WASHINGTON – It may be no exaggeration to assert that the solution to the energy problems of this country could be in the hands of farmer cooperatives.
According to Eric Vaughn, president and chief operating officer of Renewable Fuels Association, the national trade association for the domestic ethanol industry, the ethanol industry is flourishing, and that growth is being driven from production plants created by farmer cooperatives.
Vaughn spoke to Ohio Farm Bureau leaders meeting in Washington last week on their annual trip to visit and talk with Ohio legislators.
Ethanol and other renewable energy sources and the effort to make them a part of the new national energy policy taking shape in the 107th Congress is one of the Farm Bureau’s legislative priorities for this Congress.
Built by farmers.
Vaughn asserted that it is farmers who are building the modern ethanol industry.
There are now 67 facilities across the country producing ethanol, he said, with additional plants scheduled to begin production this year.
The industry has a current production capacity of 2 billion gallons annually, and that capacity is expanding by about 30 percent this year.
Ninety percent of that development has been done through farmer cooperatives. More than 500,000 farmers are involved in the ownership of these facilities.
“They are cutting edge technology,” Vaughn stressed. “While the ADM ethanol facility on its best day never produced more than 2.5 gallons to the bushel, these new co-op facilities are regularly achieving 2.7 to 2.8 gallons.”
Now is a window of real opportunity for the ethanol industry to take its place in the national energy mix, Vaughn asserted.
The combination of the legislative initiative to develop a new national energy policy and the push to get rid of MTBE as a gasoline oxidant puts ethanol in a position to create a positive role for itself as clean burning, octane producing, domestic, and readily renewable energy supply.
The industry could triple in size in the next five years, he predicted.
“We are at the beginning of the process of debating a new national energy policy,” Vaughn said. “Can ethanol be part of the nation’s energy picture? It has the highest concentration of octane enhancer available.”
The country needs an energy policy, Vaughn said, because as everyone knows supplies are tight and prices are high.
“But it’s not just a numbers game,” he said. “It’s not how much oil we can get, but what condition it is in.”
Only refined oil is usable, and the production of domestic refineries is running at 95 percent of capacity, he said. There is no room for error anywhere.
The country isn’t increasing capacity because no one wants a new refinery in their town. So what happens, he said, if one of the refineries shuts down, or even has a reduction in capacity.
What the country needs is more supply. That supply, he suggested, already exists in ethanol, and the ability of the ethanol industry to grow is almost unlimited.
In many states, including Ohio, ethanol is already being utilized as an oxygenate blend, and now that MTBE, which is made from natural gas, is skyrocketing in price, the oil companies are pushing for ethanol themselves.
There is currently a bill in Congress to prohibit the use of MTBE and to promote the use of ethanol, another bill to prohibit the use of MTBE and to provide for remediation of water contamination it has caused, and another bill to modify regulations regarding the oxygen content of gasoline and improve the regulation of MTBE.
And finally there is the provision that would allow California, which has the worst MTBE contamination problems, to suspend federal regulations regarding reformulated gasoline.
Vaughn said he sees the debate as offering a choice of going back to nonoxygenated gas, thereby increasing the air pollution that reformulated gas was supposed to decrease, or allowing the use of ethanol as the oxygenator.
And while the use of ethanol as a replacement for MTBE would be a huge boost for the ethanol industry, he said the other quality that has huge potential for ethanol is its ability to boost octane.
While most cars don’t need high octane gas, he said, many drivers will pay the premium to get that little boost of power.
When asked about the South Point plant in southern Ohio that the Farm Bureau along with others had invested in establishing, Vaughn said that plant and three others of that era were badly designed, put in horrible locations, and never had sufficient development investment.
“The oil guys who were responsible never put enough money in it,” Vaughn said. “They let it fail.”
He said production at those plants cost about $3 a gallon. The latest facilities are producing ethanol at from $1 to $1.25 a gallon, depending on the kind of infrastructure required.