Ethanol Grows in Popularity

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Ethanol Grows in Popularity

MINNEAPOLIS--The ethanol business, once perceived as an industry kept alive mostly by government support, is becoming more viable amid worries of a global oil crunch, reported the Associated Press.

Innovation and investment are transforming the process of turning corn kernels into auto fuel, making it the leading near-term alternative to petroleum for the nation's 225 million cars and trucks, according to the report.

"The industry is growing out of its gourd," Ralph Groschen, a marketing specialist for the Minnesota Department of Agriculture, told the Star Tribune . “Ten years ago,” he said in the report, "people were saying, 'What if we get these plants built and the ethanol market goes away?' Now they're saying, 'What if we get these plants built, and the ethanol market doesn't grow as fast as it's supposed to?"'

In Little Falls, Minn., a cooperative is spending $8 million to make ethanol by burning scrap wood instead of natural gas, which is more expensive. Agribusiness giant Archer Daniels Midland Co. is building a plant that will make five times as much of the gasoline additive as a typical operation, reported AP.

In Canada and Louisiana, corn stalks, trees and leaves are being tested to see if ethanol might come from sources besides the corn that is now its mainstay.

Ethanol plants that have long relied on a 51-cent per gallon excise tax credit to keep in business are becoming competitive and profitable. At the same time, producers are installing technologies to burn less natural gas in the production of the alternative fuel and cut emissions of global warming pollutants --a step that could muffle critics of ethanol, according to AP.

Ethanol plants, which have been concentrated in the Midwest farm states, are spreading to California, Texas and upstate New York. More companies are getting in on the action, joining tens of thousands of farmers who own shares in ethanol co-ops. Even an investment firm owned by Microsoft Chairman Bill Gates has invested $84 million into Pacific Ethanol Inc., which is planning to build five West Coast plants, reported AP.

The industry's growth looks to benefit from further favorable government policy. A mandate in the energy bill President Bush signed last summer all but guarantees the industry will double its annual capacity in the next five to seven years, to more than 7.5 billion gallons. That's after the industry already doubled in the past four years, according Bob Dineen, president of the Renewable Fuels Association, said in the report.

Nationwide, 93 ethanol plants are making ethanol and another 23 are under construction. Minnesota, the third-leading ethanol-producing state, has 15 operating plants that can make up to 523.6 million gallons of ethanol annually, and two more are on the way, AP reported.

Helping ethanol's cause are the work of crusaders for energy independence like former CIA director James Woolsey and former national security adviser Robert McFarlane, who have embraced the alternative fuel. They envision a gas-and-electric hybrid car that runs on E-85, a gasoline blend that is 85 percent ethanol, AP reported.

Another reason is the decline of the methanol-based fuel additive MTBE, which 25 states have banned because it pollutes drinking water supplies.

Some hurdles remain to ethanol's wider acceptance. Today, ethanol accounts for less than 3 percent of the fuel from gas pumps, and only a tiny percentage of gas stations offer E-85. Currently, Minnesota is the only state with a 10-percent ethanol mandate for gasoline, though similar mandates are planned in Montana and Hawaii, according to AP.

Rep. Gil Gutknecht, R-Minn., has proposed a 10 percent nationwide ethanol mandate by 2010. To meet that demand, the industry would have to quadruple in size.

Congress is considering several other measures that aim to make ethanol a more integral part of U.S. energy supply. They would prod automakers to make only flexible fuel vehicles by 2016, and offer tax credits for the installation of E-85 pumps, AP reported.