Drunk on Ethanol subsidies

Written for the High Plains Journal

Today we are dealing with a strategy that two sociologists generated in 1966 called the Cloward-Piven Strategy for flooding the economy with handouts in order to completely destroy the economy of the nation. Their “theory” was that it would end poverty and yet if you have seen regions or cultures completely dependent upon government payments, you have witnessed a few “haves” and a bunch of ‘have NOTS.” For all of you who’s answer to taking a government payment, or an easement for wind, solar or pipelines, is “I have to take it or my neighbor will gain an advantage,” you are the problem.

While I could walk through about any scenario to make my point here, today I am going to choose ethanol because on Sept 26, 2024 in Brookings, SD, Doyle Turner from Iowa and I debated two individuals who absolutely were champions for a socialist society and acquiring as many taxpayer dollars as possible for the ethanol industry. Jim Seurer, CEO of Glacial Lakes Energy, even made the statement that “the Renewable Fuel Standard was the best thing for agriculture in the history of the nation.” Sorry Jim, I am putting diesel fuel, hybridization, fertilizer, pest management and about 1,000 other ag things ahead of a mandate, which is a taxpayer subsidy, of the RFS. But why wouldn’t he think that? The entire history of ethanol production has been about subsidies. In 2024, if the ethanol industry cannot stand on its own, it needs to die.

Let’s take a walk down history lane.

The Energy Information Agency (2005) describes the history of ethanol. Ethanol’s first use was to power an engine in 1826, and in 1876, Nicolaus Otto, the inventor of the modern four-cycle internal combustion engine, used ethanol to power an early engine. Ethanol also was used as a lighting fuel in the 1850s, but its use curtailed when it was taxed as liquor to help pay for the Civil War. Ethanol use as a fuel continued after the tax was repealed, and fueled Henry Ford’s Model T in 1908. The first ethanol blended with gasoline for use as an octane booster occurred in the 1920s and 1930s, and was in high demand during World War II because of fuel shortages.

Today’s ethanol industry began in the 1970s when petroleum-based fuel became expensive and environmental concerns involving leaded gasoline created a need for an octane. Corn became the predominant feedstock for ethanol production because of its abundance and ease of transformation into alcohol. Federal and state subsidies for ethanol helped keep the fuel in production when ethanol prices fell with crude oil and gasoline prices in the early 1980s. This also helped spawn the “Minnesota Model” for ethanol production, in which farmers began producing ethanol to add value to their corn (Bevill, 2008). The Minnesota Model was an agreement between local public and private parties who work to keep profits in the community by providing jobs (and the economic benefits associated with population) and adding value to agricultural products while strengthening rural communities. Ethanol’s use as an oxygenate to control carbon monoxide emissions, encouraged increased production of the fuel through the decade and into the 1990s.

With the phasing out of Methyl Tertiary Butyl Ether (MTBE) as an oxygenate and a desire to decrease dependence on imported oil and increase the use of environmentally friendly fuels, ethanol’s demand increased dramatically. In 2005, the first Renewable Fuels Standard (RFS) became law as part of the United States’ energy policy (RFA, 2005a). It provided for ethanol production of 4 billion gallons in 2006 with an increase to 7.5 billion gallons by 2012 (RFA, 2005a). Since that time, The Energy Independence and Security Act of 2007 signed by President Bush requires renewable fuel usage to increase to 36 billion gallons annually by 2022 (RFA, 2008b). The new RFS which currently guides national ethanol policy states that only 15 billion gallons of production should be produced from corn grain (starch) —the remaining 22 billion should come from other advanced and cellulosic feedstock sources.

Then there is this assessment from the Taxpayers for Common Sense organization which I must say makes a lot of COMMON SENSE:

Furthermore, the farm bill, a massive piece of legislation covering topics ranging from nutrition assistance to broadband internet, provides government subsidies for the now-mature ethanol industry, including corporate agribusiness giants such as Archer Daniels Midland. The majority of farm bill support for corn ethanol has come from energy title programs such as the Bioenergy Program for Advanced Biofuels (BPAB), trade programs such as the Market Access Program, and other commodity and crop insurance supports for corn and ethanol blender pumps (which dispense higher blends of corn ethanol, including E15). While the Rural Energy for America Program (REAP) also subsidized ethanol blender pumps beginning in 2011, Congress prohibited such subsidies in the 2014 farm bill. In 2015, 2020, and again in April 2021, however, USDA unilaterally announced more blender pump subsidies through the Commodity Credit Corporation (CCC), a fund typically reserved for farm loans and other major farm subsidy programs.1

While the ethanol tariff and the $6 billion-per year ethanol tax credit (known as VEETC) ended in 2011, a maze of ethanol subsidies still allows the federal government to pick winners and losers, distort energy and agriculture markets, and contribute to the expansion of corn into areas unsuited for intense agricultural production, which increases taxpayer costs of agricultural subsidy programs.

The RFS mandate requires oil and gas companies to blend increasing amounts of biofuels with gasoline and diesel each year, rising to 36 billion gallons in 2022.

Sadly, I have two more pages of examples of taxpayer dollars from our grandchildren that are going to subsidize ethanol. In closing I would ask all farmers to look at the pattern here. The government is saying we need to subsidize these ethanol plants because they are going to improve our GHG emissions, and yet if the plants don’t collect CO2 emissions they will be forced out. The same ole story applies here, when you rely on government for your bottom line you will never be good enough and the target moves more than a pheasant in the Northern Great Plains during the month of October. Quit being drunk on the ethanol-alcohol story and realize that it must be self-sufficient to survive the battle.