The company you keep
March 3, 2009
If it’s even partly true that you’re known by the company you keep, then the farmer-loved ethanol business got a lot less lovable Feb. 8 when Valero Energy Corp., the largest crude oil refiner in North America, announced its intent to purchase five of the choicest plants owned by mega-biofuel maker, mega-bankrupt VeraSun Energy.
Should Valero succeed in acquiring VeraSun’s best ethanol plants – and there’s little reason to suspect it won’t – Big Oil’s drooling camel will have its nose in your government-sponsored, government-protected tent.
And you know what they say about camels and tents.
In all likelihood, Valero is just Big Oil’s first camel. More will follow, especially if the ethanol business continues to struggle and cash-rich, market-insulated crude refiners can buy state-of-the-art ethanol plants for dimes on the dollar.
In fact, you have to wonder what took the refiners so long to start picking up – and picking off – ethanol operations. They’ve had big reasons to own ethanol for years.
For example, large refiners like Valero own gas stations (Valero owns more than 5,000 retail and branded stations in North America) so it has a built-in thirst for millions of gallons of ethanol. Why buy it retail when you can make it wholesale?
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Second, after years of heavy warfare, Big Oil finally got the message that ethanol is here to stay. Two hammer blows to the head – 2007’s Energy Independence and Security Act’s that mandated 15 billion gallons per year usage by 2015 and last year’s ethanol-protecting Farm Bill – seems to have done the trick.
Third, the new Administration continues to drink from the ethanol fountain Dwayne Andreas installed, and farm groups still service, in the White House. Nothing – not controversial science, debatable economics or today’s (and tomorrow’s) $1 trillion federal deficits – can pare back America’s mandated use of the bulletproof, 200-proof fuel.
Given all those good reasons, though, Valero’s purchase of VeraSun’s best-but-busted assets is just the latest little irony on a long list of ironies found throughout America’s slap-dash alternative energy policy. This one is particularly upside down, however: Are ethanol’s one-time devils now to be its new-found saviors?
If so, Big Oil’s growing interest in cheapening ethanol assets should give taxpayers, farmers and government pause. Gee, someone might ask, will the tens of billions in federal subsidies spent to birth and bankroll the U.S. ethanol amount to little more than a fabulous handout to Big Oil?
Maybe, writes Dennis Keeney in the Dec. issue of Environmental Science & Technology magazine. Two far more important facts, however, explains the emeritus professor of agronomy and ag and biosystems engineering at Iowa State, are that “biofuels such as ethanol” will supply only “about 2.9% of U.S. total energy needs by 2010 and that (figure) will rise to about 4.6% in 2030.”
But taxpayer subsidies to get to that tiny plateau will be massive. Tad Patzek, an outspoken critic of ethanol and chairman of the petroleum and geosystems engineering department at the University of Texas, recently noted that the ethanol industry asked the Obama Administration for $51 billion in bailout and loan guarantee money.
A far better investment in alternative energy, Patzek wrote colleagues and friends in a December email, would be to install “residential passive solar heaters of water” on all “122 million US households.”
If the $51 billion was used as a down payment on what he estimates would be a $200 billion project, Patzek explained, the effort “would eliminate permanently the need to produce 30 billion gallons of ethanol per year forever, or the US import of crude oil from Saudi Arabia forever.”
Forever. That’s longer than, say, 2010 or 2030, right?
© 2009 ag comm