With oil prices in record territory, presidential candidates stumping for votes in corn-centric Iowa, and congressional Democrats anxious to pass an energy bill to cut the nation’s dependence on Mideast oil, this should be the right moment for ethanol.
But a plan to dramatically increase ethanol production has become a major sticking point in congressional negotiations to complete work on the bill. And it has created a challenge for House Speaker Nancy Pelosi, whose Democratic caucus has split over the issue.
Pro-ethanol Democrats and farm groups want the bill to require a nearly fivefold increase by 2022 in the amount of home-grown alternative fuels that must be blended into gasoline. They say the mandate would reduce U.S. dependence on foreign oil and help America’s farmers.
Democrats on the other side, joined by environmental and food-industry groups, think the mandate could raise the price of corn used for food; harm the environment by using more land to produce biofuels; and gouge taxpayers by expanding ethanol subsidies.
Because of the provision’s popularity among farm-state lawmakers from both parties, it is seen as the glue holding together an energy bill that is expected to include the first significant increase in vehicle fuel-economy rules in decades.
And it might be enough to coax a signature from President Bush, who has made reducing reliance on foreign energy sources a priority.
“All along, energy-bill watchers have believed that the renewable-fuel standard was going to carry the entire bill,” said Bill Wicker, a spokesman for Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.). “It’s just very popular.”
The sense of political urgency for Pelosi to work out a compromise has risen along with prices at the pump.
“How she marries these various interests is really a challenge,” said Sierra Club lobbyist Melinda Pierce. “The Democratic Party pie gets sliced differently every time, but it’s the leader’s job to figure out how to put it all together.” House Democratic leaders want to vote on the bill next week, as soon as Congress returns from its recess.
Ethanol has been hotly debated since 1978, when Congress approved a tax break for the fuel. It has long been a key topic on the presidential campaign trail through the Corn Belt -- especially in Iowa, which is first in the nation in ethanol production and in voting on presidential nominees.
In 2005, when it drafted the last energy bill, Congress decided to require that 7.5 billion gallons of ethanol be added annually to U.S. gasoline supplies by 2012, an amount expected to be reached soon. California uses about a billion gallons of ethanol.
At the heart of this year’s dispute on Capitol Hill is the Senate bill’s renewable fuel standard, which would mandate 36 billion gallons of alternative fuels by 2022 -- up to 15 billion from corn-based ethanol. After 2016, an increasing portion would have to be advanced biofuels, including cellulosic ethanol produced from plant materials, such as switch grass and wood chips, thought to be easier on the environment than corn-based ethanol.
The House version of the bill includes no such mandate. Instead, it offers tax incentives to promote research on cellulosic ethanol. A Pelosi spokesman said the San Francisco Democrat wanted an expansion of the renewable fuel standard that would include “a significant boost to the cellulosic ethanol industry.”
Rep. Henry A. Waxman of Beverly Hills is one of the many Democrats critical of the proposed standard. “It certainly would enrich the corn lobby, but it doesn’t offer the country the sustainable energy future that we need,” he said. “Congress just gave the corn-based ethanol industry everything it wanted two years ago.”
But Matt Hartwig of the Renewable Fuels Assn., a Washington-based trade group, says what is at stake is energy security. “This isn’t about giving the ethanol industry or any other energy industry what it wants. It is about making a choice as to our nation’s energy future,” he said.
The fight has scrambled the usual alliances. The National Cattlemen’s Beef Assn. and the National Corn Growers Assn., allies in the recent fight to win House approval of a trade agreement with Peru, are on opposite sides of the battle over ethanol. Republicans are divided on the issue too, with some lawmakers from oil-producing states opposing the mandate, and others from corn-growing states supporting it.
Environmental groups, which support alternative fuels, want to ensure that stepped-up production does not damage the environment. They worry about more pollution from fertilizers and pesticides, and the conversion of grasslands and wildlife habitats to farmland.
“We are strong proponents of biofuels,” said Jim Presswood, an energy expert at the Natural Resources Defense Council. “We think they’re a critical piece of solving global warming and reducing oil dependence. We just want to make sure they’re done right.”
Forty-six Democrats, including several Californians, recently wrote congressional leaders to express similar concerns: “Rapid expansion of ethanol made from corn and other food crops has also created new unforeseeable challenges, including rising food prices, rising animal feed prices, heightened competition for water, water pollution, and the loss of grasslands and other valuable wildlife habitats.”
The Senate measure included a requirement that the process used to create any new biofuel emit 20% less greenhouse gas than the production of gasoline, but environmentalists say the measure might not account for all of the potential environmental effects.
Rainforest Action Network, Friends of the Earth and other environmental groups recently wrote the House speaker urging her to reject the fuel mandate. The groups asserted that the measure could lead to the clearing of Indonesian rain forests for palm oil plantations.
Democrats have also written to congressional leaders to say the country would benefit far more from biofuels made from nonfood sources. That would do more, they said, to reduce greenhouse gas emissions without reducing the availability -- or increasing the price -- of corn used for animal feed.
About 24% of the nation’s corn is expected to go to ethanol production this year, up from 13% in 2004, before Congress enacted the ethanol mandate.
Even though corn production has increased, corn prices have shot up. A bushel sold for about $3.50 last week, up from about $2 two years ago.
Food industry groups recently wrote lawmakers to complain that diverting corn from food to fuel “strains the supply for the commodity and increases prices for all users.”
“The only winner of the renewable fuel standard has been corn farmers,” said Scott Faber, vice president of federal affairs for the Grocery Manufacturers Assn. “Clearly, the losers have been moms who are having to pay more for the price of milk, meat and other basic staples at the supermarket.”
Ethanol proponents, who say critics have exaggerated the problems, contend that the ethanol mandate’s effect on food prices would be negligible, perhaps no more than 0.2%. “We see a greater effect than that from a hard freeze in California,” the National Corn Growers Assn. and other proponents recently wrote in a letter to lawmakers.
Lawmakers who support a mandate for increased production of domestically produced alternative fuel also emphasize a need to wean the U.S. from imports. “Sure, there are environmental considerations, but there are also national security considerations,” said Wicker, Sen. Bingaman’s spokesman. “A lot of people who are supporting renewable fuels are doing it partly because they want to displace oil imported from parts of the world where they hate us.”
Jon Doggett, vice president of public policy for the National Corn Growers Assn., said corn growers would be stepping up efforts to win passage of the renewable fuel standard as lawmakers visited their districts during the two-week Thanksgiving recess.
“Gas is over $3,” he said, “and there’s a lot of constituents who are going to want to know what they’re going to do about it.”