Rural resistance slows corn ethanol's dazzling growth

A broadening concern over corn ethanol's effect on food prices and environmental damage has seen excitement over the biofuel wither like a cornfield in September, with cancellation of at least two large plants proposed in Minnesota being the latest sign.    
 
And for the first time since corn ethanol's dazzling growth sprinkled billions of dollars and jobs – and fattened farmers' bank accounts – across rural Minnesota, a proposed facility near Eyota, Minn., has drawn opposition from local elected officials rather than the open-arms welcome that's greeted nearly all of the state's 18 plants.   
 
The nascent industry's favored-child status in the Legislature and state government through its 20 years of growth also seems on the wane. A telltale sign is the regulatory spunk shown recently by the Minnesota Pollution Control Agency (MPCA), which, up to now, has obligingly approved all plants with what critics say has been cursory review – even though the industry annually draws upwards of 5 billion gallons of water to process 735 million gallons of 200-proof ethanol for blending with gasoline.

"I'm not against ethanol, but this one is in the wrong place," said Mayor Wesley Bussell of Eyota, Minn., about 10 miles east of Rochester. He said many of the town's 1,822 residents are concerned about air emissions, odor, noise, nighttime lights and water-consumption issues.
 
"That plant would pump nearly 300 million gallons of water each year from the Jordan aquifer," Bussell said. "Our entire town only uses less than a tenth of that."      
 
Eyota asked MPCA for full-blown review
Bussell was referring to MinnErgy's planned 55-million gallon ethanol distillery, which would bring 35 jobs to Eyota. Its city council nonetheless voted 6-0 to ask the MPCA for a full-blown environmental impact statement (EIS) for the project. The Whitewater Watershed Board and the Olmsted County Board support the request, and determined opponents are organized enough to have their own letterhead and website.    
 
It's not just MinnErgy (which didn't return MinnPost phone calls) that's receiving closer environmental scrutiny. 
 
In March the MPCA surprised critics by ordering a full EIS for Agassiz Energy's 70 million gallon plant near Erskine in far northwestern Minnesota. No EIS has ever been prepared for an ethanol plant in the state. 
 
But rather than ask investors to wait 18 months and spend a half million dollars for the review, Agassiz withdrew the project (amid indications the company may reformulate its plans and re-apply for state permits).   
 
Poet Biorefining dropped expansion plans
In May, Poet Biorefining of Sioux Falls, S.D., decided to drop plans for a 65 million-gallon plant expansion at Glenville, Minn., near Albert Lea after the company said it tired of waiting for regulatory review to be completed. However, ethanol analysts say that the reason for the plant cancellation may have had more to do with corn economics. 

The MPCA's staff was to take the MinnErgy plan EIS issue to its Citizen Board on Sept. 25, but then abruptly announced a decision meeting would be delayed as staff pores through some 200 written comments (about evenly divided for and against building the plant in Eyota). Prodded by the board, MPCA Commissioner Brad Moore in January asked the state's Environmental Quality Board for a full assessment of water implications of the ethanol industry – a request that critics say is welcomed but years late. 
 
But there's more than increased regulatory interest that's causing headwinds to be felt by the industry.
 
One is the elevated price of corn that's causing some producers to see less return on their investment, especially for facilities still paying down debt. 
 
"Some got into the ethanol business to make a quick buck," said Ralph Groschen of the Minnesota Department of Agriculture. "But they didn't count on the rising price of their source product, corn." 
 
Farmer-owned co-ops dealing with rising costs
Groshen agrees with Don Arnosti of the Minneapolis-based Institute for Agriculture and Trade Policy, who said farmer-owned ethanol co-ops are best able to withstand the increasing cost of corn, because the farmers benefit both from ethanol production and rising corn prices. 
 
Bill Lee, who manages Chippewa Valley Ethanol of Benson, Minn., which is owned cooperatively by farmers, also agrees. He says that the industry developed too quickly and attracted too many critics who blame corn ethanol for driving up food and land prices, and drawing too much water for production. 
 
Perhaps the biggest complaint is corn ethanol's effect on food prices. While a growing list of analysts say prices and food shortages are an issue, it's something that State Rep. Al Juhnke, DFL-Willmar, says is overblown. 
 
Junhke said he expects that Minnesota plants will produce nearly a billion gallons of ethanol this year (that would be up from a reported 735 billion gallons last year), and that the industry otherwise is thriving.
 
Juhnke, an influential ethanol advocate who chairs the House Agriculture and Rural Economics Finance Division, said food costs and prices are mostly driven by oil prices and not by corn ethanol. He cited a recent Farm Foundation report  by Purdue University researchers that concludes the big effect on food pricing is the cost of fuel. 
 
"Like the oil companies, food companies are reaping big profits," Juhnke said, noting that items like pickles, broccoli, and potato chips are priced higher but are not produced from corn.   
 
World Bank differs
A recent World Bank report takes a different view. It said that "the most important factor" in worldwide food price increases "was the large increase in biofuels production in the U.S. and European Union." 
 
A year ago, a report in Foreign Affairs by University of Minnesota agriculture economists C. Ford Runge and Benjamin Senauer elevated the food-for-fuel debate by concluding that corn-ethanol production significantly aggravates world food supply and hunger. 
 
A report earlier this year by the Nature Conservancy said that clearing land for ethanol production is releasing more carbon linked to global warming than the oil it replaces. 
 
And land-clearing is exactly what is happening  in the United States as land prices soar because of rising crop prices. A report prepared for the U.S. Department of Agriculture said that rising land prices will mean that nearly 7 million acres of land nationally will be converted to crops from grassland, much of it prime wildlife habitat now in conservation reserve.
 
Despite its growing band of critics, it appears that corn ethanol will continue to grow. 
 
Subsidies remain in place
Federal and state corn-ethanol subsidies, along with growing numbers of states mandating minimum ethanol blends in gasoline (Minnesota's 10 percent mandate is expected to move to 20 percent) remain in place that will push ethanol production to higher levels and consume still more corn. One estimate is that at present growth rates, within 10 years up to a third of the nation's corn crop will go to ethanol production. 
 
In fact, the 2007 Energy Bill passed by Congress last December mandates increasing corn-ethanol production to 15 billion gallons annually by 2022 (it's currently at about 9 billion gallons nationally) while at the same time supporting the developing of cellulosic and other ethanol, for which technology hasn't been perfected to enable commercial production. 
 
Juhnke said today's corn-ethanol plants will become tomorrow's cellulosic-ethanol producers, relying on such nonfood sources as cornstalks, prairie and other grasses, and woody biomass (most from leftover branches and bark from timber production) to advance the effort to rely on homegrown fuel rather than risky foreign sources. 
 
Critics of corn ethanol tend to be strong supporters of ethanol produced by other sources referred to by Juhnke because, they say, the carbon generation is so much less – as is other environmental damage such as pesticides and herbicides used to grow corn.

Ron Way, a former reporter for several Midwest newspapers, covers the environment and energy issues. He can be reached at rway [at] minnpost [dot] com.