005. Caldic are currently expanding their ethanol storage facilities in Rotterdam (Botlek) as well etc. So in fact Europe by and large will make it easier for this activity of export as European biofuel capacity will not meet the directive.

    http://www.bioenergytrade.org/…..vdec05.pdf

     

     

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  2. By perry on November 26, 2010 at 3:41 am

    “Traders acknowledged using the credit for ethanol blends before it leaves the US. “If the [credit] is not there, the demand for product stays. It just means there are higher prices,” said a senior executive at one US exporter.”

    The loophole needs to be closed, but it doesn’t sound like it would affect exports much. I agree that the midwest needs to go E85 in a big way. The closer ethanol is used to where it’s made, the better the energy return.

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  3. By paul-n on November 26, 2010 at 4:14 am

    Surely we don’t have a bunch of major companies gaming a government system at taxpayer expense?

     

    Have to love the RFA’s answer of being restricted in “the amount of ethanol that can be used in gasoline”.  The government response should be “if 85% is not enough, then what is?”

    And then remove the VEETC on anything but E85 – I am sure that will get the RFA’s attention, and equally sure that, somehow, magically, they will find that they could sell more E85 after all.  I suspect we would see quite an effort in the corn states to keep as much of that credit within their states as possible – which at lest means it is being used where it is produced.

    The export loophole is another reason why the place where the VEETC should be applied, if it is to remain at all, at the point of sale, not the point of blending.  This would solve that problem “at the stroke of a pen”.

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  4. By mus302 on November 26, 2010 at 8:20 am

    “So let’s get this straight. The same government that created your expanding markets in the first place through subsidies and mandates — it is now their fault you can’t grow your markets at home because they won’t increase the mandates? ”

    He is referring to the blend wall.

    And are you sure that this loophole actually exists? Ethanol isn’t the same as biodiesel which only has to be blended with .1% diesel to qualify for the credit. If such a small addition of gasoline would qualify ethanol for the credit then the ethanol producers would collect all the credits since by law they have to add a minimum of 2% denaturant to ethanol.

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  5. By Walt on November 26, 2010 at 8:40 am

    Robert Rapier said:

    Subsidizing Saudi

    The biggest irony is perhaps that some of these ethanol exports, according to the article, are being sent to places like Saudi Arabia and the United Arab Emirates. It is possible that some of our tax dollars are being used to subsidize fuel purchases by Saudi Arabia. So the same people who have long complained that military spending in the Mideast is a hidden oil subsidy are potentially using tax dollars to sell their product to the Mideast at a discount.

    One justification the ethanol lobby often gives for keeping the VEETC is that it helps to reduce oil imports. If taxpayers are spending $0.45 to subsidize a gallon of ethanol, and that ethanol is shipped to Saudi Arabia — just what did the taxpayer get for their money? Certainly not reduced oil imports.


     

    Actually, this creates an interesting set of questions for those who focused on using ethanol mandates and subsidies to provide national security.  It was a major platform for political leaders to run around their local districts explaining this is all being done in the name of national security, and it is a must to support the legislation as written by the ethanol lobby lawyers.

    In the past few days, I have read a whole lot about the same arguments for methanol now, and the need for the open fuel standard act passage.  The passage of that act would give RR a good argument to keep that ethanol in the midwest and actually “really” promote national security.

    This is one of the more interesting articles for me to read this morning in light of what I have learned following the lobby trail that is pushing M85 and E85 for national security.  If RR conclusions/questions are accurate, it means that all these fuels are going to follow whatever market makes sense provided subsidies, tax credits and mandates direct the flow of fuels.  Of course it is obvious…but does it really promote national security?

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  6. By Rufus on November 26, 2010 at 10:49 am

    We “Import” about One Million Barrels of Gasoline, Daily. I guess it’s possible that someone could be paying for the shipping into the U.S., blending some of that gasoline with 10% ethanol, and then paying for the shipping back overseas, but that sounds like a heck of an expense just to pick up approx $0.03. I don’t see how that would pay for the shipping.

    Sounds like one of those “I guess it really could be done” deals that isn’t very likely to get done.

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  7. By Rufus on November 26, 2010 at 11:31 am

    Also, we seem to be talking about 250 million gallons of ethanol, but we Export 3.8 Billion Gallons of Diesel. Maybe we should be looking at that $52 Billion of Fossil Fuel Subsidies, and how it applies to the almost 4.0 Billion Gallons of Exported Diesel. Right?

    Anyways, it’s almost certainly a “moot” point. With this Congress/Administration’s track record it seems almost impossible that they would extend the VEETC. I would bet dollars to donuts that that puppy is deceased.

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  8. By rrapier on November 26, 2010 at 11:49 am

    He is referring to the blend wall.

    And are you sure that this loophole actually exists?

    I know he is referring to the blend wall. But to suggest they have no other option because the government won’t raise the blend wall is dishonest. They can sell all the E85 they can make if they can sell it at the right price.

    And whether the loophole actually exists — they quoted traders in the article who said they have taken advantage of it. And you notice that they RFA didn’t come out and say “This isn’t true.” Dinneen called the article “hyperbolic”, but didn’t say it wasn’t true. You know what that means? It is true.

    RR

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  9. By Rufus on November 26, 2010 at 12:12 pm

    We export Corn, Cotton, Soybeans, Wheat, Rice, and many other subsidized agricultural products. Should we quit exporting those?

    We’re spending a couple of Hundred Billion Dollars each year keeping the shipping lanes open, and the Mideast Oil Fields safe from something, or other. Should we charge that off against the price of gasoline/diesel/jet fuel/asphalt, etc?

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  10. By rrapier on November 26, 2010 at 12:54 pm

    We export Corn, Cotton, Soybeans, Wheat, Rice, and many other subsidized agricultural products. Should we quit exporting those?

    Well, yes. Especially if it’s like the case with ethanol, where the subsidy is supposed to reduce our dependence on foreign products. So give me a specific example of a cotton subsidy and let’s discuss. If the subsidy was designed to reduce cotton imports, and we are exporting — then that policy is just as stupid.

    Should we charge that off against the price of gasoline/diesel/jet fuel/asphalt, etc?

    To the extent that these charges are directly related to making sure the oil flows, they are consumer subsidies. Yes, that price should be reflected at the pump, and I have suggested numerous times that we do that by increasing gas taxes.

    The evil oil companies and their subsidies — by the way — is the topic of the next post. It is already written and will post on Monday.

    RR

     

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  11. By rrapier on November 26, 2010 at 12:58 pm

    Also, we seem to be talking about 250 million gallons of ethanol, but we Export 3.8 Billion Gallons of Diesel.

    You know, if you ever once just said “Yeah, we probably shouldn’t be doing this” it would make you seem less like an ethanol lobbyist. When your defense mechanisms kick in as they did above, you are behaving exactly like an ethanol lobbyist.

    RR

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  12. By Benny BND Cole on November 26, 2010 at 1:45 pm

    This excellent post makes my head spin.
    No wonder ordinary citizens are gamed out of their tax dollars.
    The Red States are very sophisticated at talking about limited government, but…….

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  13. By Rufus on November 26, 2010 at 1:46 pm

    For one thing, Bubba, you haven’t given any evidence that it is happening. I tried to follow you link, and it led to nothing but a list of other articles you’ve written.

    Second, the Diesel thing IS proven, but instead of addressing it you jumped right into an ad hominem attack on me.

    Third, I didn’t say anything about oil companies being “evil.” That was just an attack on a “straw” man.

    So, I’ll say this, “If we are subsidizing ethanol for export we ought to stop it. Also, if we’re subsidizing Diesel, Corn, Soybeans, Wheat, or Cotton for export we ought to stop that, also.

    But, the only subsidy that we ARE going to bring an end to is ethanol. And, unfortunately, that is NOT going to have hardly any of the desired effects that the anti-ethanol crowd has dreamed of. It was All for Naught. Too Bad.

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  14. By Rufus on November 26, 2010 at 2:03 pm

    As for the pipeline, that’s a straw man, also. The DOE killed that deader than a Dodo six months ago. And, even if it had been approved, it was merely an attempt to get a “loan guarantee,” not a grant.

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  15. By rrapier on November 26, 2010 at 2:13 pm

    For one thing, Bubba, you haven’t given any evidence that it is happening.

    If you really want to find out more, it isn’t that hard. So what is the insinuation there? That traders haven’t said that they have taken advantage of the credit? I am quoting from the story; you can get to it if you really want to. There did appear to be a weird error there; I think it is fixed. But if you Google the first line of the quote you can find the story.

    Second, the Diesel thing IS proven, but instead of addressing it you jumped right into an ad hominem attack on me.

    No, I am not playing your game of trying to deflect the focus onto something else. That isn’t an ad hom, that is what you did. But I’ll bite for a sec. The diesel thing is proven? How so? Show me the subsidies we are paying on diesel that is being sent out of the country. You will find that they are of a very different nature than the VEETC (more on that Monday). But the ethanol thing is proven. We know ethanol is being exported. We know that the ethanol industry is subsidized in many ways beyond the VEETC (akin to your diesel subsidies). So if you want to argue that subsidized diesel is being exported, by the same measure there is no question that subsidized ethanol is being exported.

    But, the only subsidy that we ARE going to bring an end to is ethanol. And, unfortunately, that is NOT going to have hardly any of the desired effects that the anti-ethanol crowd has dreamed of. It was All for Naught. Too Bad.

    Of course not. There is a mandate in place. If the mandate wasn’t in place and the VEETC disappeared, so would the ethanol industry. But as indicated in a Podcast I did this week, that isn’t what I wish to see happen. You can see that Podcast here, by the way.

    RR

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  16. By rrapier on November 26, 2010 at 2:15 pm

    Rufus said:

    As for the pipeline, that’s a straw man, also. The DOE killed that deader than a Dodo six months ago. And, even if it had been approved, it was merely an attempt to get a “loan guarantee,” not a grant.


     

    And what did my post say? They lobbied for support. A loan guarantee is support. At the time a number of people said that they wanted the pipeline to export ethanol, but I argued that it was unlikely since exports wouldn’t qualify for the VEETC. But it looks like I was wrong; there is a loophole.

    RR

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  17. By Kit P on November 26, 2010 at 2:17 pm

    Rufus I must correct
    you on this:

     

    “anti-ethanol
    crowd”

     

    Folks here are not
    against ethanol, just ask them. They are against subsidies.

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  18. By Rufus on November 26, 2010 at 2:28 pm

    Yeah, Kit; unless they are subsidies for Electric Cars, Solar Panels, Wind turbines, geothermal, Oil, gasoline, methanol, diesel, coal to liquid, gas to liquid, or watermelon wine,

    then they are “jes peachy.” :)

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  19. By rrapier on November 26, 2010 at 3:12 pm

    Folks here are not against ethanol, just ask them. They are against subsidies.

    I am not even against subsidies. Just against those that don’t actually accomplish anything for the taxpayer.
    RR

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  20. By Rufus on November 26, 2010 at 3:19 pm

    I, for one, am looking forward to the end of the VEETC.

    It’s going to cost me a little more for my E85, but it’ll be worth it to see the anti-ethanol crowd casting about looking for something else to whine about.

    And, especially knowing it will cost them money at the pump, too. :)

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  21. By paul-n on November 26, 2010 at 3:30 pm

    C’mon Rufus, chill out, you’re meant to be relaxing on holidays.

    I don’t think any of us here have argued, at any time, for subsidies on any of those things.

    And, I thank Kit for that correction, which I agree with.  I have no problem with the ethanol industry – it actually produces something useful, and does reduce oil imports (when no exported).

     It is the game playing of the ethanol lobby, and the subsidies, that gets my goat up, and the same for many other people.  (Even though I am not paying taxes for that subsidy, the Cdn government pretty much follows in step, so I end up in a smaller version of the same boat).

    The test for any subsidy should be threefold;

    1. Is the subsidy supporting something we actually want?
    2. is the subsidy actually going to achieve anything compared to if it wasn’t there?
    3. Are the gains achieved worth the subsidy cost?

    For ethanol, (1) is to reduce oil imports, and it clearly passes that, 2 is debatable, at best,  and 3 is highly debatable, since the RFS does such a good job.

    When the ethanol is exported, it fails 1, the taxpayers are not getting any extra energy independence for their money.

    I think they should still have a right to export ethanol,  just not to be paid to do so.   

     

    As for diesel, that is  a VERY good reason why there should be more diesel cars on the road!

     

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  22. By paul-n on November 26, 2010 at 3:45 pm

    Rufus, I still maintain that E85 is the one ethanol product that is worth subsidising.  In fact, it complements the RFS quite well – you can sell up to X by the mandate, and any more, you have to earn the sales as E85, but you get that subsidy to help the process – then the subsidy is actually achieving something.

     

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  23. By Rufus on November 26, 2010 at 3:48 pm

    Heck, Paul, I AM chilled. As I said, I don’t care if they end the Credit, or not. It has done a pretty good job, though. It probably saved the industry in the winter of ’08, and the Spring of 09′. The industry was “built out” well in excess of the RFS (they had the confidence to do that because of the VEETC.)

    Now, it’s close enough that even if oil tanked again it would be only a handful of refineries that would have to shut down.

    As for “good for the consumer:” Do you think the existence of close to 900,000 barrels of ethanol/day in the market is Not affecting the “price of gasoline?”

    Oh, and I’ve seen NO articles, or Comments decrying the $7,500.00 of Taxpayer Money being spent to subsidize the purchase of Electric Cars, or the Billions being spent by the government in the form of 30% Grants for the development of Wind Farms, and Solar Farms to, supposedly, charge those Electric Cars. Why is that?

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  24. By Rufus on November 26, 2010 at 3:55 pm

    That would be the way I would roll, Paul; but, they are not going to do that. The politics are just all wrong right now. The RFS will remain, and, I think, cellulosic will keep its producers’ credit; but, other than that, it’s time to p*** on the fire, and call in the dogs. The hunt is over.Ethanol is on its own.

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  25. By perry on November 26, 2010 at 3:59 pm

    Paul N said:

    C’mon Rufus, chill out, you’re meant to be relaxing on holidays.

    I don’t think any of us here have argued, at any time, for subsidies on any of those things.


     

    I have. I wholeheartedly endorse any subsidy that reduces our reliance on foreign oil. Food and energy security are absolute must haves. We have food security thanks to agriculture subsidies. We won’t get energy security without them either. That doesn’t mean policies don’t need to be tweaked from time to time. We need to find what works and do more of it. If $6 billion in ethanol subsidies saves us $15 billion in agriculture subsidies, while enhancing both food and energy security, it’s a subsidy worth keeping. I’m not claiming that’s the case. But, it needs to be looked at from all angles.

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  26. By Rufus on November 26, 2010 at 4:08 pm

    The Cellulosic Ethanol Producer Credit

    http://www.irs.gov/pub/irs-dro…..08-110.pdf

    runs until 2013. That’s the only one I really care about at the moment. Although, it would take a pretty foolhardy individual (or bank) to put up Millions of dollars today to take advantage of an act that sunsets on Dec 31, 2012.

    Cellulosic might have just missed the boat, also.

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  27. By perry on November 26, 2010 at 4:14 pm

    I would also strongly argue for a $1.00 per gallon methanol to gasoline subsidy. And the same $1.00 for a GTL or CTL gallon of gas. Anything to cut our reliance on imported oil. Energy independence would save us the $300 billion we spend annually guarding the mideast. Let the Chinese or Japanese spend their money, and spill their blood, squatting over that oil. We can do better.

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  28. By Rufus on November 26, 2010 at 4:25 pm

    Well, Perry, I’m not going to get what I want, and you’re not going to get what you want. What we’re going to get is “what Exxon wants.” And, what the “Greenies, the Republicans, and the Sauds want.”

    Gasoline, and a failed Electric Car debacle.

    We’ll probably revisit the ethanol thing in a few years when gasoline is $4.00, the country is in recession, and after a couple of small companies like Fiberight have rolled the dice, and leverage “tipping fees,” and a couple of other niche advantages into successful small-scale cellulosic enterprises.

    As an American, I’m disappointed; but as an old, retired fart I’m not going to lose much sleep over it.

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  29. By Rufus on November 26, 2010 at 4:55 pm

    “The Greenies, the Republicans, and the Sauds.”

    Ain’t THAT a “Triumverate Made in Hell?”

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  30. By Rufus on November 26, 2010 at 4:56 pm

    One ought to oppose a grouping like that just on “General Principle.” :)

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  31. By paul-n on November 26, 2010 at 5:08 pm

    Rufus I am glad to hear you are chilled out (so am I, but that is because we had six inches of snow here yesterday!).

     

    For the record, I have argued against the $7500 EV subsidy on this forum, and others.  It is far more regressive than the ethanol subsidy – everyone will be subsidising hollywood types to drive their EV’s.  I have also argued against the solar and wind subsidies, too, as have many others – they do not seem to be giving good value for money.

     

    I disagree with Perrys approach of subsidising every alternative to oil.  That keeps oil, and all fuels, artificially cheap, which means efficiency measures are less cost effective, gas guzzling cars will stay on the road longer, and the total volume of fuel used will hardly decrease.

    A tax on oil (or oil imports)  effectively subsidies all alternates, without choosing, and encourages efficiency – the two combined may be able to dispense with imports, but I don’t think either can on its own, without prohibitive costs.

    I do encourage supporting development of alternative technologies, but even that process has been gamed excessively, and much of it is yielding little value for money.

    For the cellulosics, I would sum it up  by saying it has obviously been a lot harder than any of them thought, as they have been making statements for years about what they will do, but with the exception of Fiberight, they don;t seem to be producing anything much.    Iogen and Range Fuels in particular come to mind.  

    But anything that makes energy from waste is well worth investigating, as our respective countries produce a lot of it.

    I will be back in Australia for Xmas, and it will be interesting to catch up on what is happening there with ethanol and biofuels.  I remember filling up my car on E10 back in 1988 – was only available at one station between Sydney and Canberra, and was made from waste starch, but the carburettor engined car I had seemed to love it – I would get a 5% mileage increase and it ran cooler in the 100F summer weather (which is what I am in for at Xmas) .

    My brother looked into using his canola to make biodiesel, but, in a very strange move, the Aust government required biodiesel producers, even if they use the fuel themselves, on the farm, to pay full fuel taxes on it!  I think that has since changed, but what a way to discourage production!

    Ultimately, I think what is really needed for all the alternate fuels, is simply higher oil prices (or taxes).  If producer X knows that there is always going to be a $1/gal tax on gasoline, they know what they have to work with, and we won’t have all this grandstanding about this or that tax credit, and can just get on with the job.

     

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  32. By Rufus on November 26, 2010 at 5:26 pm

    Paul, I’ve always been partial to Subsidies for Alternates, rather than Higher Taxes on Oil/gas because I’m just not sure how high we can go before it craters our economy. We have spent a long time designing this puppy around “Cheap Energy.”

    Even if we can adapt to much higher liquid fuel prices, I’m afraid that we will need to do it slowly – at least slower than the regimen that is liable to be forced upon us. That $147.00/bbl to $34.00/bbl ride was an “eye-opener.” I had envisioned many scenarios, but none were remotely similar to that one.

    I have to admit that I, briefly, had hopes for some sort of an “unwinding” of the tax credits. Something like $0.10 or $0.15/yr, with an extending out of the cellulosic credit. Alas, ’tweren’t to be. Now, I guess we’ll just ride the “Oil Price Roller-Coaster” for awhile, and see what develops.

    It’ll be “interesting;” but I’d have preferred some “Boredom.” :)

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  33. By perry on November 26, 2010 at 6:25 pm

    Paul N said:

    A tax on oil (or oil imports)  effectively subsidies all alternates, without choosing, and encourages efficiency –


     

    When crude oil went to $140, nat gas and coal went along for the ride. Part of the reason is that all three are used to heat homes. Raise the price of one, and the others are suddenly in higher demand. If raising the price of oil would work, I’d certainly support that though. I’ll support just about anything that can make a difference.

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  34. By paul-n on November 26, 2010 at 6:56 pm

    Rufus, one way to have your “boredom” would be for the gov to set an import tariff (the military security charge, as RR has called it) such that oil is $150, and adjust said tariff to keep oil at $150.

    The one thing that achieves, that nothing else does, is “price certainty”, where every alt fuel knows what it has to match – no excuses.

    Why $150?  because that is when almost all the alts, including oil shale, come into play.

    Since it is done by a tax, the money is not leaving the economy, and can be redistributed or counterbalanced in some way.  It could then even be paid out as a – I can;t believe I’m saying this – a subsidy on the alts!  Then you increase domestic production, and jobs, of all the alts, and decrease the one thing that matters.

    From $80 today to $150 is only another $1.50/gal, that is not the end of the world – here in Canuckistan we are paying $4.45 per gallon (taxes incl), Australia pays a little more, and both economies are doing better than US of A.

    I guess I am of the view that the medicine needs to be taken, and once the bitter taste has gone, things will be better.  Keeping fuel too cheap means nothing changes.

    There are plenty of precedents for governments setting/controlling prices.

     

    @ Perry, I’m not sure the home heating use was the main reason.  I think it was more a case of the rising tide of the “boom times” lifting all the commodity boats.  Coal was, and still is strong because of rampant demand from China.  NG is really just a N. American market, and demand from electricity was up, and the shale gas taps were only just starting to get turned on.

    North American NG has certainly traded its own path since, but world LNG trade pretty much tracks oil prices.  That is why some parties are looking at exporting LNG, though I don’t think it will happen.

    I don’t think it would change domestic coal too much – electricity and metallurgy are pretty much the only uses for coal here, unless someone starts doing CtL, or your electrolysis schemes.  But I’d rather burn domestic coal than imported oil.

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  35. By Thomas on November 26, 2010 at 8:29 pm

    Paul, agreed that the $7500 per car tax credit is regressive.  That amount of money is probably not a determining factor for 95% of the people who buy hybrids and BEVs.  I think it would be much better to focus on charging stations and battery research (both are being funded in their own right). 

     As for ethanol’s contribution to consumer welfare, 800,000 ethanol/day is not the correct figure.  Its 800K barrels of ethanol – barrels of foregin oil used to produce and transport the 800K barrels ethanol. As we’ve discussed before, this amounts to energy reformulation rather than net energy production for locations outside the Midwest. 

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  36. By paul-n on November 26, 2010 at 9:17 pm

    Thomas, I don’t even think the charging stations are worth public money.  Russ gives good write up on his blog about why we shouldn’t bother with public charging stations, and I tend to agree.  Let restaurants, shopping malls, offices and entrepreneurs do that.  Also, a proliferation of fast charging stations, as public ones are bound to be, contribute high, transient peak loads to the grid, which are the worst sort, and places like LA and SF already heave their peak transmission issues as it is.  Let the owners work out how to charge them at night and keep them charged.  There is also the issue of fuel tax that they are not paying, which directly reduces road maintenance funds.

    The liquid fuel return ratio for ethanol is actually pretty good – most of the energy reformulation is natural gas to ethanol – it is, presently, the only gas to liquids process where you get more liquid energy out than the gas energy you put in, and there is scope to reduce the NG input substantially.

    Yes it is a waste to truck it to Calif etc, but that will change, eventually, (probably when Californians do less driving) 

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  37. By mus302 on November 27, 2010 at 5:46 am

    Robert Rapier said:

    He is referring to the blend wall.

    And are you sure that this loophole actually exists?

    I know he is referring to the blend wall. But to suggest they have no other option because the government won’t raise the blend wall is dishonest. They can sell all the E85 they can make if they can sell it at the right price.

    And whether the loophole actually exists — they quoted traders in the article who said they have taken advantage of it. And you notice that they RFA didn’t come out and say “This isn’t true.” Dinneen called the article “hyperbolic”, but didn’t say it wasn’t true. You know what that means? It is true.

    RR


     

    If you know that he is referring to the blend wall why do you claim that he is saying that the mandate needs to be increased?

     

    What is it they say about assuming? I have looked around for information on what the minimum percentage of gasoline that qualifies for the VEETC and haven’t as of yet been able to find anything. I will keep looking and let you know what I find.

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  38. By ronald-steenblik on November 27, 2010 at 7:39 am

    Good post again, Robert. You write:

    [S]ome have claimed that the real reason ethanol producers want the pipeline is so they can export ethanol out of the country. They argued that U.S. taxpayers would end up subsidizing ethanol exports

    Actually, I was arguing this back at the beginning of the year, and I seem to recall that most people (apart, perhaps, from RF) at the time looked upon my claim with deep skepticism. But I have continued to pursue the argument, and every time I have raised it on public blogs, people from the industry have stayed away from discussing the topic like the plague. And well they might: they know that subsidizing exports undermines the argument to keep the VEETC. I have also asked other correspondents to inquire with government folk, and their inquiries have been met with either silence or responses of “gee, don’t ask me.”

    @RR: I have one cavil about your article. Again you write, 

    In any case, if that loophole isn’t closed, European governments will likely react the same way they did to the subsidized biodiesel the U.S. was shipping to Europe: They put tariffs on biodiesel coming from the U.S.

    No, they levied countervailing and anti-dumping duties on biodiesel coming from the U.S. The distinction is more than semantic. The ethanol industry has at times defended the maintenance of the $0.54/gal “secondary” import tariff on ethyl alcohol destined for use as a fuel on the argument that “Brazil subsidizes its ethanol, too.” Of course, the evidence they have provided has been paper thin, but even if it were true, the standard trade remedy would be a countervailing duty, not a tariff on imports from all countries (other than those with which the United States has free-trade agreements). The other inconsistency in the argument is that the “secondary” import tariff is levied only on ethyl alcohol destined for use as a fuel. Ethyl alcohol imported from Brazil that is destined for use in beverages or for industrial use is subject to only a 2.5% ad valorem tariff. If alleged Brazilian subsidies were a problem for one end use, they would also be a problem for all other end uses.

    @Paul N: I note that you continue to argue for an import tariff on petroleum, despite the numerous times I have pointed out that this could not happen without causing major problems. The United States has not bound its import tariff on crude oil, but it has bound its import tariffs on refined petroleum products, and generally at levels equivalent to a few cents per barrel.

    So, what would happen if Congress imposed a hefty MFN (most-favored nation) import duty on crude oil (but not on products)? First, there would be massive trade diversion of crude via countries with which the United States has a free-trade agreement (Australia, Bahrain, Canada, Chile, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, Oman, Peru, Singapore). Second, imports of refined products would soar.

    Technically, the United States could ignore the bindings on its tariffs on refined products, and raise those substantially as well, but then other WTO Member countries (which include petroleum exporters such as Kuwait, Nigeria, Norway, Saudi Arabia, United Kingdom, Venezuela) would have a right to demand compensation for reduced exports to the United States. The size of those claims could be massive.

    So, in short, if people here are going to throw around ideas about tariffs, please get the details right. They matter.

    And, by the way, a high excise tax on petroleum fuels creates no legal problems for international trade.

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  39. By sam-geckler on November 27, 2010 at 9:14 am

    Robert,

     

    From my hometown newspaper in Columbus, Indiana yesterday; this is how the VEETC  is being portrayed in corn producing states.

    http://www.therepublic.com/vie…..ls-Future/

     

    As you can imagine there is no mention of the mandate associated with the Energy Independence Act.

     

    Sam

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  40. By Kit P on November 27, 2010 at 12:10 pm

    “From my hometown
    newspaper in Columbus, Indiana ..”

     

    Thanks for the link
    Sam.

     

    “As you can
    imagine there is no mention of the mandate associated with the
    Energy Independence Act.”

     

    I was wondering Sam,
    have you actually read the legislation? It sounds like Sam should be
    getting his information from the NY Times or LA Times. They will
    quote professors from Cornell or UC Berkley who will explain why
    farmers in Indiana should not grow corn. They will tell you that
    your electricity should not come from coal but solar panels. People
    who live daily with smog will tell you how to clean your air. There
    are even people who live in Hawaii who explain that sugar ethanol is
    more efficient than corn ethanol.

     

    Yes, Sam there are a
    lot of people who will explain why Indiana should not be a more
    productive state. Why people in Indiana should not expect some of
    their tax dollars to come back to them. However, Sam before you
    listen to closely to these people you might consider what they have
    accomplished and if what they promote is is not in their best
    interest.

     

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  41. By rrapier on November 27, 2010 at 12:47 pm

    If you know that he is referring to the blend wall why do you claim that he is saying that the mandate needs to be increased?

    Because they have explicitly stated it many times. When they point fingers at the government and say it’s their fault they can’t sell more ethanol, they are talking about raising the blend wall. That’s not an assumption.

    What is it they say about assuming? I have looked around for information on what the minimum percentage of gasoline that qualifies for the VEETC and haven’t as of yet been able to find anything.

    I don’t understand the question. E85 qualifies for the VEETC. In that case, there is absolutely nothing from keeping those producers from taking full advantage of those subsidies. But they have not been able to grow that market — even with the subsidies in place.

    RR

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  42. By rrapier on November 27, 2010 at 12:57 pm

    Kit P said:

    I was wondering Sam,

    have you actually read the legislation? It sounds like Sam should be

    getting his information from the NY Times or LA Times.


     

    Have you? Because at the same time that you chastise Sam, you indicate no familiarity with the legislation. So I will ask you for the umpteenth time, why don’t you explain the advantage of having a subsidy on top of the mandate? For someone who seems to be pretty conservative, you seem to have a tough time with this one.

     

    There are even people who live in Hawaii who explain that sugar ethanol is more efficient than corn ethanol.

    And there are people who live in Viriginia and work in the electricity industry who couldn’t tell you the first thing about the efficiency of either process. Ask them about fertilizer requirements, yield per acre, and distillation efficiency of the two and you are likely to be met with a few red herrings and a long, rambling obfuscation.

    RR

     

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  43. By rrapier on November 27, 2010 at 1:21 pm

    Actually, I was arguing this back at the beginning of the year, and I seem to recall that most people (apart, perhaps, from RF) at the time looked upon my claim with deep skepticism.

    Yes, I remember. I was thinking of your arguments when I wrote that. I thought you were wrong.

    No, they levied countervailing and anti-dumping duties on biodiesel coming from the U.S.

    I will correct the article to make sure the terminology is accurate.

    RR

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  44. By perry on November 27, 2010 at 1:35 pm

    Robert Rapier said:

    So I will ask you for the umpteenth time, why don’t you explain the advantage of having a subsidy on top of the mandate?


     

    One advantage would be E85 selling for less than a gallon of E0. You say the E85 market should be expanded Robert. How many consumers will opt for E85, or even E10, that costs more than gasoline? That would be the case right now without the .45 subsidy. Mandate or no mandate, consumers will do what’s best for their pocketbook. And the only way blenders will be able to sell that ethanol will be to put “out of order” signs on the 100% gasoline pumps.

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  45. By rrapier on November 27, 2010 at 3:26 pm

    One advantage would be E85 selling for less than a gallon of E0. You say the E85 market should be expanded Robert. How many consumers will opt for E85, or even E10, that costs more than gasoline?

    And the easy solution to that — as has been suggested here before — is only keep the subsidy for E85.

    As for E10, they don’t have a choice in most places as to whether to opt for it. That’s the thing about a mandate: It says that you will do it regardless of whether E0 costs less.

    RR

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  46. By perry on November 27, 2010 at 3:55 pm

    Robert Rapier said:

    And the easy solution to that — as has been suggested here before — is only keep the subsidy for E85.


     

    Even with the subsidy, the price spread for E85 is only 12% currently. Consumers know it takes a 25% spread to make economic sense. That leaves us with the saturated E10 market for now. You’re probably right that the mandate could be made to work without the E10 subsidy. That’s only 4.5 cents per gallon. But, it’s wishful thinking that the midwest, or any region for that matter, will increase E85 consumption if the price ain’t right.

     

    I know I’m a lone fruitcake on the issue of subsidies. Any subsidy that reduces reliance on foreign oil is worth doing imo. Our vast reserves of coal and natural gas will probably never displace much oil without subsidies. The capital costs of GTL and CTL are enormous. The end product never seems to be competitive. Instead of fighting against this subsidy, our energy would be better used fighting for more subsidies that work imo. You can probably list a half dozen reasons this subsidy makes no economic sense. I can list a half dozen reasons a CTL subsidy makes no sense. We need one anyway.

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  47. By Wendell Mercantile on November 27, 2010 at 4:17 pm

    Our vast reserves of coal and natural gas will probably never displace much oil without subsidies.

    Huh? Of course, they will — when oil production has peaked and becomes too dear to use as mere transportation fuel.

    We are fortunate — although many don’t realize it — that methanol from coal and natural gas is our “ace in the hole” for the foreseeable future — and it will happen out of necessity, and without mandates or subsidies, because of a lack of other viable, affordable options.

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  48. By Rufus on November 27, 2010 at 4:29 pm

    The stations in the Midwest are selling more, and more E85 at a narrower, and narrower spread to E10 (averaging between 10% and 15%, currently.)

    One reason for this is “more E85-capable vehicles, and a better mix (Ford Fusions, for ex.) Many vehicles come out okay with a 15% spread. A lot has to do with the “type” of driving one does. An ex: Many “pick-up truck” owners report very comparable mileage with E10 when towing, or hauling a moderate load (the truck on E85 will tend to “downshift” less often.)

    Right now, many of the Midwest stations are buying their ethanol from the local biorefinery for about $2.05/gal. This would allow them to sell E85, profitably, in the $2.15 to $2.20 range. However, even the Kum and Go’s of the world are getting $2.39, and up. That tells me that demand is getting more robust.

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  49. By perry on November 27, 2010 at 5:07 pm

    Wendell Mercantile said:

    Our vast reserves of coal and natural gas will probably never displace much oil without subsidies.

    Huh? Of course, they will — when oil production has peaked and becomes too dear to use as mere transportation fuel.


     

    We’ve been hearing that for the last 40 years. Back in the 70′s, we were told synthetic fuels would be competitive with $40 oil. Here we are at more than twice that, and it still ain’t happening. Had we aggressively used subsidies, we might well have gained energy independence in the last 40 years. Instead, we’re still waiting for the day oil is too costly. In the meantime, our annual trade deficit has grown bigger than the GDP of most countries, and we spend a similar amount defending mideast oil supplies. It’s insane, yet we keep sticking with what ain’t working.

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  50. By Wendell Mercantile on November 27, 2010 at 6:10 pm

    We’ve been hearing that for the last 40 years.

    Yes, but in that 40 years it hasn’t yet become a necessity to use something other than oil. For the last 100 years, oil has been the best and most economic source of fuel. It’s energy dense, portable, and still has a higher EROEI than the alternatives.

    If it weren’t, we would have switched to an alternative long ago.

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  51. By perry on November 27, 2010 at 6:28 pm

    Wendell Mercantile said:

     For the last 100 years, oil has been the best and most economic source of fuel.


     Best for who Wendell? Not best for the US. Every year, we spend enough on foreign oil to start another economy the size of Denmark’s, Venezuela’s, or Argentina’s. We spent a trillion dollars on Iraq, and spend that again every three years defending the Middle East. Economically, crude oil is KILLING US. We’ve mortgaged our children to the hilt. China owns them. Now, we’re pimping off our grandchildren. Still waiting for the day when oil is UNeconomic.

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  52. By Wendell Mercantile on November 28, 2010 at 12:47 am

    Best for who(m) Wendell?

    Best for the hundreds of millions of U.S. drivers who continue to demand the freedom to drive their cars wherever and whenever they want, and for an economy that runs* on fossil fuels. Not sure where you live, but as I walk to and from work everyday, I see thousands of commuters (one to a car) driving from their matchbox homes to their cubicles in the morning and then back home at night.

    The only thing that makes that possible is motor fuel made from millions of years old stored sunshine in the form of petroleum that can be easily turned into energy dense gasoline and diesel oil.

    Sure, we have to send billions overseas to get that petroleum, but that’s what American people want. Do you think any politician has the guts to tell them they can’t have that? How many Americans do you think are ready to give up the “right” to get in their cars and drive wherever and whenever they want — courtesy of that energy dense, convenient fuel made from petroleum?

    Someday Americans will all get a bucket of ice cold reality in the face, but that day isn’t here yet, and no politician is ready to tell them that.
    _________
    * If you visited a big box store yesterday on Black Friday, I bet everything you saw there was delivered on a truck powered by diesel fuel made from oil. As you sit in your house, look around and tell me what you see that didn’t come on a truck to where you bought it.

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  53. By paul-n on November 28, 2010 at 5:26 am

    Rufus wrote;

    Right now, many of the Midwest stations are buying their ethanol from the local biorefinery for about $2.05/gal. This would allow them to sell E85, profitably, in the $2.15 to $2.20 range. However, even the Kum and Go’s of the world are getting $2.39, and up. That tells me that demand is getting more robust.

    Rufus,  who is doing the blending here?  If they are buying straight ethanol at the biorefinery, and blending at the point of sale, they can claim the credit, and then they  could profitable sell for less than they buy it.  Or is the “biorefinery” (=distillery?) claiming the credit?

     

    Interesting comments about the PU trucks – it would seem the performance advantage of ethanol is best at higher loads, presumably where the cooling effect of vaporising ethanol is most beneficial.   A city commuter would not get their engine in this zone very often – at light loads, the engine is quite inefficient, and the ethanol won’t do much to change that.

     

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  54. By Rufus on November 28, 2010 at 11:16 am

    Paul, sometimes the biorefinery sells the E85, already blended, sometimes the chains are blending it, themselves. Sometimes the ethanol is bought by the blender for distribution to the smaller stations.

    But, Don’t Forget Taxes, and Shipping. That will eat up the blender’s credit, plus a bit.

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  55. By paul-n on November 28, 2010 at 12:46 pm

    Well, it sounds like they are closer to your “county model”.  If someone is just buying the regular gasoline from the refiners, and then it is being blended locally, at least then the credit goes local, instead of to the oil company.

    We would see more of that if the credit was just for E85, as that puts control in the hands of whoever produces the ethanol, not whoever produces the gasoline.

     

    Perry wrote;

    Any subsidy that reduces reliance on foreign oil is worth doing imo.

    Reducing reliance on foreign oil is indeed the goal.  But if the subsidies are structured, like the ethanol one, that they make the fuel cheaper, then it encourages greater consumption, which increases dependence on oil, and makes the gap that the alts are trying to bridge, that much larger.

    The incentive structure needs to encourage domestic development and production, but not encourage consumption.

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  56. By paul-n on November 28, 2010 at 12:57 pm

    Ron Steenblik wrote;

    So, in short, if people here are going to throw around ideas about tariffs, please get the details right. They matter.

    Yes they do, but I am not particularly concerened about them – there are people like you that can sort them out.  If the general concept is to encourage domestic production (of oil and aternates) and simultaneously reduce imports and total consumption, then making imported oil more expensive, thus raising the market price for domestic + alts, is one way to go about it.  It is also the one way that the US has not yet tried.

    An import tax/tariff (not just on crude, but on all imported energy, on a btu basis), along with country of origin labellling for fuel, is the simplest way to achieve this, and I am a proponent of simple solutions.  However, if for all the reasons you describe, a simple import tax can’t work, then surely there can be some other structure that achieves the same result?  America is the champion of system gaming, and I am sure it can be done.

    One alternative might then be a tax on all energy sold (retail, industrial,airlines, etc),and then an equivalent tax credit for domestic production  Politically, this a much harder sell – as the taxpayers will feel (correctly, that they are paying tax on every gallon they buy, where the import tax can be avoided, by not buying imported fuel.

    I am primarily concerned with the overall concept – if it is agreed that it (or some other plan) is the way to go, then I’m sure those details can be sorted out to make it work.

     

     

     

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  57. By Kit P on November 28, 2010 at 1:48 pm

    “But if the
    subsidies are structured, like the ethanol one, that they make the
    fuel cheaper, then it encourages greater consumption, which increases
    dependence on oil, and makes the gap that the alts are trying to
    bridge, that much larger.”

     

    Paul do you have a
    dog? If so I would like you to make a video and post it on the
    Internet. I want to see a dog wagged by its tail. The cost of
    something is controlled by the 90% not the 10%. Of course if E85 is
    cheaper than encouraging its use would reduce imports.

     

    For example, a E85
    pickup uses 100 gallons of E10, that would be 10 gallons of ethanol
    and 90 gallons of imports. Switch to E85, that would be 85 gallons
    of ethanol and 15 gallons of imports. Even if this yahoo follows
    Paul thinking with fuel being five cents cheaper decides to double
    his driving; it is still only 30 gallons of imports.

     

    Wait for it!

     

    “One alternative
    might then be a tax on all energy sold ..”

     

    Paul is back to his
    liberal solutions of taxing energy and then begging the government to
    get your own money back. Paul energy is already heavily taxed.

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  58. By perry on November 28, 2010 at 2:28 pm

    Paul N said:

     However, if for all the reasons you describe, a simple import tax can’t work, then surely there can be some other structure that achieves the same result?  America is the champion of system gaming, and I am sure it can be done. 


     

    One of the quickest, easiest ways to reduce consumption, would be to kill the exemptions on the gas gazzler tax. Congress did the right thing by taxing fuel hogs, but then decided only small, lightweight, hogs would be taxed. The big, clunky, gas guzzlers earned a pass. Automakers responded by making half the fleet big, clunky, fuel hogs.

     

    Implement the gas guzzler tax across the board. Then, front load those gas taxes paid at the pump. People are going to pay the .38 a gallon one way or another. The .38 gas tax on a 20 mpg car is $1900 based on a 100,000 mi. average. It’s half that for a 40 mpg car. Put those taxes on the sticker price, and hybrids suddenly become no-brainers. Especially on clunkers like the Tahoe.

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  59. By Rufus on November 28, 2010 at 2:38 pm

    Well, the sad truth is: Oil has a “lobby.” Wind, and Solar have “lobbies.” Ethanol has a “lobby;” but, E85 Has “No Lobby.” For the Political, and Financial Powers, E85 is, at the very, very best, an Afterthought.

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  60. By savro on November 28, 2010 at 3:27 pm

    Rufus said:

    Ethanol has a “lobby;” but, E85 Has “No Lobby.”


     

    The absurdity is in the truth of this seemingly contradictory statement.

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  61. By ronald-steenblik on November 28, 2010 at 3:52 pm

    Paul wrote:

    I am not particularly concerened about them [the details of trade policies] – there are people like you that can sort them out.

    Yet you continue to espouse ideas that would have profound trade implications, despite being shown repeatedly that they cannot work.

    One alternative might then be a tax on all energy sold (retail, industrial,airlines, etc),and then an equivalent tax credit for domestic production.

    Yeah, the government could do that, I suppose. But it would open itself to challenge from other trading nations, not least Canada. Australia has structured its ethanol subsidy in that way, applying a A$ 0.38143 per litre tax on all fuel, including ethanol, but giving domestic ethanol producers a rebate equal to the tax. (In the case of biodiesel, both imports and domestic production get the rebate … for the moment.) That tax rebate is due to be phased out, and the affected volumes are small (about 50 million U.S. gallons a year), which is probably one reason why no potential ethanol-exporting country has bothered to incur the expense of challenging the policy. But a market as large as the U.S. market for petroleum fuels is a whole ‘nother kettle of fish.

    Moreover, even if a tax-and-rebate scheme that favored domestic production survived challenges from other countries, it would meet with a lot of opposition from green groups, who are already (along with the Obama Administration) calling for an end to other tax breaks enjoyed by domestic oil-and-gas producers.

    Politically, this a much harder sell – as the taxpayers will feel (correctly), that they are paying tax on every gallon they buy, where[as] the import tax can be avoided by not buying imported fuel.

    Bzzzzzzzzz! Tilt! Go back to Economics 101, do not collect 200 dollars. Imposing an import tariff raises ALL domestic prices, whether the imports are segregated and labeled separately (almost impossible to do, given how petroleum is handled and mixed), or not. Prices are set by the marginal volume sold, and as long as that marginal supply has to be imported, domestic suppliers are going to ensure they get that higher — world price plus tariff — price.

     

    You just cannot seem to bring yourself to accept the idea of a more general increase in taxes on petroleum fuels. Why? 

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  62. By Wendell Mercantile on November 28, 2010 at 4:03 pm

    For the Political, and Financial Powers, E85 is, at the very, very best, an Afterthought.

    Methanol also has no lobby or political friends that can compare to that of industrial corn farming* or corn ethanol. But it’s day will come. Mark my words.
    _____________
    * Big Ag and the corn growers lobby had more to do with the push to ethanol than the ‘ethanol lobby.’ The main impetus behind corn ethanol was to increase the commodity market for corn.

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  63. By rrapier on November 28, 2010 at 5:33 pm

    The absurdity is in the truth of this seemingly contradictory statement.

    Agree 100%. The ethanol lobby should be the E85 lobby; had they created that market the sky would be the limit.

    RR

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  64. By Rufus on November 28, 2010 at 11:21 pm

    It wasn’t all that simple. The Cars weren’t there, and the vehicles that were flexfuel weren’t badged. Plus, the oil companies fought E85 (and, ethanl in general) tooth and nail.

    Then, a few of the fossil fuel-funded greenie groups gained a lot of traction with the phony, but catchily-titled “food for fuel,” and then the absolutely absurd ILUC (indirect land-use change) nonsense.

    All in all, the only thing that kept the ethanol industry alive was the RFS, and consequent RFS2.

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  65. By ronald-steenblik on November 29, 2010 at 1:13 am

    Um, before everybody gets carried away, let’s bring a reality check back into the conversation. All the mainstream ethanol lobby groups have pushed for E85 for years. But they did not concentrate their efforts there because they already had allies in even bigger industries. Remember GM’s “Live Green, Go Yellow“? OK, it was mainly a way to exploit the dual-fuel loophole and bathe in greenwash at the same time, but it also increased awareness (especially among politicians) of the possibility of running vehicles on high concentrations of ethanol (something that Brazil had been doing for years). There was also the E85 fuel coalition (which sells the bumper sticker shown below), as well as numerous governors promoting E85: 

    Ethanol Guzzler

    The E85 crowd succeeded in getting hefty subsidies to help filling stations install E85 pumps, and also requirements that federal agencies keep increasing the share of their fleets that were flex fuel, and fill up those vehicles with alternative fuels wherever and whenever possible. All this is amply documented in the Global Subsidies Initiative’s first study of U.S. ethanol policies. That demand for E85 did not take off as planned is not due only to insufficient distribution points: car buyers came to realize that, contrary to initial promises, the fuel was not consistently sold at energy-adjusted prices significantly below the price of gasoline.

    The country might have used a lot more E85 in places like Florida (which at one point offered huge incentives for E85 pumps), had the industry not held on tightly to the import tariff, thus largely shutting out Brazilian ethanol from the eastern seaboard (especially after the 2008 Farm Bill eliminated duty drawback).

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  66. By ronald-steenblik on November 29, 2010 at 1:47 am

    Rufus (obviously no longer in “chill-out mode”) wrote:

    Then, a few of the fossil fuel-funded greenie groups gained a lot of traction with the phony, but catchily-titled “food for fuel,” and then the absolutely absurd ILUC (indirect land-use change) nonsense.

    Please, Rufus, provide documentation to substantiate your claim that concerns expressed about “food for fuel” came exclusively from “fossil fuel-funded greenie groups”. I have on record just about every environmental group (whether or not it had ever receved money from an oil company), as well as development groups, such as Oxfam, making the connection. Moreover, analyses by the World Bank, the OECD, the FAO — anybody who worked on agricultural policy — also concluded that rapid increases in biofuel production were having important impacts on the prices of grains and vegetable oils. (indeed, ethanol spokespersons have long taken credit for eliminating those U.S. crop subsidies that kick in when prices fall below a certain pre-determined threshold.)

    Yes, the USDA and others showed the relatively smaller percentage effect on total household expenditure on food (which itself is $1.2 trillion a year, and half of which is the cost of meals purchased outside the home), but that is not the same as the effects of biofuel policies on the basic prices of corn and other grains, which is a much more important indicator for staples consumed in developing countries than it is for the proverbial box of highly packaged, highly processed corn flakes.

    And as for ILUC, what is absurd about the theory, Rufus? Granted, putting a precise number on ILUC is an inexact science. But no agricultural economist that I know (and I know plenty) would dispute the basic argument that rising prices stimulates increased production, some of which is bound to come from more-intensive farming (the “intensive margin”) and some from clearing new land somewhere in the world (the “extensive margin”).

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  67. By paul-n on November 29, 2010 at 2:08 am

    Ron wrote;

    Yeah, the government could do that, I suppose. But it would open itself to challenge from other trading nations, not least Canada.

    Just why is that?  Gasoline in Canada is taxed about $1.30/gal more than in the US.  Canada gives all sorts of tax breaks on domestic production, particularly oilsands which enjoy lower royalty rates than conventional oil.  How can Canada really complain if the tax rate is raised to something less than what Canada itself taxes at?  All the Euro countries have taxes way higher than here, and give tax exemptions for biofuels, but I haven;t seen any trade wars break out from crude producers (or even biofuel producers) about that.

    Consider the theoretical case of the US doing what BC has done , and imposing a carbon tax, that works out to say, $1.50/gal.  Would achieve the same result, reduce imports, increase prod of alts, but would the rest of the world, really be up in arms if America decided to be proactive about reducing its oil consumption?

    I just can’t see a trade war breaking out if the US decides to do what many other countries already do – impose high taxes on petroluem – but I will be happy for you to show me a case where that has happened.

     

    @Kit – I am absolutely not a fan of taxing and then begging for that money back – that is why I would prefer to simply tax the undesirable stuff – imported oil.  We could not tax it any more than it is, which is obviously the way you would like to go.  That will achieve the goal of not having a new tax for the government to waste, but it does not help to reduce oil imports.  The alternative system, of subsidising alternatives has, to date, led to cherry picking, and not all successfully.  

    While various alternatives have their individual technical challenges, one thing they all share is none of them are competitive with oil, at or near current prices.  This fact alone is a major impediment to investing in them.  To then subsidise them is then asking the general taxpayer to pay for them, whether or not they are an oil user.  So, we have the government giving back money they have already taxed – a cosmetic difference, at best, I’d say.  

    And, it simply has not worked.

     

     

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  68. By ronald-steenblik on November 29, 2010 at 4:18 am

    I repeat, Paul. This is what you wrote:

    One alternative might then be a tax on all energy sold (retail, industrial,airlines, etc),and then an equivalent tax credit for domestic production.

    That is very different than a tax on all energy sold and NO tax credit for domestic production. Read my comments again in that light, please.

    As I wrote earlier: imposing an excise tax, carbon tax or whatever on fuels is perfectly compatible with international trade rules and agreements, as long as the principle of national treatment is observed: i.e., foreign goods are treated no less favorably than domestic goods.

    What you are alluding to in the case of low royalty payments or tax benefits on production is something else. There is a raging controversy going on in Canada over what can be considered subsidies and what cannot. (See, for example, Fossil Fuels – At What Cost? Government support for upstream oil activities in three Canadian provinces.)

    As yet, no country has challenged another country’s subsidies to oil and gas production at the WTO. Why? Perhaps because estimating the benefit conferred is very difficult. (Comparing royalty rates, for example, is not enough: one has to look at the whole tax and royalty package.) Perhaps because of fear of retaliation over other traded goods. On that, your guess is as good as mine.

    And there you go again, Paul:

    I would prefer to simply tax the undesirable stuff – imported oil.

    Tell me what was wrong with my explanation of why that would be difficult and why it would likely create unintended consequences.

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  69. By Wendell Mercantile on November 29, 2010 at 9:45 am

    …a few of the fossil fuel-funded greenie groups gained a lot of traction with the phony, but catchily-titled “food for fuel,”

    Rufus~

    With the population of the earth at 7.3 billion and growing towards 9 billion by 2050, how can “food v. fuel” be a phony issue? Control and allocation of resources has always been an issue, but it will become the issue of the next three decades.

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  70. By Kit P on November 29, 2010 at 10:46 am

    “I am absolutely
    not a fan of taxing and then begging for that money back ..”

     

    Sure you are Paul!
    Incentives work very well at promoting production yet you are arguing
    against incentives in favor of higher taxes.

     

    “9 billion by
    2050, how can “food v. fuel” be a phony issue?”

     

    It is a phony issue
    when Wendell says things like ’9 billion by 2050′. Right now it is a
    phony issue but who knows in 40 years. Of course I see no reason for
    it to be an issue in 40 years. The doomsayers of 40 years ago got it
    pretty wrong. The sky is falling, the sky is falling! Wait for it!
    Someone is selling about telling you the sky is falling.

     

    When an marine tells
    you something Wendell, you may want to listen. Oliver North wrote a
    book about evil people in the Middle East who want to kill us. When
    you read a book that is 15 years out of print and it gets it right,
    then you may want to listen.

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  71. By Wendell Mercantile on November 29, 2010 at 11:36 am

    Of course I see no reason for it to be an issue in 40 years.

    Getting feisty again aren’t you Kit P? You had mellowed a bit before Thanksgiving.

    You’re right, it doesn’t have to be an issue in 40 years — it just depends on how we control and allocate resources. And deciding whether food is for eating or for making fuel will be one of the critical decisions we must make.

    Or, we can do nothing, and the outcome will happen without our input.

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  72. By rrapier on November 29, 2010 at 12:23 pm

    Paul is back to his liberal solutions of taxing energy and then begging the government to get your own money back.

    Says the guy who loves ethanol subsidies: The epitome of big government. Kit loves those $6 billion subsidies that put us further down that deficit hole while getting almost nothing in return for it (since 12 billion gallons of ethanol were mandated anyway this year — with or without the subsidy). Since this is taxing taxpayers and giving us back a bit of that at the pump, your position on this one is very inconsistent.

    RR

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  73. By Stephanie Dreyer on November 29, 2010 at 12:39 pm

    Robert I wanted to remind you that Growth Energy (the company I work for) did propose a solution to the current market access problem we face. Current government policies cap the amount of ethanol that we can use at 10 percent. Our fueling freedom plan calls for the build out of flex fuel vehicles and blender pumps that can distribute blends of ethanol from E0 to E85 to break that “blend wall” and give consumers choice at the pump that includes clean, renewable ethanol.

    We have the capacity to displace more foreign oil here in the U.S. but we need the regulatory caps lifted, and we need to reform the transportation fuels market. Once the infrastructure is in place, the ethanol industry will be able to compete without any support from the government and we will be able to use our homegrown ethanol within our own borders.

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  74. By Wendell Mercantile on November 29, 2010 at 12:58 pm

    Current government policies cap the amount of ethanol that we can use at 10 percent.

    Stephanie,

    That’s not true at all. Nothing stops fuel stations from selling E85.

    Instead of continuing to lobby for E12 or E15 and forcing people to use it, why not build your market for E85 in the Corn Belt states where the transportation costs of moving ethanol are low?

    Please answer this: Instead of asking for mandates that we use E12 or E15, why don’t you push for a mandate that would require corn farmers burn ethanol in their farm equipment? If all the farmers in the Corn Belt used ethanol in their ag equipment, you wouldn’t need to worry about the so-called “blend wall” for several years. The Swedish company Scania several years ago developed compression ignition engines that burn ethanol. Why doesn’t your lobbying organization urge a mandate that ag companies such as John Deere, New Holland, and Case-IH use those (or similar) engines in the tractors and corn pickers they sell in the Corn Belt?

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  75. By paul-n on November 29, 2010 at 3:24 pm

    Once the infrastructure is in place, the ethanol industry will be able to compete without any support from the government and we will be able to use our homegrown ethanol within our own borders.

    Really, without any support?  Are you saying then, that the biggest means of support you have, the RFS, can be removed, once the allowable limit is raised?

     

    Why didn’t Growth Energy just say that then?  ”if you raise the allowable levels of ethanol in the fuel, we will accept removal of all forms of support, including the VEETC, and the RFS.”

     

    So we can have any level of ethanol in the fuel, from 0 to 85, and the customer can choose, and there is no mandated minimum volume of ethanol.

    Sounds good, but that is definitely not my read of GE policies

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  76. By Kit P on November 29, 2010 at 6:52 pm

    “And deciding whether food is for eating or for making fuel will be one of the critical decisions we must make.”

     

    I do not think so Wendell.  I think it is a choice of weather we let American’s produce the energy we need or we let others do it for us.  Since American farmers have demonstrated an ability to create a world glut of food why not let them work on creating a glut of energy too?  

     

    Since ethanol is a hot button topic let me use electricity to illustrate my point.  We can make electricity with imported LNG in CCGT (the California plan to create jobs in Mexico) at a much lower capital cost and labor cost.  Of course, our electricity bills them become subject volatile world LNG prices.  A drought in Spain may cause electricity to become more expensive in the PNW.  If we provide incentives to build new coal, nuclear, and renewable energy generation while at the same time increase drilling for NG, we create jobs in the US.

     

    When you look at just the cost of the incentives to get higher capital cost energy production built in the US but ignore potential future savings and taxes paid, you are only seeing one side of the picture.  Since incentives only support the initial fraction of productions, we will have time to decide both the value of the incentives and any unintended consequences.  This would include impact on world food supplies.   

     

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  77. By Walt on November 29, 2010 at 9:57 pm

    Robert Rapier said:

    The absurdity is in the truth of this seemingly contradictory statement.

    Agree 100%. The ethanol lobby should be the E85 lobby; had they created that market the sky would be the limit.

    RR


     

    It would be a great start…for sure.  At least it would get some marketing dollars to reduce fears.  But, pass the Open Fuel Standard Act and it would be a real start.

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  78. By moiety on November 30, 2010 at 10:46 am

    I would say it is biting now.

     

    The 2011 renwable fuel standards are out now.

    http://www.greencarcongress.co……html#more

     

    This only measues (if I read it correctly) how much can be produced/made available and not what is actuallly used in the USA i.e. worst case scenario is that the standard could be based on a fuel with a 100% export rate (not the case).

     

    What this is means is that the EPA, an environmental protection agency is potentially putting too much weight on how much ‘green’ fuel contributes to reducing USA’s environmental perforance and how much oil it has weaned itself off.

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  79. By Optimist on November 30, 2010 at 5:43 pm

    GREAT piece of reporting, RR!

    If the MSM was capable of this quality, they would be growing by leaps and bounds. Or to be more precise, if the MSM was willing to do non-PC fact-finding, as opposed to the-sky-is-falling-what-you-don’t-know-can-get-you-killed-stay-tuned-you-don’t-want-to-miss-this PC BS.

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  80. By Optimist on November 30, 2010 at 5:48 pm

    “And deciding whether food is for eating or for making fuel will be one of the critical decisions we must make.”

     I do not think so Wendell.  I think it is a choice of weather we let American’s produce the energy we need or we let others do it for us.

    Agreed. But converting food into fuel is a perverse value-destroying self-sabotaging act that we can only afford if it is practised on a small enough scale. As the scale increases, so does the pain.

    Sure we can produce our own fuel. Just not from food.

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  81. By Kit P on November 30, 2010 at 6:58 pm

    “Sure we can
    produce our own fuel. Just not from food.”

     

    Do you know that
    your are 100% wrong Optimist? I think you should change your name to
    pessimist. Think of ethanol and other biofuels as a value added by
    product of making animal feed. The protein value is not lost. It is
    value increasing, job and tax creating process. Now we are selling
    DDG to China. We are also past small scale. What is not to like? I
    do not know why liberals do not like productive people but someone
    has to work to pay taxes so they teach our kids to hate America.

     

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  82. By paul-n on November 30, 2010 at 7:04 pm

    Whatever else you may think of corn ethanol, at least that corn is NOT being used to make high fructose corn syrup to feed to kids – i’d rather run my car on it than have kids drinking it.

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  83. By rrapier on November 30, 2010 at 7:12 pm

    Kit P said:

     It is value increasing, job and tax creating process.  


    How do you know that? Have you done the analysis to show that accounting for $6 billion in subsidies and the increases in food costs are a net positive? Of course you haven’t. You have no idea.
     

    What is not to like?

    The redundancy of the subsidy on top of the mandate. You never have explained why you think this is a good idea. It is certainly an odd thing for a conservative to support. 

    I do not know why liberals do not like productive people but someone has to work to pay taxes so they teach our kids to hate America.

    And someone has to work to pay taxes so we can fund ethanol subsidies to keep ADM in business.

    RR

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  84. By rrapier on December 1, 2010 at 2:19 pm

    Paul N said:

    Meanwhile, the US senators are actually saying someting about the tax credit and import tariff.

    Story in todays NYT that 17 Senators, from both parties, have petitioned the Senate majority and minority leaders to let the VEETc expire, including this line which sounds like something RR wrote;


     

    I have been beating that drum since 2007, and here at the end of 2010 I see lots of people using the arguments I have used. As you say, some of them are almost verbatim. I think I was the first to use the argument about the redundancy, I was the first to use the analogies of paying companies to obey the law, and I pressed hard to cast the spotlight on the fact that the oil companies were the recipients anyway. So when this turned into a “more subsidies for oil companies” debate, the ethanol lobby was at a real disadvantage. Of course they had made the claim that they don’t really benefit since the money is being collected by the oil companies, but I took that and ran with it: “If you don’t benefit, and the oil companies collect the subsidies, then it is a no-brainer to get rid of it.”

    So maybe this blog did make a little difference in the debate. :)

    RR

     

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  85. By paul-n on December 1, 2010 at 2:44 pm

    RR, if it has taken three years for your arguments to make it to the Senate floor, you are probably doing better than most, as these things go!  Your phrase  ”paying them to obey the law” is just the sort of sound bite everyone loves these days.

    If your blog was not making a difference, you would not be ethanol enemy No. 5!  be interesting to see if your ranking changes on next year’s list!

     

    The thing that truly surprises me the most about the tax credit, is why the distilleries didn’t get into the blending business themselves, buy and blend enough gasoline such that all the product you sell is E85, and that can be blended do to E10 by the oil co’s.   But if they did that, would the oil co’s balk at buying it, and demand just straight ethanol?

     

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  86. By ronald-steenblik on December 1, 2010 at 11:47 am

    Paul writes:

    Whatever else you may think of corn ethanol, at least that corn is NOT being used to make high fructose corn syrup to feed to kids – i’d rather run my car on it than have kids drinking it.

    As I have posted here before, that is a false dichotomy. Production of HFCS has largely been unaffected by ethanol production. (The increase in amount of corn used for ethanol has been an order of magnitude greater than the decline in corn used to produce HFCS.) A bigger effect has been the recession (reduces demand for expensive sweetened things) and the bad press that HFCS has received of late. 

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  87. By ronald-steenblik on December 1, 2010 at 12:25 pm

    Kit P wrote:

    Think of ethanol and other biofuels as a value added by-product of making animal feed. The protein value is not lost. It is value increasing, job and tax creating process.

    No, Kit, it is not. Calling ethanol a byproduct of making DDGS, for example, is turning the concept of value-adding on its head. An unsubsidized company does not take a product with a good market price, invest in capital, and spend lots of money on labor and energy, just to sell a product that fetches a lower price than the feedstock one started with.

     

    So, clearly DDGS is a byproduct of making ethanol, not the other way around. Is ethanol a value-adding product? Not as long as it requires a subsidy that is as large or larger than the value added it would generate in the absence of government intervention. In that case, any nominal value-added from the ethanol plant has to be adjusted for the reduction from value added due to higher prices paid by consumers and the taxation of value added in other industries in order to pay for the ethanol subsidy.

    If that were not the case, then the answer to any country’s economic woes would be for every economic activity to subsidize every other economic activity.

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  88. By paul-n on December 1, 2010 at 1:36 pm

    Meanwhile, the US senators are actually saying someting about the tax credit and import tariff.

    Story in todays NYT that 17 Senators, from both parties, have petitioned the Senate majority and minority leaders to let the VEETC expire, including this line which sounds like something RR wrote;

     

    “We cannot afford to pay industry for following the law,” the senators wrote

     

    The Renewable Fuels Association immediately issued a statement against this , which included this great line, on the subject of the tariff;

    In a time of budget concerns and tax debates, propping up industries in other nations that already enjoy the largesse of their native governments seems counterintuitive.”

    Of course, they argue for a continuation of the largesse of the American government, in this time of budget concerns and tax debates…

     

    {edit}  So the RFA has a problem, in principle, with America buying subsidised ethanol from other countries, but is very happy to export subsidised American ethanol to other countries.  No double standard there at all…   

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  89. By ronald-steenblik on December 1, 2010 at 3:40 pm

    I have been beating that drum since 2007.

    And the Global Subsidies Initiative has been beating that drum since 2006. Laugh To quote from “Biofuels–At What Cost?” (October, 2006), Section 2, page 57:

    The settings of current production-linked support—the per-gallon rates of subsidization—are highly arbitrary, and warrant re-examination. Overlapping programs may also carry a high cost for little benefit in terms of energy infrastructure. Production is subsidized at the federal level even though consumption of it is mandated through the RFS. Ethanol production is supported on the grounds that it helps wean the U.S. from imported petroleum, but special loopholes in vehicle efficiency standards for flexible fuel vehicles (including those that run on high ethanol blends) result in higher oil imports. The maintenance of a high tariff on imported ethanol (2.5 per cent plus 54¢/gallon), in particular, sits at odds with the professed policy of the U.S. government to encourage the substitution of gasoline by ethanol.

    Supporting policies are needed to achieve a more diversified response to energy-security needs. Simple tools such as properly integrating the security costs associated with energy imports from insecure areas into energy prices should be baseline conditions for energy security, allowing a variety of market responses rather than targeted subsidization of politically-chosen alternatives.

    Subsidies to liquid biofuels are being injected into an already distorted agricultural economy—one through which billions of dollars in support are channelled each year. The wider energy market in which biofuels are sold is itself distorted by subsidies and special tax breaks, and subject to considerable volatility. Opportunities for unintended consequences are plentiful.

    At last count (a year ago, the report had been downloaded more than 400,000 times.

    That said, I agree that RR’s blog (and his blog on Forbes) has been enormously influential.

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  90. By Kit P on December 1, 2010 at 6:34 pm

    “No, Kit, it is
    not.”

     

    Oh please Ron spare
    me your circular argument. It is what it is!

     

    “Not as long as it
    requires a subsidy ..”

     

    Do you mean
    incentives to build high capital cost production facilities to
    support the NATIONAL ENERGY POLICY? Tell me Ron, do you need to
    present business plan to a banker to get a loan to write a report?

     

    Again it sure looks
    to me like the corn ethanol did what was asked of it. Create
    productive jobs producing what America needs.

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  91. By ronald-steenblik on December 2, 2010 at 1:27 am

    Oh please Ron spare me your circular argument. It is what it is!

    My bad, Kit! Convinced by your clearly demonstrated superior understanding of economic theory, your barrage of unassailable empirical evidence, and the lucidity of your prose, I must recant.

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  92. By paul-n on December 2, 2010 at 4:14 am

    Of course, instead of complaining about the “blend wall” the ethanol industry could pull its finger out and develop some new markets, like Brazil is doing.  The city of Sao Paulo has just inked a deal with Scania for 200 new ethanol powered buses, first 50 to be delivered in May 2011 (buses to be built in Brazil).  

    http://www.scania.com/media/pr…..043en.aspx

    They have a longer term goal of replacing all 15,000(!) buses in Sao Paulo by 2018 – now that is what I call developing a new market!

    No word yet on when we’ll see a similar move in Des Moines, Iowa…

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  93. By Kit P on December 2, 2010 at 12:17 pm

    “No word yet on when we’ll see a similar move in Des Moines, Iowa”

     

    Paul would you like to think about this statement after having some sleep?  How many buses does an American city of a half a million have compared to a city of eleven million?  And Paul did you even bother to check to see what they are doing in Des Moines or any other city in areas that produce biofuels.  Last we checked those hicks in Iowa are leading in the production of biofuels and renewable energy electricity while the left coast white wine sipping, double non-fat latte slurping, left coast big city watermelon mayors (yes that includes BC) are issuing press release?

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  94. By rrapier on December 2, 2010 at 12:38 pm

    Kit P said:

    Again it sure looks to me like the corn ethanol did what was asked of it. Create productive jobs producing what America needs.


     

    And if we forced all Americans to buy a new car every three years, it would also create productive jobs. The question would be whether it is a net positive. What happens right now is money flows from across America, via mandate, into the Midwest. Of course the Midwest benefits. But you can’t say that the country as a whole does. You simply have no idea of the total cost to the rest of society. Corn prices are much higher than they were a few years ago; good for farmers, bad for people who buy corn.

    I continue to be amazed at your strong support of this Big Government mandate. Seems to be the sort of thing you would generally be against.

    RR

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  95. By Wendell Mercantile on December 2, 2010 at 12:49 pm

    Again it sure looks to me like the corn ethanol did what was asked of it. Create productive jobs producing what America needs.

    Kit P~

    No one ever asked that of corn ethanol. I know I’m beating a dead horse, but the sole reason for the push behind corn ethanol was to increase the market for corn as a commodity crop. That push came from Corn Belt state politicians, the lobbyists of the National Corn Growers Association, and Big Ag.

    It was only after the corn ethanol push started that they realized they could change their spin and started talking about creating American jobs and burning fuel grown in America.

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  96. By Wendell Mercantile on December 2, 2010 at 3:40 pm

    it is not quite that simple.

    Paul,

    Actually Paul, I realize that. I guess I needed a “tongue in cheek” emoticon.

    But my point is valid: What is good for the goose is good for the gander, and before the corn and ag lobbies started pushing for corn ethanol mandates for others, they should have first gotten their own houses in order and started using ethanol on their farms. I think they have been duplicitous by wanting everyone else to burn corn ethanol while not being willing to make any effort to do it themselves.

    Besides, a tractor or corn picker could run on a spark-ignition ethanol burning engine as well as using a compression ignition engine — it wouldn’t have to be something like the Scania technology.

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  97. By paul-n on December 2, 2010 at 2:16 pm

    Kit, since you asked, here is some info about the bus system in Des Moines;

    DART is already the largest public transit agency in Iowa, serving 19 cities in and around Polk County to varying degrees. Those include Ankeny, Altoona, Alleman, Bondurant, Carlisle, Clive, Des Moines, Elkhart, Granger, Grimes, Johnston, Mitchellville, Pleasant Hill, Polk City, Runnells, Sheldahl, Urbandale, Windsor Heights, West Des Moines.

    Their website does not say how many buses they have, but it does say they do 15,000 miles daily. So while they do not need 15,000 buses like Sao Paulo, they probably have 50-100 of them – enough for an order that any manufacturer would be happy to have.  

    15,000 miles/day, at about 3mpg for city buses is about 5000gal of diesel per day.  For ethanol buses, that would probably be 8000gal/day, or 2.9 million gal/yr.  Hmm, what local distillery wouldn;t want a contract to supply that?  Not only supporting locl jobs, but the $ 3.65m that currently leaves the Des Moines area for diesel fuel, will stay right there.  It would appear that they are buying some natural gas buses, which would be at least as expensive as the ethanol ones – why not go with a fleet that uses your own fuel?

    I care not for the wingnut mayors (Vancouver’s included) who try to foist their ridiculous dreams on their cities.  Iowa may indeed lead the country in producing renewable fuel, so what is wrong with then leading the country in showing how it can be used?   If the chardonnay set on the coast doesn’t like it, then don’t sell to them -let them pay for imported oil.

     

     

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  98. By Wendell Mercantile on December 2, 2010 at 2:37 pm

    Iowa may indeed lead the country in producing renewable fuel, so what is wrong with then leading the country in showing how it can be used?

    Paul,

    And that should of course include mandating Iowa’s corn farmers use only ag equipment that burns ethanol. The technology exists — compression engines can burn ethanol. Iowa’s state assembly should require their farmers have such engines in their tractors and corn pickers.

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  99. By paul-n on December 2, 2010 at 2:53 pm

    Wendell, it is not quite that simple.  Scania makes a limited range of the ethanol engines, but farm equipment has as many different engines, from as many different makers, as there are different pieces of equipment, so re-powering is not really an option.  Co fuelling, however, is an option, and a very good one at that, and can be done to almost any engine.  

    I am not sure about having yet another mandate – a co-operative effort to produce and install the co-fuelling kits would be the best way to go, in my opinion.

    But the city buses – ethanol all the way.  For the hundreds (thousands?) of school buses, co fuelling would be a good one – just develop one simple, standard kit and away you go.

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  100. By Kit P on December 2, 2010 at 4:29 pm

    Wendell you seem to think that putting the word ‘big’ and ‘lobbyists’ in sentence makes it a compelling argument but I am sorry it just make me think of those with ‘little’ vision who are only against how others do things.  It is not spin that corn ethanol creates taxpaying American jobs.  It does create jobs.   It is a really good thing, are you saying you like to put Americans out of work.  Do have a better plan Wendell?  How about more off shore drilling to create jobs in California, Florida, and Virginia?  I think that is great idea. That has just been banned again.  Is it the fault of the corn lobby? 

    I am for all of the above and against those who spend there time thinking of reasons to put other Americans out of jobs.  The Wendell of the America are winning at putting people out of work.    

    “You simply have no idea of the total cost to the rest of society.”

     

    Sure I do, the cost is insignificant.  It is so small I can not believe we are even debating it.  

    So let’s talk about the cost of cheap commodities.  The cost of electricity in the US has remained stable except where it is produced with natural gas.  The doubling NG electricity generation has lead to doubling the cost of NG since about 1990.  All those industrial jobs that depended on cheap NG are gone to China for good.  This has had a very significant affect on American society.  

     

    American farmers have led the world in producing cheap ag commodities.  A lot of credit is due to the very efficient use of energy to increase production.  As world demand for energy increases as India and China increase consumption, the cost of energy increased to produce those cheap ag commodities.  The only about 10% of the increase in corn prices is is due to corn ethanol.  Whatever the cost to society, ethanol is not causing it.   

     

    Finally, let’s talk about the people who drive $50k cars and live in 5000 square foot houses.  They were in debt up to their eyeballs.  When the bubble burst, they took a lot of people with them.  Sad but try not to blame the corn farmers for every thing.

     

    I have already stated that the cost of corn ethanol is insignificant but what are the benefits.  A certain amount of ethanol or other additive is needed for air quality.  The next 5% to get to E10 creates a few rural jobs and increases demand for the farmers’ cheap commodities.  In the context of American society, I do not think it is that significant either.  It is a start that should make OPEC think. 

     

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  101. By paul-n on December 2, 2010 at 4:47 pm

    Wendell, certainly they should be making more efforts to use their own fuel, and I think we will actually see more of that.   I wonder if the ethanol lobby hasn’t supported such projects because they are worried the lawmakers would point to such projects and say develop those instead of increasing mandates.

     

    The spark ignition engine wouldn’t work, unless the equipment was redesigned for it.  They have much lower torque at the diesel rpm’s, so you would need a bigger engine, which likely just won;t fit, or a speed reducing gearbox, which also likely won’t fit.  Either way, it gets real complicated real fast, and all that for a less efficient engine.    An irrigation engine might be a different story, but that should be electric anyway!

    The co fuelling approach gets 80% of the benefits for less than 20% of the cost – it is the only practical way for existing equipment.  And it can run on  hydrous ethanol, direct from the distillery, without the molecular sieve drying process.

    And it can be used with methanol too – two fuels for the one system!

     

    You can even get a ready made kit for your Jetta;

    http://www.snowperformance.net……php?pk=94

    Interesting dyno chart there – mid range torque goes from 278to 315 ft-lbs – I think you would notice that difference.

    http://www.snowperformance.net…..pdf-95.pdf

    Their review got a 3.7 mpg mileage increase, but I suspect the driving experience would be better than that number suggests.

    Probably not worth the cost unless you do a lot of driving – I know one sales rep in Calgary who drives a Jetta wagon all over the prairies – about 50,000 miles per year!   4mpg for him would save about $600 per year, and make passing those semis easier too.

     

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  102. By Wendell Mercantile on December 2, 2010 at 5:32 pm

    Do have a better plan Wendell?

    Kit P~

    Yes. We could put lots of people to work in Utah, Wyoming, and Montana turning all that coal into methanol and dimethyl ether.

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  103. By Kit P on December 2, 2010 at 6:24 pm

    “so what is wrong
    with then leading the country in showing how it can be used?”

     

    How about this
    sentence Paul?

     

    So what is wrong
    with (fill in the blank) leading the country country in showing how
    (fill in the balnk)?

     

    Here is the deal
    Paul. You inferred something about someplace in Brazil that I do not
    care about and you do not know anything about is doing something good
    based on a press release of someone selling a product. Then you
    infer that someplace I might care about but you still do not know
    anything about is not doing enough.

     

    So Paul if you were
    a young engineering in my presence I would slap you upside the head
    and tell you think like an engineer and not like a journalist.
    Ethanol buses might a great idea but you did not tell me why you
    think so. Then you attacked Iowa rather than present a case for why
    it would be good for an Iowa city.

     

    Just for the record,
    the 2005 Energy Bill had provisions for school buses and cities buses
    to cost share biofuels and CGN test programs. Also hybrid school
    buses. I have not followed those programs but often when someone ask
    why we are not doing something, the answer is we are. If you would
    like to follow up how those incentives are working I would be
    interested.

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  104. By Kit P on December 2, 2010 at 6:39 pm

    “Yes. We could put
    lots of people to work in Utah, Wyoming, and Montana turning all that
    coal into methanol and dimethyl ether.”

     

    Go for it Wendell,
    it is not renewable energy but there might be something 2005 Energy Bill to support such a program. Why
    not do a little research and tell me what you find out. I promise to
    not talk the ‘big’ coal lobby. If there was C10 (10% coal derived
    gasoline), I would buy it. My pickup would not be the first around
    where I live with a I love coal pumper sticker.

     

    I am a complacted guy, I can like more than one fuel.  I am sure E10 will not call me a cheater. 

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  105. By paul-n on December 2, 2010 at 7:30 pm

    Ethanol buses might a great idea but you did not tell me why you
    think so. Then you attacked Iowa rather than present a case for why
    it would be good for an Iowa city.

    Perhaps you missed the parts were I explained why it would be good for an Iowa city (or any other one in the cornbelt, for that matter).

    I said that instead of exporting excess ethanol, the ethanol industry could find new markets for it here.  Exporting ethanol does nothing to help energy independence.  The growers and distillers work hard to produce it, to help America’s oil independence, but what how does it help if it can;t be used here and the only alternative is to export it?   Using it for city buses, as Sao Paulo and Stockholm do, is an example of a new market.   There are currently no city buses running on ethanol in the US, but there are a lot of city buses, and it has been proven that buses can be run on ethanol – can you spot the market opportunity there?

    I said that any local distillery would be happy to have a contract to supply almost 3m gal/year to DART – that is local jobs for local people – generally a good idea.

    I said that the city would keep over $3m in the local economy instead of it leaving on imported fuel – also a good idea

    I said that if this is done, there are lots of other cities/towns in the cornbelt that could use ethanol buses – more jobs and more benefits to their local economies.

    Things I didn’t say, but are other reasons why this is a good idea;

    • They don;t have to buy the buses from that Swedish company – there are quite capable bus buiders right here.  I am sure they would take on the challenge of making ethanol powered buses if it meant they could sell more right in their local markets, then they would have an exportable product
    • Ethanol has proven, to date, to be the only biofuel that is economical to make – biodiesel, other than from waste cooking oil, is not cost effective.  So ethanol is scalable, and biodiesel is probably not, without massive subsidy.  So to develop new uses for the fuel that can be scaled, would seem to make more sense than developing new uses for the one that can;t.  

    The 2005 energy bill did indeed contain stuff for running buses on biofuels.  Ethanol is a biofuel, and the only successful one at that, so this idea is completely in line with the intent of that bill -so do you have a problem with that? And what development is being done today about biofuels in buses – none!

    The ethanol lobby has not even lifted a finger on using this biofuel in city buses, or heavy vehicles, or agricultural equipment, any of the myriad other uses for their fuel.   Instead, they are exporting ethanol, and have proposed a pipeline to the coast to make it easier to export.   

    I’m sorry if you don;t think finding local uses for locally produced fuel is a good idea.  I have not been to Iowa and readily admit I don;t know much about the place – but I’m willing to bet they would be happy to use local fuel, and support local industry, than use imported oil.  

    The Scania buses are a real world example – not an over hyped scam – of one way to achieve just that.  It creates a new market where the operators actually want to use ethanol (because it is advantageous to do so) instead of being mandated to use it – that is just what the ethanol industry needs to grow and succeed.

    Until they find ways for customers to want to use their product, they will only ever be able to sell what is mandated.  Develop new markets, and this is but one example, and they take control of their own destiny – how is that not a good idea?  

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  106. By Kit P on December 2, 2010 at 11:02 pm

    “The Scania buses
    are a real world example – not an over hyped scam – of one way to
    achieve just that.”

     

    Much better response
    Paul. If you were a fleet manager would you just buy some buses or
    would study the issue first?

     

    “The initiative
    has shown that ethanol-powered buses are ready to operate in Brazil,
    immediately helping to replace the use of fossil fuel with a
    renewable source and offering a tremendous advantage in emission
    reduction,” says Wilson Pereira.”

     

    So Paul do you think
    some ideas that have large capital cost should be studied carefully
    like they did in Brazil?

     

    “I’m sorry if you
    don;t think finding local uses for locally produced fuel is a good
    idea.”

     

    Did not say that it
    was a bad idea, said that Paul did a crappy job of supporting his
    position.

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  107. By paul-n on December 3, 2010 at 12:17 am

    Ok, I did not lay out all the arguments at the start – but you already know that I am in favour  of  finding new uses for ethanol where it is produced, 

    The thing that I really like about the ethanol bus is precisely that it is not a large capital item, and it is not an R&D project, is not infrastructure, does not involve flashy websites, etc etc.  - do some homework first of course, take a trip to Stockholm maybe, but if they really wanted, they could buy one bus, or even one engine, and start using it.  

    What really irks me is that there are not more efforts being made to make use of the one successful biofuel, that is the sort of innovation that energy bill was trying to encourage, and the biggest biofuel industry is doing hardly anything.  Meanwhile,  money is still being wasted on hydrogen fuel cell buses.  The US does not have monopoly on that – $5m was spent to set up and run three hydrogen buses in Whistler for the Winter Olympics, part of the problem of having Ballard fuel cells here, they get all the money and other companies with far more promising/useful projects have to wait in line.

    With a potential market of hundreds of thousands of buses in the US, that could run on ethanol, I would think this avenue is worth pursuing.  Even though they are also ideal candidates for CNG, I think they are good ones for ethanol.  And, in this case, with Scania having done the years of development to prove the concept, it is a low risk strategy even for a domestic engine mfr.

     

    I am not quite so sure about school buses.  Problem there is there are lots of them and they do relatively low mileage.  But transit buses that run all day long are a great energy/money saving opportunity. 

     

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  108. By Wendell Mercantile on December 3, 2010 at 12:26 am

    The ethanol lobby has not even lifted a finger on using this biofuel in city buses, or heavy vehicles, or agricultural equipment, any of the myriad other uses for their fuel.

    Excellent point Paul. If I ran an ethanol plant and had to pay dues to belong to one of the Big Ethanol alphabet groups, I would withhold those dues until our lobbyists and marketeers started working to expand the ethanol market through the simple steps you outlined — instead of whining to Congress about mandates, subsidies, blend walls, and an expiring VEETC.

    The ethanol industry has relied entirely too much on lobbying Congress and state assemblies instead of getting out their and expanding their market through aggressive marketing techniques and R&D. Why aren’t the Big Ethanol alphabet groups leading the way in using corn ethanol for mass transportation, and developing and providing after-market add-on kits to turn regular gas-burning cars into flex-fuel cars?

    I’d still love to see just a few Corn Belt farmers actually burning ethanol to run their farms, or as Paul suggested, the Cities of Omaha, Indianapolis, Des Moines, and Peoria running their buses and fire trucks on corn ethanol.

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  109. By paul-n on December 3, 2010 at 12:45 am

    If the VEETC expires, I wonder if the ethanol producers will start to question just what value their industry groups are creating?  The lobbyists have put all their eggs in the basket of VEETC, and if they lose that, then what?  They are left with a mandated volume, a stagnating E85 market and nothing else.  

    And, it is always possible a future government will repeal/scale back the RFS.  Any industry that purely relies on government policy for its existence and profitability is not a stable long term investment, as governments and policies change.  Make themselves independently viable, with varied markets,  and they will be more successful, attract more investment, and even enjoy the goodwill of their customers ( the general public) – all elements of a stable and successful business.

    Who wants to invest in an industry that says it will die at the stroke of pen?

     

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  110. By Kit P on December 3, 2010 at 8:17 am

    “What really irks
    me …”

     

    It seems to me Paul
    that you are more interested in being irked than actually following
    closely to see what is happening. One of the things that leads
    successful renewable energy projects is a low key approach. Trying
    to develop renewable energy in the PNW, I knew that Texas and Iowa
    were states removing the barriers and figure out how to do it best
    for their states. Watch closely fort a long time.

     

    “Meanwhile,  money
    is still being wasted on hydrogen fuel cell buses.”

     

    I watched that too
    and it is still going on in California and Connecticut. This is what
    I mean about watching closely. One of the public utilities I worked
    with had a well publicized fuel cell program. It quietly went away
    after they concluded they were not practical.

     

    Let me point out
    that many of the things you think are good ideas are in fact not very
    good ideas. Before you are critical of why people are not doing
    something maybe you should look for the reasons. Paul and I both
    think HFCV are a bad idea even though we may have thought it sounded
    great in the beginning. For every biogas projects that gets built
    using FC, two could have gotten built using ICE. Those with energy
    efficiency OCD do not see that they are not very efficient with
    capital and few good environmental projects get built.

     

    “I’d still love to
    see ..”

     

    Wendell is that
    because you have read press releases or actually done research to see
    if it is a good idea?

     

    They do lots of
    things lots of places. When they do things in California, BC and the
    EU; I would be a little skeptical. Furthermore, as I like to say,
    this ain’t Denmark.

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  111. By Wendell Mercantile on December 3, 2010 at 9:44 am

    Wendell is that because you have read press releases or actually done research to see if it is a good idea?

    Let me peel back the onion for you Kit.

    Running a corn farm on the corn ethanol they produce is a bad idea, because it’s not possible. That’s why I’d love the see the NCGA and the Big Ethanol alphabet groups try to do it — so they could find out just how bad the EROEI of corn ethanol is.

    If corn farmers and the ethanol industry had to run their operations on only the ethanol they produce, those operations would quickly grind to a stop.

    The ultimate test of any fuel production system is to connect the output pipe to the input pipe to see if it keeps running.

    Back in the day, the US Patent Office used to get thousands of patent applications for perpetual motion machines. Finally, the USPO told applicants they would no longer accept them unless they could first pass a simple test. That test was to connect the output to the input and see if the invention kept running. If it did, the USPO would be happy to issue a patent. So far, the USPO has patented no perpetual motion machines.

    While not a perpetual motion machine, corn ethanol production should have to pass a similar test. Show us you can run on the fuel you produce without needing fossil fuel inputs.

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  112. By Kit P on December 3, 2010 at 10:21 am

    “Let me peel back
    the onion for you Kit.”

     

    Wait for it!

     

    “Show us you can
    run on the fuel you produce without needing fossil fuel inputs.”

     

    Huh! Still waiting
    Wendel. No, Wendell that is not a requirement. We are trying to
    show that we can produce transportation fuel domestically. This is
    exactly what anti’s do. The keep making up new pseudo criteria to
    change the subject. Come on Wendell, show me the study that makes
    you think ethanol use on buses in Iowa is a good thing.

     

    There is an
    environmental engineer at a large ‘green’ mass transit authority that
    I ask question occasional. While he often provides a link, I do not
    need a reference to believe what he tells me. For example, he has
    told me why biodiesel and hydrogen programs have failed and the
    problems they are having CNG. The problems are more political than
    techincal. Some flake on the city council has a ‘good’ idea and
    promotes it without thinking it through. The first road block sinks
    the program.

     

    I do not think
    either Wendell or Paul has done enough homework. Wendell is an anti-
    and Paul is a supporter who is critical because they are no going
    going fast enough. Both are wrong!

     

     

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  113. By rrapier on December 3, 2010 at 1:29 pm

    Kit P said:

    It is not spin that corn ethanol creates taxpaying American jobs.  It does create jobs.   It is a really good thing, are you saying you like to put Americans out of work. 


     

    But the question is whether it creates net jobs. Money flows from across the country into the Midwest to create those jobs. The point was illustrated aptly a few years ago by someone who suggested that we mandate that everyone buys a new computer. It would definitely create jobs in the computer industry. But it would also take away money that people might use to spend on other things, potentially costing jobs in other sectors. So can you say that ethanol has not done that? No, you can’t.

    “You simply have no idea of the total cost to the rest of society.”

    Sure I do, the cost is insignificant.  It is so small I can not believe we are even debating it.  

    This is where you go on a long, rambling digression instead of answering the question. What are the costs? Corn prices have doubled; that price is reflected in everyone’s grocery budget. $6 billion tax dollars are being used to prop up the industry. So do the cost benefit analysis for me to show that the cost is “so small.” Just tell me what the overall impact on the nation’s grocery bill is. Don’t say “small”, quantify it and back it up. You say you have an idea; I am calling your bluff.

    RR

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  114. By Kit P on December 3, 2010 at 3:07 pm

    Insignificant, as in a very small number that can not be documented in the noise of other small factors.  Significant, as in a factor that is large enough to document like droughts and the general cost of energy.

     

    Since I do not eat field corn, I am not too concerned but RR you are making the claim.  It is for you to defend.  Back it up!

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  115. By Wendell Mercantile on December 3, 2010 at 3:22 pm

    Since I do not eat field corn

    Kit P~

    You don’t, or do you mean you don’t eat it directly? Practically everything* you eat has reformed field corn in it, and some things such as Doritos, Fritos, corn tortillas, and masa harina are made directly from field corn.

    Tell us what you’ve eaten so far today and let us evaluate whether you are eating some reformed version of field corn.
    _________
    * Pork, beef, and chicken; milk; eggs; and everything sweetened with HFCS from breakfast cereal, to pickles, to bread, to soda pop. There are few prepared foods to which a processor hasn’t added HFCS.

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  116. By rrapier on December 3, 2010 at 3:36 pm

    Kit P said:

    Insignificant, as in a very small number that can not be documented in the noise of other small factors.  Significant, as in a factor that is large enough to document like droughts and the general cost of energy.

     

    Since I do not eat field corn, I am not too concerned but RR you are making the claim.  It is for you to defend.  Back it up!


     

    So Kit can’t defend his claim. You say it is insignificant, but can’t actually put a number on it.

    We know that the cost to taxpayers on just the VEETC is $6 billion. That is significant. The CBO last year calculated that displacement of 1 gallon of gasoline by ethanol has a taxpayer cost of $1.78. That doesn’t include the cost of the ethanol, nor the inflationary impact on food prices. Pretty much every study out there indicates that there is some impact on food prices. (How can there not be; a doubling of corn prices is going to cause food inflation). Even if it is a very small percentage, it is a small percentage of an enormous number.

    So, yes, you are as wrong as you have ever been about anything.

    RR

     

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  117. By rrapier on December 3, 2010 at 3:52 pm

    Kit P said:

    Last we checked those hicks in Iowa are leading in the production of biofuels and renewable energy electricity while the left coast white wine sipping, double non-fat latte slurping, left coast big city watermelon mayors (yes that includes BC) are issuing press release?


     

    By the way, I just want to make the observation that you have proven yourself time and time again to be the biggest snob on this blog. Nobody here has ever talked about the people in Iowa the way you stereotype entire regions of the country.

    And by the way, the reason Iowans are leading the nation in biofuel production is that the rest of the nation is forced to buy it. Iowans don’t even proportionally use much of it themselves. But I think it’s funny the way you characterize that can-do attitude in the Midwest when the entire program is completely dependent upon government mandate — and even with that they cry for more subsidies. Can-do? Sure, as long as the government holds my hand.

    RR

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  118. By ronald-steenblik on December 3, 2010 at 3:58 pm

    Excellent, Robert!

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  119. By Kit P on December 3, 2010 at 5:57 pm

    “Doritos”

     

    Doritos are made with field corn?  I knew there was a reason I did not eat Doritos.  I have eaten oat flakes with raisins, dried apricots, banana, lots of coffee.  Fish & green beans last night, pinto beans tonight.  I know what you are getting at Wendell so it should be pretty easy to show ethanol is the cause of food prices going up significantly and not other factors.

     

    It has been a while since I paid someone to make coffee for me or fix my breakfast.  If you want to shove a bunch of processed crap in your face and complain the ethanol is making it expensive fine with me.   

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  120. By ronald-steenblik on December 3, 2010 at 9:02 pm

    Kit wrote:

    If you want to shove a bunch of processed crap in your face and complain the ethanol is making it expensive fine with me.

    A large part of the “processing” of field corn that takes place is the processing — through consumption, digestion and metabolization — of that grain into poultry meat, pigmeat, dairy products and even catfish.

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  121. By rrapier on December 3, 2010 at 9:26 pm

    Kit P said:

    It has been a while since I paid someone to make coffee for me or fix my breakfast.  If you want to shove a bunch of processed crap in your face and complain the ethanol is making it expensive fine with me.   


     

    The problem here is your ignorance. You think if you can downplay the impact on yourself, then everyone else is at fault if increasing corn prices impact their food budget. You make excuses. I would bet you eat bacon and eggs sometimes. I bet you drink milk. I bet you eat fish with corn meal on it. In fact, this corn growers site has a very long list of things that corn goes into it, and it isn’t just food. The site said that of 10,000 items in a grocery store, at least 2,500 use corn during production or processing.

    So if you want to close your eyes and ears and say “La La La, I can’t hear you” — then that’s your problem. If you want to deny that a doubling of corn prices has impacted people’s food budgets — and hits poor people the hardest — then you can live in denial. It impacts everyone, including school lunches. But to say that there has been little cost as a result of our ethanol policies is delusional. We have an annual food budget of more than a trilion dollars. It doesn’t take much of percentage increase due to corn to add up to big numbers. (Of course high energy costs played a big role as well, but it isn’t like we had a mandate behind that).

    The fact is as I said before: You don’t have a clue as to the total costs, and you don’t know whether there has been any net job creation. You are just talking out of your nether regions. Besides the $6 billion VEETC, there has been a stealth tax on all American in the form of incrementally higher food prices. That is what has fueled the job creation — transfer of wealth into the Midwest — often from those who can least afford it.

    RR

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  122. By Wendell Mercantile on December 3, 2010 at 11:35 pm

    I have eaten oat flakes with raisins, dried apricots, banana, lots of coffee.

    Kit P~

    Did you put milk on your oat flakes?

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  123. By rrapier on December 4, 2010 at 12:18 am

    Wendell Mercantile said:

    I have eaten oat flakes with raisins, dried apricots, banana, lots of coffee.

    Kit P~

    Did you put milk on your oat flakes?


     

    He wouldn’t admit it. He thinks if he can deny that this has any impact on himself, then there really is no impact. Very delusional, as if his world is the entire world.

    RR

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  124. By Kit P on December 4, 2010 at 11:08 am

    “Did you put milk
    on your oat flakes?”

     

    I did Wendell, about
    two ounces. What is that about 5cents? Add that to the 5 cents for coffee, and
    50 cents for the cereal and we have a significant chunk change. Of
    course significant is a relative term. Should we consider
    significant in the context of the whole.

     

    The good news is
    that we have just made flight arrangements for the bi-coastal kids to
    get home. That is a significant amount of money that put breakfast
    cost in the insignificant column.

     

    Se Wendell, are you
    going to provide me some data to support claims that ethanol is a
    significant part of the increase in food prices and that increase is
    a significant part of the family budget? You do not have to bother,
    while some think I am ignorant I have seen the data. It has been
    presented here and other places. One of the reason I do not think I
    am ignorant is because I actually listen to other people. It could
    be that the data has changed.

     

    I was once wrong
    about the amount of coal they use in China. I stated that China
    consumed about the same amount of coal as the US. It wasn’t that I
    was a little wrong but I was off by 100% in only five years. As it
    turns out that is a very significant change. What we are doing in
    the US with wind, solar, ethanol are all insignificant. This changed
    the paradigm for the cost of making electricity in the US because the
    world price of was now higher than what it US coal producers to get
    the coal to the world market.

     

    Debating the 0.5%
    and the 1% is more interesting than the 50%, 20%, 20%, and 10%.

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  125. By rrapier on December 4, 2010 at 11:21 am

    Kit P said:

    Se Wendell, are you going to provide me some data to support claims that ethanol is a significant part of the increase in food prices and that increase is a significant part of the family budget? You do not have to bother, while some think I am ignorant I have seen the data. It has been presented here and other places. One of the reason I do not think I am ignorant is because I actually listen to other people. It could be that the data has changed.


     

    If you have seen the data, present it. Define “significant.” You want others to present numbers, while you present meaningless responses like “insignificant.” I think you forget that we are talking about a national food budget of over a trillion dollars. It doesn’t have to be a large percentage to end up being a big number. One percent of a trillion dollars is ten billion dollars nationally.

    You asked for numbers; I have given them to you. Still no explanation for why you consider the $6 billion VEETC so small to be insignificant, and that is only part of the cost. You clearly have blinders on in this case; you are the person who won’t allow facts to get in the way of your preconceived conclusions. You have talked it up so much, you are exhibiting clear symptoms of denial.

    If you continue to speak in broad generalities and don’t address actual numbers, I will take that as a concession that you could not support your argument. Thus, the ethanol industry’s success can be directly attributed to generous subsidies and mandates that cost many billions of dollars, being transferred from all across the country into the Midwest. Can-do? Sure, if everyone is forced to give me money to do it. We could all have California wine in our cars if the government forced us to do it. Then we could talk about that “can-do” attitude of those latte-sippers you show such contempt for.

    RR

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  126. By Kit P on December 4, 2010 at 1:40 pm

    “If you have seen the data, present it.”

     

    RR you made the initial claim, it is your obligation to support your claim. I have defined the terms I used. It hard to prove a negative. Now I never said the ‘a national food budget’ was not a significant number, it is the effect of ethanol on the change on that number that I said was not significant.

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  127. By rrapier on December 4, 2010 at 2:44 pm

    Kit P said:

    “If you have seen the data, present it.”

     

    RR you made the initial claim, it is your obligation to support your claim. I have defined the terms I used. It hard to prove a negative. Now I never said the ‘a national food budget’ was not a significant number, it is the effect of ethanol on the change on that number that I said was not significant.


     

    Right. I emphasized a claim for which you have provided zero evidence to back up. You have claimed insignificant, but have given zero evidence other than your gut feel and anecdotes. You seem to agree that there is an impact; please quantify it or admit that “insignificant” is a WAG with no basis.

    Further, YOU made the initial claim that ethanol has done what was asked of it and created all of these jobs. My point — which you have not refuted — is that those jobs were created at a cost to the rest of society that you don’t know; thus whether any net jobs are created is debatable. Further, you claimed that you do have an idea of the costs; funny that you can’t actually seem to present any data.

    I have presented evidence. You have never addressed the $6 billion, redundant VEETC. That is significant. So the ball is in your court if you wish to claim insignificant. You already $6 billion in wasted taxpayer money to explain away before we even get into the impact on food prices.

    You are over your head. Quit digging.

    RR

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  128. By rrapier on December 4, 2010 at 5:31 pm

    Here are some of Kit’s California latte-sippers:

    Dairy industry’s woes pinned on ethanol subsidy

     

    Michael Marsh, chief executive officer of Western United Dairymen, a voluntary membership organization representing more than 60 percent of the milk produced in California, said the price dairymen are being paid for milk isn’t that bad. It’s the cost of feed that’s killing producers.

    “If our feed costs were at somewhere near normal levels, most of the producers would be cash-flowing today,” Marsh said.

    The cost of feed has exploded partly because of ethanol. The price of corn has gone up as it’s been used for fuel instead of feed.

    “Subsidizing ethanol raises the price of food for American citizens,” said Ray Veldhuis, a third-generation dairymen in Winton. “Those subsidies cost Americans about $6 billion a year. Let ethanol be sustainable by itself, and if it can’t, then let it go by the wayside.”

     

    These are dairy farmers; I am sure Kit knows more about the situation than they do. If these guys only lived in Iowa and produced ethanol instead of milk, they would earn Kit’s admiration instead of his contempt that they are Californians and his denial that our ethanol mandates that Kit is so proud of is causing hardship for others around the country.

    RR

     

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  129. By Wendell Mercantile on December 4, 2010 at 6:04 pm

    These are dairy farmers; I am sure Kit knows more about the situation than they do.

    Well, Kit does put milk on his oat flakes. Wink

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  130. By rrapier on December 4, 2010 at 6:09 pm

    Wendell Mercantile said:

    These are dairy farmers; I am sure Kit knows more about the situation than they do.

    Well, Kit does put milk on his oat flakes. Wink


     

    Yeah, but only a nickel’s worth, so there really isn’t any impact at all.

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