Part 2: Despite its hype as a green fuel, corn-based ethanol is dirty business from the farm all the way to the exhaust pipe.

Ethanol Pushers 

Part 2: Despite its hype as a green fuel, corn-based ethanol is dirty business from the farm all the way to the exhaust pipe.

Last week, the Pitch visited Garnett, Kansas, a town where residents had chipped in to build a $46 million plant that cooks corn into ethanol. They believed that the plant would provide jobs that would keep Garnett's young people from moving away, that it would promote business and provide farmers with financial stability. But Garnett has seen little benefit from the plant. Corn prices are still low, the plant has produced few jobs and shops in the town square still sit empty.

A gray sky hangs over a soybean field framed by the weathered metal of empty storage bins. A humid breeze threatens more unwanted August rain that could stall the harvest after a too-hot, too-dry growing season. Some of the corn crop is down after last night's storm.

But Gene Millard is smiling.

"This goes back a ways," he says, surveying his farm.

In 1905, Millard's grandparents bought the first acres of this land near tiny Osborn, Missouri. Now a grandfather himself, Millard grew up here in a house that got so cold in the winter, he could scrape frost off the walls.

"Right where these beans are, that was a military training field," he says. "When I was a little kid, I'd watch these B-51s land right back here until the Second World War was over and the land went back to the farm. But there was a house here and a barn and all that. So this has some emotional attachment."

Millard had begun a broadcasting career on rural AM radio stations when he took over the land in 1966 as a third-generation farmer. His 1,200-acre operation has been passed down through the same family for more than 100 years. Millard has reason to be proud of his family's accomplishment, because it's rarely been easy.

The farm started as a livestock operation, but the family didn't have enough money to stay in the hog business when the industry started moving to high-volume corporate farms in the late 1970s.

Then the farm crisis of the 1980s hit, and the rural economy collapsed.

"People were losing their farms, losing their homes, losing their self-respect," Millard says. "It was just a pandemic of travesty, disasters. Land values deflated, everything of asset value deflated."

The worst of the crisis passed, but prices for Millard's crops continued to decline. In the mid-'90s, while he managed two radio stations to supplement his income, Millard started working with other farmers to find a way to make their land profitable.

"We were on what I call the bleeding edge," he says. "The proposal was that we, as producers, have to start taking some strong initiatives to invest in a future if we're going to stay on our farms."

On this late summer afternoon, Millard looks like a man who isn't going anywhere. When Millard's son Brian came home complaining about his teaching job, Millard was able to hire him as a business partner, paying Brian the same salary he had made in a classroom. In 2006, Millard says, they'll enjoy more return from their corn than he's seen in years.

The reason: a new brand of moonshine that has Americans drunk with optimism about the country's energy future.

Millard is the chairman of Missouri's first ethanol production plant. Golden Triangle Energy is a modest complex in Craig, Missouri, that turns bushels of corn into gallons of vehicle fuel. He wears a black ball cap emblazoned with Golden Triangle's icon.

Guys like Millard joined hundreds of federal bureaucrats, smartly dressed businessmen and jeans-wearing farmers at the American Coalition for Ethanol conference at the Hyatt Regency Crown Center last month. There, they heard Kansas Gov. Kathleen Sebelius, Missouri Gov. Matt Blunt and scores of energy experts herald a new fuel economy that will bring prosperity to rural America and break the country's dangerous and dirty addiction to foreign oil.

In one speech, Jason Grumet, director of the National Commission on Energy Policy, made a stunning proclamation about ethanol.

"This is truly about the possibility of changing the world, about ensuring the homeland here, improving our economy, eliminating global poverty and actually challenging the petroleum oligarchs so that we can spread this global freedom and democracy around the world," he said.

It's been a good year for ethanol, starting with George W. Bush's State of the Union speech, in which the president lamented America's dependence on foreign oil and proposed ethanol as a way to "change how we power our automobiles." State and federal mandates already in place ensure that ethanol-gasoline blends increased their presence at gas pumps across the country.

Riding the dirt roads that crisscross Millard's farm, it's easy to believe that fuel distilled from corn still shimmering with last night's rain might really help lower gas prices, clean the environment and end our self-destructive reliance on the Middle East.

Too bad it isn't true. lambering back into his pickup after dumping two inches of water out of his rain gauge, Millard distills in one sentence what his 400 acres of corn mean to the rest of America.

"We deliver enough corn for a gazillion bags of Cheetos," he says, half-joking.

There's just one problem: Though his crop sustains countless snack-happy Americans (and farmers like him feed millions of cows), it can't deliver enough profit to feed his family.

In recent years, the price for finished corn products — soft drinks, chips and breakfast cereals — has gone up. But the price for corn itself has gone down. Millard remembers that in 1972, he was getting $3 a bushel. The price slid closer to $2 in the 1980s. Recently, he says, it dipped as low as "$1.70-something."

He needs $3 a bushel. "So if the market will only give us two," he says, "we've got to have a dollar someplace else."

That's where the rest of us start picking up the tab.

Taxpayers have subsidized corn production since 1973, when the United States government started doling out direct payments to farmers. Between 1995 and 2004, corn farmers in Kansas and Missouri banked more than $2.6 billion in federal aid. Paying farmers to keep growing has resulted in an overabundance of corn that even the world's most obese nation doesn't have the appetite to consume.

What to do with all that excess?

Politicians came up with a timely solution while the country was reeling from the energy crisis of the 1970s: spin cornstarch into engine fuel, and we could drive off into the sunset of energy independence. The government has subsidized ethanol production ever since.

Late last year, the federal government passed a law requiring 7.5 billion gallons of renewable fuels to enter the nation's fuel supply by 2012 — a goal that would barely replace 5 percent of the 140 billion gallons of gas Americans will burn this year.

Congress congratulated itself for passing the supposedly landmark legislation, but grain-belt politicians and the powerful agribusiness lobby had been pushing corn-based fuel for decades. Crowned "Senator Ethanol" by his own press office, Kansas Sen. Bob Dole stirred up federal enthusiasm for ethanol subsidies starting in the late 1970s. Also pushing for corn-fuel incentives, Archer Daniels Midland — one of the largest agriculture corporations in the world, dominating the purchase, transportation, processing and distribution of corn- and soybean-based ingredients in the United States and abroad — put sizable financial muscle behind the effort.

ADM is the country's leading refiner of ethanol. This year, it is expected to produce approximately 1 billion gallons (more than that of the next five highest producers combined). Since 2000, ADM has contributed $3 million to federal legislators. In the past decade, it's sent checks to Missouri's U.S. Sens. Kit Bond (totaling $9,000) and Jim Talent ($11,000) as well as Kansas Sens. Sam Brownback ($5,000) and Pat Roberts ($7,500), all Republicans.

The link between ethanol interests and politicians on both sides of the aisle is only growing stronger. In one of the most closely watched Senate races in the country, Democrat Claire McCaskill and Republican Jim Talent have both touted their fondness for ethanol — and their support for hefty public subsidies — in their tours through rural Missouri.

Such bipartisan gushing has driven the production boom. As Ashley McCarty, policy director for the Missouri Corn Growers Association, points out, "Government programs have been absolutely crucial in helping the ethanol industry find solid ground."

That's because the subsidies don't end with the mountain of grain.

Government subsidies have also translated into billions of dollars for ethanol manufacturers.

For nearly 25 years, manufacturers took advantage of a hearty tax exemption of 52 cents for every gallon of ethanol they produced. The tax break cost the federal government somewhere between $7.5 to $11 billion between 1979 and 2000, according to the General Accounting Office. The feds knocked the credit down to 51 cents per gallon in 2004.

An additional tax credit of 10 cents a gallon goes to plants that cook up fewer than 60 million gallons a year — such as all of the operational plants in Missouri and Kansas.

Also pouring out of federal coffers this year: $85 million in loans and grants that will aid new ethanol ventures, thanks to the Energy Policy Act.

But Millard says those federal subsidies are small beans. "What really helped get this industry off the ground was some very, very positive leadership from the state," he says.

In 1999, Missouri began granting ethanol plant investors a tax credit of up to $15,000 or 50 percent of their investment in a new plant. That program has shelled out approximately $10.5 million since its inception, according to the Missouri Department of Agriculture.

Once a plant is up and running, the public money keeps flowing. Since 1988, when Kansas started a fund to support ethanol plants, the Sunflower State has doled out nearly $53 million in incentives for approximately 650 million gallons of fuel production. Since Missouri began a similar program in 2000, the state has contributed $32 million to the three plants operating in the Show-Me State.

It takes more public money to get the corn fuel into gas tanks. Though blends of 10-percent ethanol are compatible with current pumps, higher blends — such as the hyped 85-percent-ethanol fuel known as E85 — require special storage tanks and on-site piping that mean $10,000 to as much as $30,000 in retrofitting costs for a typical station, according to the U.S. Department of Energy. Less than 1 percent of the nation's nearly 175,000 fuel retailers now sell E85 (57 are in Missouri, 13 in Kansas). Federal and state governments are willing to help foot the bill to change that, though — between Uncle Sam and the state, Kansas E85 retailers get up to 70 percent of that cost reimbursed.

Tax breaks eventually make their way to consumers — but only those who are willing to take their own ethanol trip. Kansas residents and companies that buy flex-fuel vehicles designed to run on gas or E85 — and show proof that they've pumped 500 gallons of E85 into their tanks — can get a sizable credit from the state. From 2001 through the latest numbers from 2005, the program credited ethanol consumers more than $240,000 in state cash.

On the other side of the state line, a much-publicized 10-percent mandate will make all Missourians ethanol consumers. In 2008, when all gasoline sold in the state will contain 10 percent ethanol, Missouri will become the third state in the country with a captive commercial market for the 10-percent blend.

Of course, the oil industry lines its bulging pockets with government handouts, too. Ethanol subsidies pale in comparison with the staggering amount of taxpayer money that's pumped into petroleum resources.

But if we're really trying to break our addiction to oil, it would make more sense to invest in something that's really a cure.

At least ethanol is better for the environment. That's the message politicians and the agriculture lobby hope will hook consumers.

But major environmental groups aren't buying the green-fuel hype.

"The 'green fuels' idea comes from corporations like ADM, for example, really green-washing their image, and the politicians from the farm states," says Bill Griffith, chairman of the Kansas Sierra Club. "The environmental community knows corn-based ethanol is a dead end."

The biggest problem is the fertilizer.

On average, farmers put down 140 pounds of nitrogen and 60 pounds of phosphorous fertilizers to grow one acre of corn. The chemicals don't just fertilize the corn — they feed algae blooms that suck up oxygen in streams and lakes, driving away fish and other aquatic life. In Iowa, the nation's leading ethanol producer, the state's Department of Natural Resources reported in 2005 that nitrogen and phosphorous levels in the water were as much as 10 times the level appropriate for Midwest streams. The city of Des Moines has the largest water-treatment system in the world to deal with the fertilizer residues, but still issues regular "blue baby alerts" during the spring planting season, cautioning parents to avoid giving tap water to infants.

Ethanol can't even be sold as an all-American fuel, because 40 percent of nitrogen fertilizers are imported from overseas — including the Middle East.

The need for fertilizer will only increase as the number of corn-planted acres jumps by nearly 8 million between 2006 and 2010, according to the University of Missouri-Columbia's Food and Agricultural Policy Research Institute.

Then there are the herbicides — particularly atrazine. It's banned in Europe and regulated as a possible human carcinogen in the United States. Its most recent claim to fame: a growing body of research that the chemical has had bizarre sex-changing effects on amphibians. Despite those concerns, the 2005 USDA Crop Chemical Survey reports that more than 65 percent of the nation's corn acres were doused with atrazine to control weeds.

And corn farmers are deeply dependent on fossil fuels: diesel, to fire up the tractors that plant crops and the combines that harvest them; propane, to dry the grain before transport; gasoline, for the trucks that drive the corn to grain bins and then to the ethanol plant.

Fossil fuels and corn production are, in fact, intimately connected.

"When we talk about energy with our growers, it's not necessarily just about ethanol," Sue Schulte, spokeswoman for the Kansas Corn Growers Association, recently told an auditorium full of concerned Johnson Countians who had gathered for a forum on energy independence. "It's about diesel. It's about natural gas. It's about a whole range of energy issues. So, in addition to pushing for increased biofuels development, we're also pushing for more domestic natural gas, more gasoline, any kind of resource we can use to produce our crops, as well."

The plants that refine corn into ethanol aren't clean, either. Take Missouri's Golden Triangle. The Missouri Department of Natural Resources cited the plant for air-quality violations nine times between May 2002 and July 2005, costing Golden Triangle a $4,000 penalty in 2003. In mid-2005, Golden Triangle paid a $30,000 fine for violating the Clean Air Act, and the U.S. Department of Justice and the EPA ordered it to install $2 million worth of technology to reduce its emissions of pollutants.

The plants also consume massive amounts of water — an average of 750,000 gallons a day. Earlier this year, residents in Hayne, Kansas, opposed the construction of an ethanol plant in their community, mainly because they were concerned about the availability of water. In addition, communities with ethanol plants must contend with discharges of industrial pollutants such as sulfates, chlorides and suspended solids into local waterways.

Science in the field has been hot with arguments about whether the process of creating ethanol is a worthwhile use of resources. The most recent study broke in July, when researchers at the University of Minnesota published an analysis in the journal Proceedings of the National Academy of Sciences concluding that ethanol creates just 25 percent more energy than it takes to produce it — a notably "small" gain, in their opinion, given the wide environmental impacts.

As Griffith points out, the industry may be able to advertise ethanol as a green fuel for the short term. But it will soon become more evident that the resource-guzzling, water-polluting process isn't doing any favors for the environment.

"We know the clock is ticking," he says of the corn-based fuel. "It's just not sustainable for the long term."

The Presto Conoco station at the intersection of Holmes and Bannister Road is the metro's only retailer of E85 — the fuel blend that includes 85 percent ethanol and 15 percent gasoline.

At the pumps on the far west end of the station, stickers caution "STOP! NOT GASOLINE." On the middle of each pump, a placard displays a drop of water and cottony white clouds surrounded by a golden starburst.

A manager on duty says the station has had the pumps for a couple of years now. In fact, these pumps have appeared in a number of photo ops for the likes of Rep. Emanuel Cleaver and Sen. Jim Talent, as they've showcased their disdain for Middle East petroleum and their support for homegrown fuels. The cashier says the heavily stickered E85 pumps get a steady flow of traffic, thanks in part to the Bannister Federal Complex that sits barely a quarter-mile down the road.

"It's mostly government," she says of the E85 customers there. "But some other people, too. Want a brochure?" She extends a glossy flier from a stack next to the cash register.

On this busy Tuesday morning, though, the E85 pumps stand empty. For all its on-site advertising, what the brochures call "The American Fuel" is a tough sell.

Today, with regular unleaded gasoline selling for $2.09, the ethanol blend costs $3.49 a gallon.

Proponents tout ethanol as a clean-burning fuel that significantly offsets greenhouse-gas emissions. Scientific studies, however, suggest that such boasts are misleading. Two studies published this year found that ethanol saves the atmosphere less than 14 percent of the greenhouse gases produced from gasoline consumption.

Even such modest gains were questioned in an August analysis from Consumer Reports. Putting a Chevy Tahoe filled with E85 to the test, researchers suggested that the corn fuel actually increased greenhouse-gas emissions by 12 percent to 25 percent. That's because the average flex-fuel vehicle gets about 5 miles per gallon less than the average gasoline-powered car. And driving on E85, which can drop fuel economy by 30 percent, the flex-fuel SUV has to refuel far more often.

Despite these problems, the federal government has created loopholes in fuel-efficiency standards in an effort to encourage automakers to build more flex-fuel vehicles.

The auto industry estimates that more than 6 million flex-fuel vehicles are on the road, and U.S. automakers recently pledged to roll out 2 million annually by 2010. But because of their lower fuel economy — and the fact that not many gas stations sell E85, which forces most flex-fuel vehicle owners to fill up on old-fashioned gas — those supposedly clean-burning engines may actually feed our addiction to oil. Research by the Union of Concerned Scientists (a nonpartisan group based in Cambridge, Massachusetts) calculated that flex-fuel vehicles boosted U.S. oil dependence by 80,000 barrels a day in 2005. By 2010, that could grow to 200,000 barrels a day of additional oil dependence.

Meanwhile, those government loopholes have allowed automakers to avoid as much as $1.6 billion in fuel-economy fines between 1998 and 2004.

Squinting in the harsh glare, city employees holler greetings to one another as they pull into the fueling station at the fleet yard on Brooklyn Avenue. It's just after 7:30 on a crisp September morning, and each of six diesel pumps is occupied by a heavy-duty blue truck with a Water Services emblem on its doors. The rusting faces on the green pumps say "Gasboy," but the city employees are filling their tanks with a different brand of fuel.

Back in 1997, the city of Kansas City, Missouri, started a pilot program to curb its use of gasoline and diesel and switch a portion of its municipal fleet to alternative fuels. It started with two Crown Victorias, says Sam Swearngin, superintendent of the city's central fleet. Now, hundreds of city vehicles — from public works trucks to aviation department buses —use renewable fuels to reduce the city's pollution and costs.

But the city fleet doesn't consume a single drop of ethanol.

Instead, the employees fueling up this morning are pumping a blend of biodiesel, a fuel made from soybeans. Others are powered with compressed natural gas.

Don't get Swearngin wrong; he has nothing against ethanol. But it does have some clear disadvantages compared with other farm-based fuels, including biodiesel.

High blends of ethanol require flex-fuel engines, whereas biodiesel can run in any diesel vehicle in the city's fleet. To dispense E85, Swearngin would have to install different underground tanks, but biodiesel flows fine through the aging Gasboy pumps. Besides, drivers get far fewer miles out of a gallon of ethanol compared with gas, whereas biodiesel packs as much power as typical diesel.

"The trend in Midwest fleets is biodiesel," Swearngin says. "I can't tell you when or if I'll ever use ethanol."

Of course, when the 10-percent mandate takes effect, Swearngin will use small amounts of ethanol like the rest of the state.

But, if Kansas City's air pollution experts have any say, the metro may get an exemption from the law.

James Joerke, air quality manager for the Mid-America Regional Council, says his organization is not anti-ethanol. But it is pressing the governor's office to let Kansas City off the hook because the 10-percent blend could push the metro out of compliance with EPA ozone standards.

"Yes, it is a little bit cleaner," Joerke says of ethanol. The corn alcohol is an oxygenate, so it helps fuel combust more fully, he explains. But the problem with the 10-percent blend is that it makes the fuel more likely to evaporate. So while residents pump their fuel at the local gas station or let their cars sit in a hot parking lot while they do their grocery shopping, the 10-percent ethanol blend known as E10 allows smog-forming pollutants to ease into the atmosphere more readily. Because the past two years have produced a troubling number of ozone alerts, the city is in danger of violating EPA standards if it doesn't clean up its ozone act during the coming year.

It's not just the experts who are beginning to consider ethanol's drawbacks. Consumers, reading recent critical editorials and articles in the likes of Forbes and Car and Driver, have begun to question ethanol's bold promises.

As Johnson County residents file into an excessively air-conditioned lecture hall at the University of Kansas' Edwards campus in Overland Park, they glance through glossy handouts with a smiling mug of U.S. Rep. Dennis Moore set against a clear blue sky and the image of a wind turbine.

The August forum is optimistically titled "A Call to Energy Independence." Trying to dispel a palpable sense of frustration, the Lenexa Democrat talks of putting a man on the moon.

"Our nation has an unhealthy dependence on foreign oil, and as we continue to rely on politically unstable nations for oil, we will continue to be entangled in foreign conflicts, which threaten both our economic and national security," he says gravely. "But if we set goals, if we act now, we can make a difference. Remember back several years ago, there was a call for putting a man on the moon. We set a goal, we met that goal, and we can do the same in regard to energy."

During her turn among panel speakers, Sue Schulte of the Kansas Corn Growers Association boasts that just that morning, she added another ethanol plant to the energy resources that Kansas contributes to the nation's independent-energy goals.

But the audience is skeptical. One man has heard that ethanol plants use tremendous amounts of water. A woman asks about the possibly overstated air-quality improvements. A woman affiliated with a fuel retailers' association points out a gap in communication between ethanol producers and station managers.

Moore is quick to qualify his shoot-for-the-heavens opening statements.

"Some people always want a silver bullet," he says. "But sometimes, that's just not the way it is."

In fact, even proponents like Schulte acknowledge that ethanol is no silver bullet. "A lot of people come up to me and say, 'Well, you know, can ethanol really be the solution to our energy problems?'" she tells the crowd. "And I have to say, 'No, it's not.' But ethanol is a part of the solution."

In reality, even the corn-ethanol industry's most optimistic projections make up just a sliver of the solution.

Richard Nelson, an engineering professor at Kansas State University, has spent 16 years researching fuels derived from plants. He says corn will never contribute much to America's energy needs.

"What I began to realize," he says, "is that the gas market is 140 billion gallons [per year], and diesel is 60 billion. If we're going to make a dent in that, it's going to take some land base to do it. What is that land base going to use, and can you sustain it over a 10-, 30-, 50-year period of growth?

"I think we've woken up to the fact that we can't produce 140 billion gallons from ethanol," he says. "It's just not going to happen."

If the industry continues to grow, fuel and food will soon start to compete for the same kernels. Stan Cox, a researcher at the Land Institute in Salina, Kansas, warns that even if the nation went hungry, farms could not produce enough corncobs to fill our gas tanks.

"Let's say the U.S. ends all grain exports and converts that to fuel," Cox proposes. "That would get us the equivalent of two gallons of gas per person per month. If we ourselves gave up eating food, turned all the grains and oil seeds we feed or eat into fuel, we'd get another two gallons a month. In addition, we could strip all remaining crop residues from the land and get another two gallons, maybe a bit more. That's six gallons of gas per month per head. But no food. And degraded soil."

Energy researchers say the way forward is cellulosic ethanol, made from a process that would use industrial-strength enzymes to break down the tougher materials in corn stalks, timber and hearty grasses. Nelson has worked with switchgrass for years and says the plant has a much lighter impact on the environment and more promise as a future fuel source. But even he doesn't promise that energy independence will sprout from America's cropland.

"A lot of scientific work needs to be done, and people realize corn isn't going to get us there," he says. "How far will cellulose get us? I don't know."

Cox has run the numbers, and he doesn't think that America's energy demands can be satisfied by switchgrass or any other crop.

"The amount of fuel we could produce within our borders on all of our cropland in a year would keep us going from New Year's to Labor Day," he says. "After that, we'd be walking."

Driving down the soggy dirt roads in his flex-fuel pickup, farmer Gene Millard acknowledges that ethanol will never replace gasoline as Americans' primary fuel: "We just use too much," he says.

Right now, the nation is gripped by an "irrational exuberance" when it comes to ethanol production, he cautions. Millard knows that the pendulum can swing both ways, so instead of cashing in on the current fervor by increasing their fuel production, Millard and his partners in Golden Triangle hope to differentiate their plant.

The wildly expanding ethanol market is set to flood the United States with 8 billion gallons by 2008. By then, Millard says, his facility plans to start pumping out 200-proof alcohol that has a wide range of industrial and commercial uses.

"Just look in your medicine cabinet," Millard says of the possibilities for Golden Triangle's alcohol expansion. "How about a little Scope?"

While the rest of the country banks on corn farmers to solve the fuel crisis, Missouri's pioneer ethanol plant will at least be poised to provide some relief if the ultimate reality is just too sobering.

"Vodka," Millard says with a slightly mischievous smile. "We're not going to sell vodka. But we could. We're permitted."

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