Is the ethanol subsidy on its last ear?

The subsidy for ethanol is set to expire this month — both SD senators are arguing for it’s extension.  The AL has a full story from it’s reporter with one of the coolest name ever – Cody Winchester.

The end of the subsidy would be pretty crushing to the ethanol industry.  I think it’s even hard to imagine the full impact here in the middle of ethanol country…..but it wouldn’t be good.

Relying on the gov’t is tricky thing at best (as Lewis and Clark Regional Water System)  If ethanol is to remain a viable renewable fuel, perhaps it’s new deal with NASCAR will be bigger boon to win further acceptance of the alternative than any gov’t subsidy….of course money in the pocket is better than a car in the pits.

54 Replies to “Is the ethanol subsidy on its last ear?”

  1. DDC

    Ethanol is not a viable fuel source. We’ve already wasted billions of dollars on it. It’s time to cut our losses, let the subsidies end.

  2. ip

    Yep, pure heptane.

    The spontaneous ignition of the beetle-killed pine in a 100-yard radius would be measured in megatons. Now consider that there are 70 million acres of collapsed pine forest in the United States alone.

    Turpentine distilled from the California pines such as Ponderosa Pine (Pinus ponderosa) and Gray Pine (Pinus sabiniana) yield a form of turpentine that is almost pure heptane. When producing chemical wood pulp from pines or other coniferous trees with the Kraft process, turpentine is collected as a byproduct. Often it is burned at the mill for energy production. The average yield of crude turpentine is 5?10 kg/t pulp.

    In 1946, Soichiro Honda used turpentine as a fuel for the first Honda motorcycles as gasoline was almost totally unavailable following World War II.

    The BP oil disaster in the Gulf of Mexico brought emergency to the abuse of Earth to make plastics while ecoterrorists Halliburton, Koch Industries, and Exxon Mobil reap record profits.

    This story aired recently on KCRW’s To the Point:

    “25% of the world now bans plastic bags, and Los Angeles County is one of a growing number of US communities getting on board. Will the limits of cloth bags like Grandma used to carry require thinking about what goes in them?”

    So, here’s the part that nobody wants to talk about publicly:

    For parts of the West this is as much a reduction in the threat of weaponized wildfire than an economic development opportunity. Harvesting timber is diesel fuel intensive. Just paying for pine removal after the collapse of the housing market has exacerbated the potential for catastrophic conflagrations.

    Keystone, Hot Springs, Custer, Pringle, Hill City, Rochford, Nemo, Silver City, Deadwood, Lead, Newcastle, even Rapid City, Piedmont, Sturgis and Spearfish are at extreme risk from the tactical use of wildfire.

    Just six strategically-placed improvised fuel air explosives (FAEs) deployed during red-flag conditions have the potential to create a firestorm that would be virtually unstoppable. Repeated discussions with the Forest Service, law enforcement, fire department officials, even the Rapid City Journal, elicit smirks and suspicion from their representatives.

    Explosive, heptane-rich ponderosa pine infests Black Hills and Rocky Mountain forests historically populated by aspen, chokecherry, and hazelnut.

  3. duggersd

    Steve, oookaaaay? DDC looked correct. I do not read ip so I would not know if that is where this is coming from.
    As for the subsidy, if we cannot get rid of the subsidy right now, can we at least get rid of the tariff? How can Brazil produce ethanol at a profit and we cannot? Do they have a subsidy? If so, I would think their government would not allow it to be exported.

  4. Kristi Golden

    Thank you Steve for the grammatical edit. I’d say that generally I don’t make that mistake — but clearly you caught me.

  5. DDC

    That last one was for your 12:48 coment.

    Thune is all for ethanol subsidies. He’s one of their biggest supporters. I don’t see why it would be a problem for him campaigning in Iowa at all.

    I don’t see him getting the nod anyways.

  6. Arrowhead

    Can someone explain to me the difference in supporting subsidies for ethanol but not supporting the bailout of our auto industry companies like GM and Chrysler?

    Maybe they both require government money to stay afloat? Maybe neither are acceptable alternatives to gasoline or Ford?

  7. insomniac

    This is really where the $3million in farm subsidies will hurt Kristi Noem. She needs to either be fiscally conservative and say no to government money on subsidies and set realistic timetables to wean these companies away or just admit that money for SD and the pet projects that she approves of are fine.

    But then she can’t complain about bailouts and subsidies to others around the country because in the end aren’t all Reps and Senators just looking out for what is best for their constituents?

    Start looking out for our country and not just the state!

  8. DDC

    Ethanol as a vehicle fuel exists solely because the government subsidizes its production and mandates its usage.

    Car companies would exist regardless, because people need to get from point A to point B. If GM & Chrysler would have gone completely under, other car companies would have bought out many of their assets and filled the void that was created. That likely would have happened to Chrysler, while GM probably would have simply gone through bankruptcy and cut a lot of dead weight.

    In other words, without government subsidies the ethanol fuel industry would all but disappear since it only exists due to government policies. We’d still have cars if the government didn’t give GM & Chrysler a huge wad of our money.

  9. Arrowhead

    DDC,

    Exactly! but the government creates unfair playing fields.

    It picks winners and losers. In this case it picks larger farmers and corporations and allows them to bennefit from a product that doesn’t work. Where their smaller neighbors struggle to keep the family farm because you can’t compete with an unfair advantage.

    If the Government had stayed more involved with GM and Chrysler and started subsidising electric or hybrid cars and didn’t give Ford the same subsidy but required them to put out an equivalent product the company wouldn’t be able to survive because the government subsidized vehicle would be much less expensive on the actual market. Just like ethanol is not really competitive with gasoline.

  10. DDC

    Comment by Anonymous on December 6, 2010 @ 1:21 pm

    What is the difference between this and the auto industry bailouts?

    I’m not sure exactly what the question is or where it is directed, but I’ll give you my answer. There is no difference. Both bad ideas and a waste of taxpayer money.

  11. Anonymous

    I just want to make sure John Thune and Kristi Noem realize there isn’t a difference for their pet projects and other Representatives and Senators.

    If they are in favor of cutting spending in other peoples backyards they need to cut in theirs.

  12. mushroom

    John Thune is not electable as President if he supports this stuff.

    It is HYPOCRITICAL!!!!!!!!!!!!!!!!

  13. Anonymous

    by the way I loved the title. last “ear”. hillarious!

    I hope the subsidy goes away but i’m sure it won’t. Because JT isn’t ready to say no to his bacon.

  14. The Dude

    I wish Thune would not vote to extend the bill.

    I would be ok with extending it for a short 3-5 years so they were given warning that the money would dry up but I don’t think it should be subsidized indefinitely.

  15. Dave R

    I’m with DDC.

    Subsidies are not only economically irrational, but morallyy wrong by coercively taking from one group of people to enrich another group.

    Now is the best time to end ethanol subsidies – if you need a time to stop doing the Wrong Thing. Corn prices are high and in an inflationary economy those that produce commodities are economically advantaged.

  16. Anonymous

    Dave R:

    And why do you think corn and other grain prices are high? You sink ethanol, you sink crop prices.

    We do get something back in terms of ethanol costing less at the pump but if you took all the subsidy away, it would skyrocket and become unaffordable. I don’t begrudge the subsidy to get the industry going because it was such a small industry it would probably have never gotten off the ground to become a viable alternative to fossil fuels. The use of corn was phase one and we are moving closer to using next to anything (think Back to the Future) on a large scale basis on top of making the production more efficient.

    To be fair though, fossil fuels enjoy many more tax benefits than ethanol:
    Total subsidies received by the oil industry, not just exclusive subsidies, range between $133.2 billion and $280.8 billion annually. It’s a wide range, but a necessary one as many of the studies we looked at are made up of ranges themselves. Also, few if any, recent studies have been completed on many of the support areas we counted.

    The comparative total support level for ethanol, not just exclusive subsidies, is at least $16 billion. The final number for ethanol is likely higher, due to the hundreds of state and local subsidies this young industry receives

    The real question is there a future of self-sufficiency in the ethanol industry or even wind power for that matter or are we just going to say that we will be beholden to fossil fuels until the private sector magically creates a better solution that won’t cost taxpayers any money. My take is we continue to support ethanol and see where technology takes us.

    There is much hypocrisy as deficit hawks like Coburn (oil/farm) and Thune (farm) will be quick to defend subsidies for their respective states’ industries.

  17. Anonymous

    It’s one thing to allow tax cut incentives to big oil and another to give subsidies to ethanol.

    I’m not in favor of giving anyone subsidies. I don’t mind encouraging businesses to start but eventually they need to be cut lose. Look at farmers for example. They have been subsidized since FDR.

  18. Anonymous

    This is Kristi’s chance to lead a charge against Government spending. I’d like to know what her position is. She is a farmer, she has taken subsidies but does she think that they need to continue indefinitley or does she want to put a stop to them so that farmers can practice the free market philosophy she preaches.

    I would really like to hear Kristi’s stance. I just hope it isn’t the same as John Thune’s I’d like her to become her own person in DC and not just a John Thune yes person.

  19. DDC

    @2:42

    I’m curious as to where you got your oil subsidy numbers from?

    Regardless, if every single ear of corn was used for ethanol, it would only reduce gasoline consumption in the US by 12%. Please explain to me how you can make that work?

    If all of the billions we blew on ethanol had been put into coming up with more fuel efficient vehicles, we’d save more than that. We’re throwing money at a solution that cannot fix the problem.

  20. Duh

    As Anon 6:02 above infers, people need to realize that ethanol subsidies promote R & D. Granted it is a small industry and may go the way of the DODO if the subsidies were to cease.

    However, where would we be in the future if we quell any type of research? Currently, they are researching and developing cellulistic ethanol, i.e. using any vegetation to convert to fuel. If they take Ethanol away, then everyone here will bitch in unison about the high cost of gas and that there aren’t any viable alternatives. What are each of your respective costs to fund the subsidies? Negligible at best. What do you save buy filling up with Ethanol-based fuels? $3, $10, $80 per fill?

    Getting rid of Ethanol subsidies is a mere drop in the bucket when you look at the overall budget. OPEC would love to see Ethanol fail. Why would you?

  21. DDC

    Duh,

    When you’re researching the wrong things it hurts you in the long run. Think of it like a murder case. Some detective is convinced that a certain person must have done it and spends the department’s entire budget investigating that person. After he blows all the money, they find out that person was on cruise in the Bahamas when the murder took place and couldn’t have done it. Now they have no suspect and no money to solve the murder, investigate any other crimes, process rape kits or run patrols on the street.

    Everyone loses when money is spent on something that everyone knows can’t work. The numbers don’t work and we’ve wasted a ton of money to learn how to make Everclear on a massive scale.

  22. duggersd

    Ethanol blended gas is cheaper because it gets a subsidy. So someone is paying the difference.
    OPEC does not care if ethanol fails. Unless there is a major improvement in the energy derived from a gallon of ethanol and a major cut in the costs, it will never replace fossil fuels.
    I believe there are studies that show how much energy is used to make one gallon of ethanol. It is not pretty.
    POET is a major player in ethanol. They are large enough they should be able to do all of the R & D necessary to make the technological advances. They certainly should not need a subsidy.
    That drop in the bucket is a drop in the bucket. The beginning of the longest journey begins with the first step.

  23. BurningBrule

    What a boondoggle is/has been ethanol. Pure pork politics at its worst. And BOTH Republicans and Democrats had a hand in this. Heck, Grassley has built his politcal career on this stupendous boondoggle.

    Here is the inestimbable PJ O’Rourke on our Farm Policy:

    “U.S. farm policy is, along with North Korea and the Stanford liberal arts faculty, is one of the world’s last outposts of anti-free-market dogmatism.”

  24. ip

    Burning diesel fuel to make ethanol even sounds like South Dakota: ?If an uncontested re-election doesn?t give John Thune the political courage to say no to BP and the ethanol robber barons, then he has no business getting near the White House when the successor to Obama needs to stop trillions in red ink.?

  25. The Truth

    If you buy gas, whether it’s E10 or not, you (the consumer) are receiving the benefit of the tax credit.

    Just like the income, estate, small business or child tax credit, take away a credit and you raise taxes.

    This whole issue gets bogged down in BS.

  26. ip

    South Dakota is already a chemical toilet. Court this technology and put a plant in Huron; they’ve always wanted to be the railroad hub. Divert yearly flood water from the James for process media.

  27. DDC

    So, take my money away from me, filter it through a bureaucracy, let the well-connected ethanol producers take their cut (so the Broin brothers can have a “who can build the biggest mansion in Sioux Falls” contest) and I should be thankful for it?

    Yeah, OK.

  28. The Truth

    DDC,
    Help me understand how not paying a higher tax on fuel or anything else is somehow taking money from you?

    Let me get this right. Raising a tax, somehow puts money in your pocket? Help me understand that math, or better yet, your version of how tax credits work.

    This argument is getting dumber all the time.

  29. Dave R

    Anon 2:42

    Wind energy is just as dumb as ethanol. Its more than twice as expensive as nuclear energy, its unreliable, unsightly, destructive to the environment and noisy.

    Both ethanol and wind programs exist only to transfer money from the taxpayer and consumer to the pockets of the politically connected. Its wrong.

  30. anon

    Why on earth haven’t we just said we are going to take the ethanol money and build a few Nuke power plants? We would have a ton of energy.

  31. Voter

    Poet has come out against the subsidies because they don’t benefit from them. The OIL and GAS companies get the subsidies for mixing their product with the ethanol.
    Poet would like to see any government help go to stations that would like to put in blender pumps and buy their ethanol directly from the producer–instead of through the oil and gas companies.
    Once the corn is at the plant the natural gas used to make ethanol is minimal and it uses 75% less water per gallon than it takes to refine oil into gasoline.
    Does it take petroleum products to produce the corn? Yes. Would those products be used to produce corn or soy beans anyway? Yes.

  32. Anonymous

    The sad thing and hard thing for me to say is if John Thune was from Michigan he would have wanted a Government bailout for the auto industry too.

  33. DDC

    Comment by The Truth on December 6, 2010 @ 9:21 pm

    DDC,
    Help me understand how not paying a higher tax on fuel or anything else is somehow taking money from you?

    Let me get this right. Raising a tax, somehow puts money in your pocket? Help me understand that math, or better yet, your version of how tax credits work.

    This argument is getting dumber all the time.

    I was referring to all of the subsidies that the ethanol industry receives, but I’ll be happy to explain this to you.

    The “tax credit” isn’t a tax credit as we understand it to be. You and I don’t get any money back when we pump our gas. The producers get the money so they can in turn conceivably offer a lower price for their product at the pump. This is on top of all the other subsidies and tax incentives that the ethanol industry directly and indirectly receives.

    The blender of the fuel gets a “tax credit” of $.45 for every gallon of ethanol that they blend with gasoline. That $.45 is sent to them quarterly and is taken directly out of the General Fund of the United States Treasury.

    When the government sends the blender that $.45, we need to come up with $.45 more to fund government. They get that $.45 through taxes (either current or future).

    So, to “save” me $.045 on a gallon of e-10, they have to take it from me through taxation. A problem with this is that the government is very inefficient (and is borrowing the money, paying interest on it), so that $.045 ends up costing about double by the time it shows up as “savings” at the pump.

  34. DDC

    Comment by Anonymous on December 7, 2010 @ 1:08 am

    Does it take petroleum products to produce the corn? Yes. Would those products be used to produce corn or soy beans anyway? Yes.

    That’s assuming we’d be producing as much corn and soybeans as we are without ethanol subsidies. We wouldn’t be. We also wouldn’t be pumping as many chemicals into our environment without the subsidies. We also might be using the land for more productive things. It also ignores all the extra fuel used to get the corn in ground, to the ethanol plant and to the blender.

    Ethanol does not gain us any energy savings. It is a waste of money.

  35. Duh

    “Comment by Anonymous on December 7, 2010 @ 1:08 am
    The sad thing and hard thing for me to say is if John Thune was from Michigan he would have wanted a Government bailout for the auto industry too.

    You have no basis to make that statement so don’t make an issue out of something that doesn’t exist.

  36. DDC

    Comment by ip on December 7, 2010 @ 11:05 am

    How should current cropland be reassigned, Derek?

    It doesn’t need to be “reassigned”. Let the marketplace decide what to produce with reasonable environmental regulation.

    No single person (or organization)is smart enough to know what the best collective use of all land is. Individual landowners/producers are in the best position to make decisions on what to do.

  37. DDC

    “Comment by ip on December 7, 2010 @ 11:51 am

    Amazing that you and ip might agree on something, Derek. If you had 5,000A. to plant in the Spring, what would you put in?

    You and I actually agree (to a degree) on more than either of us would like to admit. 🙂

    I have no idea what I’d plant for the most part, but I would put in a lot of trees and restore grass waterways.

    And, make a comment on this? From Jeremy Scahill at the Nation:

    ?One of the most incendiary details in the documents is that Blackwater, through Total Intelligence, sought to become the ?intel arm? of Monsanto, offering to provide operatives to infiltrate activist groups organizing against the multinational biotech firm.?

    Blackwater & Monsanto are great examples of why we need strict limits to the government’s power.

  38. The Truth

    DDC,
    Thanks. If ethanol gets a .45 per gallon tax break/credit/discount then E10 (10% ethanol / 90% gas) would only have a .045 tax rebate.

    Regardless, if somebody is getting charged less, whether that’s the retailer, producer, oily or whatever – if that .045 goes away, as in the tax goes up… It’ll come out of somebody’s pocket. Trickle down theory tells me that’s the consumer.

    I’ll stay “for” all the tax cuts.

  39. DDC

    Yeah, that’s exactly what I said on E-10. Not sure if you’re agreeing with me or trying to correct me while agreeing with me?

    It already comes out of your pocket. You’re just getting tricked into thinking you’re not getting screwed. Why not end the “tax credit” and keep that money in your pocket to begin with?

  40. The Truth

    You make a great argument for all of the tax cuts to expire. I just disagree with your rationale.

    If the government is collecting X from income, fuel or sales and the government puts X+2 into the treasury to make up for it, that just means the government is spending money it never had in the first place.

  41. DDC

    Comment by The Truth on December 8, 2010 @ 7:09 am

    You make a great argument for all of the tax cuts to expire. I just disagree with your rationale.

    Nope, but nice try to twist my words. The ethanol “tax credit” isn’t a tax cut. It’s a wealth transfer. The government is paying people to blend ethanol with gasoline. It’s also market distortion to create a demand that doesn’t really exist.

    Ethanol receives subsidies that total between $1-1.50 per gallon. Where do you think that money comes from?


    If the government is collecting X from income, fuel or sales and the government puts X+2 into the treasury to make up for it, that just means the government is spending money it never had in the first place.

    I have no idea what your little equation means, but you’re right that the government is spending money that it doesn’t have. That’s why they should quit sending money to people for blending ethanol with gasoline. Even if we weren’t spending money that we don’t have, it would still be a bad idea to take tax revenue and send it to those same people.

  42. "The point is ladies and gentlemen that greed, for lack of a better word, is good." Gordon Gekko

    Monsanto is a corrupt and greedy corporation and I would like to see them go under.