Driving under the influence

How the corn-ethanol lobby bought its way into your gas tank

Illustration By Doug Boehm

Under the blazing sun of fall, the corn is ripening for harvest on California farms. This year, farmers all over the state will grow tens of thousands of acres more than ever before, an increase of 78 percent over last year. However, this does not mean more corn is bound for the table or to feed livestock that produce dairy products and meat. Instead, these new fields of the golden yellow and white grain will barely make up for the corn that will wind up in motorists’ gas tanks in the form of ethanol.In the face of rising gas prices and limited supplies of oil, California, like the rest of America, is making a major turn toward ethanol without fully examining the health and economic consequences in the quest for a so-called cleaner fuel. Ethanol proponents are creating the mistaken perception that the biofuel can lead the way toward energy independence and emits less of the carbon dioxide that causes global warming. Instead, rapid growth of the heavily subsidized ethanol industry will lead to higher food prices, overuse of water, water pollution and soil erosion. Just as serious, it will not help clean the air and will even increase air pollution, particularly in smog-clouded cities in the Sacramento and San Joaquin valleys and in sprawling Los Angeles. A Stanford University study found that ethanol poses the same health risks—or worse—than gasoline.

And, in a little-known reality that surely will annoy many drivers, ethanol-fueled cars get poorer mileage than gas-powered cars, up to 25 percent worse, and a gallon of ethanol roughly costs the same as gasoline. Edmunds Automotive documented the reduced mileage in road tests.

At this pivotal moment when scientists and politicians should be speaking up, the ethanol lobby, wielding influence over lawmakers with thousands of dollars in campaign contributions, is having its way in Sacramento and Washington, D.C.

Earth Policy Institute President Lester Brown criticized the blind acceptance of ethanol that is sweeping the nation. “Ethanol euphoria is not an acceptable substitute for a carefully thought through policy,” said Brown. “Do we really want to subsidize a rise in food prices?” With increased demand for ethanol, corn prices have doubled over the last year on the world market, triggering tortilla riots in Mexico. In Sacramento, politicians give lip service to the public-health and economic worries, but continue to rush headlong to clear the decks for a major increase in the use of corn-based ethanol in California. Recent state-government acts of generosity include approving millions of dollars in direct subsidies to the ethanol industry, an easing of clean-air standards, and a gubernatorial order for the California Air Resources Board to adopt preferences for low-carbon fuels. Now, as the Legislature heads toward a finish, lawmakers are moving to further subsidize the ethanol industry through a series of fee hikes on motorists and diversions of money from other purposes.

The subsidy bill, Assembly Bill 118, authored by Assembly Speaker Fabian Núñez, D-Los Angeles, has passed the Assembly and was poised to move to the Senate floor at press time. To help fund a rollout of alternative fuels, including ethanol, the bill would raise the vehicle-registration fee by $3, smog fees on cars by $8, and a variety of other Department of Motor Vehicles fees.

“The bill is fuel and technology neutral,” stresses Beth Willon, spokeswoman for Núñez. However, she confirmed it is intended to include incentive payments to help install a network of ethanol pumps around the state. It also will make payments to lower the cost of so-called flexible-fueled vehicles that can burn higher levels of ethanol than today’s cars, most of which are limited by warranty to burning only gasoline containing up to 10 percent ethanol. “It’s all about biofuels,” explained Willon.

Oil companies operating service stations that could get money under the bill to install ethanol pumps have been frequent campaign backers of Núñez, as have auto-industry interests that could benefit from the incentives for flexible-fueled vehicles. In his 2006 run for the Assembly, the speaker picked up $6,300 from car dealers through their California Motor Car Dealers Association and $3,300 from DaimlerChrysler AG, which makes flexfuel cars. He also received money from oil companies that use ethanol in gasoline and could put in pumps, particularly if funded by the state, including $4,500 from ChevronTexaco; $3,000 from BP, which operates ARCO stations; $1,000 from Exxon; and $1,500 from Valero.

While the speaker’s bill would provide some funds for the advanced technologies sought by pro-environment groups like the Union of Concerned Scientists, behind-the-scenes supporters of cleaner forms of energy fret that the $130 million a year expected to be raised by the bill could be dominated by corn-based ethanol. One industry executive, who would not speak for attribution, called the contention that corn-based ethanol is environmentally friendly and worthy of more state funding “a crock.”

The problem that supporters of other alternative fuels see is that the subsidies and environmental rollbacks are cementing corn-based ethanol’s position and foreclosing the opportunity for superior environmental technologies to succeed in California. These include plug-in hybrid cars, for instance, that can run emissions-free on battery electric power far enough to get most people to and from their jobs. The cars, which use well-known technology and could be built today by automakers, can be fully charged with the increasing supply of wind and solar energy that powers California’s electric grid. For longer trips, they can get auxiliary power from their gasoline-powered engines.

“That has gotten short shrift because it’s not perceived as a silver bullet,” said Danielle Fugere, global-warming campaign director for the Bluewater Network, an arm of the environmental group Friends of the Earth. “All we can hope is that the state sees beyond corn ethanol.”

Bluewater Network and other environmental groups are working to make any massive introduction of ethanol in California subject to sustainability standards that will prevent increases in air pollution, rises in food prices and overuse of water and soil erosion. However, Fugere said that the governor and other politicians in Sacramento have seized on corn-based ethanol as a quick way to show progress on global warming, even though some studies raise questions about whether it will reduce greenhouse-gas emissions.

Concerned about unrestrained use of ethanol for cars, Senator Christine Kehoe, D-San Diego, is pushing for legislation to make the alcohol fuel subject to such sustainability standards. They are needed, she said, to prevent “unintended consequences that can be damaging.” However, oil companies are fighting her efforts.

Meanwhile, ethanol proponents are firmly entrenched in Sacramento. Tom Koehler, vice president of Pacific Ethanol, which operates a recently opened ethanol production plant near Fresno and then moved its headquarters to the state capital, called the latest round of legislation an important step to “solidify” ethanol’s position in California. He also said a low-carbon-fuel directive issued earlier this year by the governor would help. Koehler’s firm, chaired by well-known Republican politician Bill Jones, is the largest marketer of ethanol in the west. The company is busy building another plant in Stockton and has received permits to construct a third California facility in the Imperial Valley.

Ironically, even companies that are developing alternative technologies to produce ethanol from waste are concerned about the rush to corn-based ethanol. “We will never be able to produce enough ethanol from corn to be substantially independent in this country,” said Jim Stewart, chairman of the BioEnergy Producers Association, a group that is backing technology to turn garbage into ethanol and electricity. He maintains that the technology to do so is here today, but that its backers have been shut out by Sacramento lawmakers. To move forward, he explained, lawmakers will have to change the state’s solid-waste law to classify ethanol production from waste as a form of recycling, similar to recycling cans and bottles.

The city of Los Angeles hopes to set up a facility to turn garbage into energy, potentially including ethanol. Los Angeles County also is interested in seeing a waste-to-ethanol plant built, said Coby Skye, county Department of Public Works associate civil engineer. The proponents hoped a bill, Senate Bill 1020 authored by Senator Alex Padilla, D-San Fernando Valley, would offer the opportunity to qualify such plants as recycling operations. However, Padilla was not committed to amend his measure, which would raise the state’s recycling goal for municipal waste from 50 percent to 75 percent. Instead, he called those who want to turn garbage into fuel—including backers in Los Angeles city and county halls—just “one of many stakeholders around a very large table here at the Capitol.” Meanwhile, the bill appeared to be stalled for this year.

Warns Don Anair, Union of Concerned Scientists’ vehicles analyst: “We can’t replace our gasoline use with biofuels. We have to have advanced, efficient vehicles. We need to reduce consumption of fuels.”

Ethanol got started in the California market when former Gov. Gray Davis banned the use of a methanol-based gasoline additive, known as MTBE. He acted after the chemical was found in drinking-water wells, having leaked from underground gas-station storage tanks. The MTBE was added to fuel to reduce the amount of carbon monoxide produced by cars, which is a problem during cold winter mornings.

While headlines at the time focused on the drinking-water contamination problem, Methanex Corporation, which made the methanol-based additive, pointed out that wherever MTBE showed up in water, it was accompanied by gasoline, too, which leaked from the same service-station storage tanks. The solution, the company argued, was not to ban MTBE, but to fix the leaking tanks to prevent both the additive and cancer-causing gasoline from getting into well water. However, little publicized documents filed in a legal challenge to Davis’ ban on MTBE show that instead the governor may have been influenced in his decision by Archer Daniels Midland Company, one of the largest marketers of corn in the world and the nation’s biggest producer of ethanol. ADM figured that if the methanol-based compound was banned, ethanol would be next in line as a federally required fuel additive to clean up carbon-monoxide pollution in the nation’s largest gasoline market. California burns 16 billion gallons of gasoline a year. If MTBE were banned, ADM knew the federal-fuel-additive mandate would require refiners to ensure that the ethanol content of California gasoline was 6 percent. This would create an overnight market for 960 million gallons a year of ethanol in California, worth around $2 billion annually.

“During the middle of his 1998 California gubernatorial campaign,” Methanex said in a 2001 complaint filed under the North American Free Trade Agreement, “now-Governor Gray Davis met secretly with top executives of ADM. On August 4, 1998, after receiving an initial $5,000 campaign contribution from ADM, he traveled to Decatur, Illinois, where ADM is headquartered, on a private plane owned by ADM, in order to confer with executives of ADM.”

Later, ADM would give Davis $100,000 for his campaign coffers, retired ethanol executive Doug Vind recalled in testimony in the case. Vind, who worked for Western Ethanol Company, added that he went on to raise substantial amounts of additional campaign cash from ethanol interests for Davis, with whom he recalled money “was almost always the subject of conversations.”

Davis won the governorship with the help of the ethanol industry, and soon after his election banned MTBE, giving the ethanol business an important foot in the door in California. Under the federal Clean Air Act and U.S. Environmental Protection Agency rules, the state still was required to use an additive in gasoline that would reduce the amount of carbon monoxide emitted by cars during the winter, even though it was primarily taking old vehicles off the road that reduced atmospheric levels of the pollutant in big cities like Los Angeles. Los Angeles met the standard for the pollutant in 2001, according to South Coast Air Quality Management District air-monitoring data, and levels have improved since then.

Meanwhile, ADM and farm interests continued to lobby for federal favors for ethanol in Washington, where political spending by the ethanol industry has been growing. ADM, for instance, has contributed about $3.2 million to federal candidates since 2000, according to the Center for Responsive Politics. Not surprisingly, Midwest lawmakers in the company’s home state were the biggest beneficiaries, like Sen. Dick Durbin, D-Ill., who got $57,350 and Rep. Dennis Hastert, R-Ill., who received $38,500. However, California lawmakers also have scooped up some ADM cash, including $6,500 for Sen. Barbara Boxer and $6,000 for Sen. Dianne Feinstein.

Illustration By Doug Boehm

The industry’s lobbying presence also has been growing in the nation’s capital. The National Ethanol Vehicle Coalition, for example, spent a little more than $50,000 lobbying in 2002, a figure that topped $250,000 last year, according to center data.

Their efforts culminated with a mandate passed by Congress and signed by President Bush under the Energy Policy Act of 2005. It called for oil companies to use at least 4 billion gallons of ethanol in their fuel beginning in 2006, and to increase the amount each year until 7.5 billion gallons of ethanol is used in 2012. Congress also provided a 51-cents-a-gallon tax credit for oil companies for each gallon of ethanol they use in fuel, which automatically boosts the price that ethanol producers can charge by the same amount.

At the same time, the ethanol industry continued to expand its influence in Sacramento under the administration of Gov. Arnold Schwarzenegger. A review of campaign-finance data reveals that Pacific Ethanol’s Jones gave $20,000 to Schwarzenegger’s re-election campaign. ADM gave $25,000. Schwarzenegger paid a ceremonial visit to Pacific Ethanol’s plant after it opened near Fresno. Earlier this year, he issued his so-called low-carbon-fuel directive, which seeks to lower the content of carbon in fuel to reduce greenhouse-gas emissions by 10 percent by 2020. The state also is seeking to replace 20 percent of the gasoline burned in California with alternative fuels, which could include electricity and natural gas, as well as ethanol. Increased use of ethanol to achieve the low-carbon-fuel standard, though, has its down side when it comes to air quality.

Studies by the CARB show that boosting the amount of ethanol in gasoline to 10 percent will increase hydrocarbon emissions by 118 tons a day during the summer. The studies found, too, that emissions of toxic pollutants, including cancer-causing benzene, would increase under some weather conditions. Finally, more ethanol in gasoline is expected to increase nitrogen-oxide emissions, which form not only ozone, but also dangerous fine particle pollution in the air. Statewide emissions are expected to grow by 21 tons a day.

Aside from making the air over California more unhealthful, the boost in the ethanol content of gasoline also will cost motorists an extra $600 million a year, about $36 per driver, because it will cut mileage by 1.3 percent, according to the air board.

Despite its drawbacks, though, last June the CARB changed its fuel regulations to lift the cap on the amount of ethanol allowed in gasoline from 6 percent to 10 percent under an arcane and little-noticed change in a regulation known as the predictive model. The change will allow sales of ethanol to go from 900 million to 1.5 billion gallons a year, enough to support as many as 12 new ethanol plants in California, which typically produce 50 million gallons a year.

SCAQMD clean fuels officer Paul Wuebben called the move “a tipping point” for ethanol. His boss, executive officer Barry Wallerstein, said that it would be easier to clean up smog if ethanol was kept out of gasoline all together. The state agency overruled their objections and, in a prepared statement, Robert Sawyer, who chaired the board, called ethanol a clean fuel “essential to reaching healthy air goals in California.” The state agency plans to have refiners develop plans to cut emissions from other sources of pollution to make up for the extra emissions from cars burning more ethanol. Sawyer, however, was not happy about what he called pressure by the governor’s office to fast track so-called low-carbon fuels and wait on other options to reduce greenhouse-gas emissions. When he revealed himself to not be a team player, Schwarzenegger abruptly fired him a month later. The deposed chairman then told all to the Legislature about how he had grown tired of political interference from Schwarzenegger aides.

But 10 percent ethanol in gasoline may just be the beginning.

Seeking to further expand its market, Pacific Ethanol’s Koehler said that the ethanol industry now envisions increasing the level of ethanol allowed in California gasoline to 12 percent, and later to as much as 15 percent. “The focus needs to be on increased blends,” he said. To push ethanol further, the industry is testing higher blends in cars to see if they damage engine components.

Others are pursuing establishing a network of pure-ethanol pumps around the state. With a state subsidy from CARB, Pearson Fuels is seeking to set up a network of pumps. The San Diego-based company, which operates the only service station in the state that supplies pure ethanol, known as E-85, is negotiating for station sites, said Mike Lewis, its president. The state agency is providing $5.4 million to fund 51 E-85 pumps around the state, plus is giving out $6 million to developers of 10 “biofuels” plants. Only about 200,000 cars on the road in California can burn E-85, so-called flexible-fuel models that can run on any combination of gasoline or ethanol, according to Michelle Kautz, a spokesperson for the National Ethanol Vehicle Coalition. That number will increase, however, because Detroit automakers have pledged to produce a million flexible-fuel vehicles a year by 2012, she said.

Yet there are conflicting studies about the impact of E-85 on air quality. For instance, one study done at Stanford predicts Los Angeles and California would see worse air quality with E-85. If all cars burned it by 2020, according to the study recently published in the journal Environmental Science & Technology, the Los Angeles area alone would see 120 more deaths a year from air pollution, 650 more full-blown hospitalizations and another 1,200 emergency-room visits due to acute asthma attacks. While the study focused on how ethanol would affect Los Angeles, it said that similar effects would be felt in other smoggy areas.

“Ethanol is being promoted as a clean and renewable fuel that will reduce global warming and air pollution,” said Mark Jacobson, an atmospheric scientist at Stanford and a co-author of the study. “Ethanol poses an equal or greater risk to public health than gasoline, which already causes significant health damage.” CARB estimates that air pollution kills at least 6,500 people each year in California and hospitalizes another 9,000. Smog mostly causes respiratory and heart ailments.

Politicians in Sacramento are making the case for ethanol based on studies showing that it is a low-carbon fuel that will help the state carry out its landmark global-warming law, passed last year. Indeed, studies commissioned by state agencies show that even corn-based ethanol may lower emissions of greenhouse gases, because the corn recycles carbon dioxide in the atmosphere. When ethanol made from corn is burned, that carbon dioxide then is absorbed out of the air by the next corn crop. A recent study conducted for the California Energy Commission, for instance, showed that while it is true that it takes more fossil fuel to make a gallon of ethanol than a gallon of gasoline, and that drivers can go farther on a gallon of gas than a gallon of the alcohol fuel, ethanol still beats gasoline because of the re-absorption of carbon dioxide by the next crop of corn.

“Corn ethanol is an absolute winner [on greenhouse-gas emissions] with one exception, and that’s if you use coal as a source of energy,” for making the ethanol, said Koehler. A recent study by Argonne National Laboratory shows that modern ethanol plants cut greenhouse-gas emissions compared to gasoline by 22 percent. The study’s author, Michael Wang, said the Pacific Ethanol’s plant near Fresno cuts carbon-dioxide emissions by 40 percent because the byproduct of its process—known as distiller’s grain—can be shipped quickly to nearby dairies as cow feed without drying it. Ethanol plants more distant from livestock herds must dry the grain by burning natural gas, which adds emissions.

Critics of such studies contend that they have failed to fully account for the energy involved in bringing ethanol to market. One skeptic is Tad Patzek, a UC Berkeley civil engineer. He points out that the studies have failed to “define system boundaries” and therefore are flawed. When taking into account all of the energy used to grow corn and from the changes in land-use caused by using a grain once destined for the dinner table to make fuel, Patzek maintains it takes as much as 3.9 gallons of ethanol to actually replace one gallon of gasoline. The result is that greenhouse-gas emissions increase by at least 50 percent, the engineer claims. Patzek is not alone.

“The entire state of Iowa, if planted in corn, would yield approximately five days of gasoline alternative,” said Robert Costanza, a professor of ecological economics at the University of Vermont. Each acre of corn, he said, provides enough ethanol for “not even two fill-ups for an SUV.” Moreover, he said, using corn for ethanol would cut food availability, cause soil erosion and use water for irrigation. Even the Tiax report for the state said that to make sure ethanol actually cuts greenhouse-gas emissions, state environmental regulators will have to monitor how growing crops to produce fuels affects land-use. For instance, if land is cleared to grow more crops by burning forests, it will increase carbon-dioxide emissions. But while the academic debates and competing studies continue, increasing use of ethanol already has set off massive changes on the ground.

Up and down the state, numerous ethanol-production plants are being planned or are under construction, aside from Pacific Ethanol’s two plants in Stockton and Imperial Valley. Production of ethanol in California could rise from 68 million gallons last year to as much as 364 million gallons a year if all 10 known plants are built, according to the California Energy Commission. In the Imperial Valley, for instance, Batley Farms has formed a company to produce ethanol from sugar cane. William Batley Jr. and his daughter Nora are seeking permits to build a 50 million-gallon-a-year plant. Ultimately, they plan to build five plants, which would require 150,000 acres to be converted to sugar cane from other crops, such as alfalfa used to feed animals, or potentially vegetables. That’s more than 234 square miles, or a third of the farm land in the sprawling valley. The plants would provide about 1.6 percent of the motor fuel now used in California, not to mention projected growth in gasoline usage.

“The agricultural economy in California is in a slump,” said Batley Jr., who hopes that his sugar-cane ethanol plant will revive the valley’s economy, which has been battered by low-cost food imports.

“Water is going to be a big issue and what crops get water,” Juan Guerrero, University of California Agricultural Extension Service farm adviser, warned about the plan. Water deliveries from the Colorado River to the desert-growing area are expected to be cut back due to the persistent drought in the Southwest, he explained. Sweet sorghum could be used instead to make ethanol and it would require less irrigation than water-intensive sugar cane, he said, which typically is grown in tropical areas. Aside from the water it takes to irrigate crops used to make ethanol, the process of making the alcohol-based fuel requires 12 gallons of water for each gallon produced, according to Friends of the Earth.

Overall, however, the biggest impact of using corn and other crops to produce ethanol is that it is triggering major shifts in agriculture and big food price increases. In California, for instance, the higher price of corn due to increased demand for the grain to make ethanol is good for its growers. “But if you’re a buyer running a dairy or poultry operation, it’s a concern for you,” observed Dave Kranz, California Farm Bureau spokesman.

Increased use of corn for ethanol is driving up food prices, the U.S. Department of Agriculture documented in a report released last May. Attracted by rising corn prices, farmers have shifted from growing soybeans and other crops to planting more corn, which then creates a short supply of those foods and causes their prices to increase. Even though acreage planted to corn nationwide is up by 19 percent, USDA estimates that 30 percent of the nation’s corn crop will be used to make ethanol in just a couple years. This dramatically will cut exports of corn from the United States, which is the world’s leading supplier of corn, the report said. It also likely will force more grazing of cattle on grasslands and higher prices for meat and poultry worldwide, it added.

“The American public is told by our government the rate of inflation in 2006 was only 2.2 percent,” according to E. Ralph Hostetter, publisher of American Farm Publications. “However, when the price increases in food and energy were factored in, the reality was 4.8 percent.”

The problem is more acute in poor nations. In testimony before the Senate Environment and Public Works Committee earlier this summer, Lester Brown of the Earth Policy Institute warned that the agricultural and energy industries are merging. This means that food prices are likely to continue to drift upward until they reach their energy-equivalent value. “The stage is now set for direct competition for grain between the 800 million people who own automobiles and the world’s 2 billion poorest people,” said Brown.

The corn-based ethanol industry is undaunted. Koehler, for instance, calculates that food crops can be used in the United States to produce 15 billion gallons a year of ethanol, double the federal mandate under the Energy Policy Act of 2005; Congress may push the mandate to 36 million gallons. In the days ahead in Sacramento, lawmakers may pass the speaker’s bill with its funding for ethanol pumps and cars that burn more of the biofuel. The only challenge remaining for the well-greased ethanol industry will be how to best use the money in its quest for a bigger market share and more profits here in the nation’s largest motor-fuel market.