Cost concerns drive ethanol debate

To some legislators, a 10 percent ethanol mandate doesn't look as good today as it did two years ago.

A Missouri House committee listened to testimony April 22 about a bill that would repeal Missouri's E-10 mandate, which took effect in January.

The mandate, officially known as the Missouri Renewable Fuel Standard Act, requires all Missouri gasoline under 91 octane to be a blend of 90 percent gasoline and 10 percent ethanol unless the price of the 10 percent ethanol blend costs more than 100 percent gasoline.

The mandate's supporters say its benefits include cheaper gas and decreased dependence on foreign oil in favor of Midwest-grown crops.

Its opponents cite the rising cost of corn because of higher demand and reduced gas mileage because of the lower energy content of ethanol as reasons to pull the law, which was passed overwhelmingly by the Missouri legislature in 2006, off the books.

"Two years ago was a completely different story," said state Rep. Mike Dethrow, R-Alton, Mo., who originally supported the E-10 mandate but now sponsors the bill that would repeal the law.

"At that time, the thought was we would save more on gas prices for consumers, there [would be] reduced dependence on foreign oil, [it would] help corn farmers add value to $2 corn," he said. "Completely different scenario today. ... Ethanol has turned out to be part of a bigger problem."

Dethrow said constituents from his district have approached him with concerns ranging from the use of ethanol in small, two-cycle engines to poorer gas mileage in their automobiles and the rising food prices.

"I'm hearing complaints from moms back in my district who shop at the local grocery store who are concerned about anything that drives up the cost of food, and this is a piece of it," he said.

Ashley McCarty, director of public policy for the Missouri Corn Growers Association, said the inclusion of ethanol in gasoline isn't directly connected to escalating prices of food.

"No additional corn is being consumed from the 10 percent ethanol standard, ... so I do not think you can connect [ethanol-blended gasoline] to having an impact on the price of food," she said.

McCarty said she thinks decreasing food transportation costs through the savings of biofuels outweighs any influence that higher corn prices might have on the price of food.

She also said the rising price of corn - which rocketed from $2 a bushel in January 2006 to $4 a year and a half later to about $6 today - can be attributed largely to the recent slide in the value of the U.S. dollar, which causes other countries to want to buy American grain because it is cheaper.

Dethrow said he agreed that other factors contribute to inflated corn prices, but he stressed that ethanol is the one piece of the puzzle that can be changed locally.

"Don't blame everything on ethanol, but it's the only piece of the problem we have any control over in Missouri," he said.

McCarty said she doesn't see a grudge between corn farmers, who are thriving on higher corn prices, and livestock producers, who have to spend more on food to raise their animals. She also said only one independent livestock producer who wanted to repeal the mandate came to the legislative hearing last week.

"You did not see a groundswell of support to repeal the ethanol standard from any livestock group," she said.

McCarty said she thinks any livestock-corn price problems will be resolved when the market evens out and livestock producers won't have to pay as much for feed.

"I think you will see these discussions subside after these markets level out over the next several months," she said.

Dethrow, a former livestock producer, said he thinks there is a bit of a rift between the two agricultural groups but that there are bigger issues at hand.

"They've always depended on each other for many years," he said. "There is a difference of opinion on how our grain should be used. ... I think the bigger question is not a division among grain and livestock. I think the bigger question is, do we use ethanol to make fuel instead of food?"

Independence from foreign oil is another benefit of the 10 percent ethanol blend, McCarty said.

"If a terrorist group fires rocket-propelled grenades at an oil tanker in the Straits of Yemen, we're not seeing the same price reactions as other parts of the world are and other parts of this country are," she said.

An independent study commissioned by the MCGA projects that the 10 percent ethanol requirement will save Missouri drivers about 10 cents per gallon this year and about $54 per driver each year for the next 10 years.

Some are concerned, however, that less-efficient ethanol causes drivers to get fewer miles to the gallon, Dethrow said.

"We started seeing reports of those mileage issues [when ethanol was introduced into gasoline]," he said. "... [People are] more aware of that as gas goes up, up, up."

Terry Reynolds, a salesman at Sydenstricker Farm & Lawn in Kirksville, said he thinks oil companies are the ones responsible for the recent inflation of prices.

"When you get $110 oil, you get $6 corn," Reynolds said. "When you get $50 oil, you have $3 corn."

Sydenstricker sales manager Bill Frazee said he agreed, noting that until more recent gas price hikes, corn prices steadily ranged from $2.50 to $3 a bushel for about 20 years.

"Ethanol's getting a bad rap," Frazee said. "When oil started going up, everything else started going up. I guarantee you get oil down to $50 again, and food prices will be back to where they were."

Dethrow said the bill to repeal the mandate has support but that it will be difficult to get movement on it this late in the session.

"We'll just wait and see what happens through the summer and in the fall when we come back for next session in January ... and see what the attitudes of people are out there, and how much we learned, and be able to discuss more of the costs and benefits of ethanol," he said. "... We'll just see how people out in the real world react."