Fuel for Growth

Despite Controversy, Ethanol Is in High Demand, Lifting Farm Fortunes

AURORA, S.D. -- Past miles of frozen corn and soybean fields and signs warning of crows, a procession of trucks and rail cars ferrying corn kernels is lined up at a plant producing an increasing amount of one of the nation's hottest alternative fuels.

This sprawling plant is grinding massive amounts of corn and turning it into ethanol -- an alcohol-based gasoline additive that was recently touted by President Bush as a way to reduce dependence on Middle Eastern oil, though some experts doubt its value. Mixing ethanol into gasoline displaces some oil consumption and boosts octane levels to improve vehicle performance.

The recently expanded VeraSun Energy Corp. facility here -- in a tiny town an hour north of Sioux Falls on the flat, windswept Upper Plains -- has become one of the country's largest ethanol production operations, running around the clock and churning out 120 million gallons per year. But it still cannot keep up with increasing demand from oil companies that mix the additive with gasoline.

"There's a need for more," said Don Endres, chief executive of VeraSun, "and we just don't have enough."

Workers here unload thousands of pounds of corn at a time into ground-level grates, making a noise like a heavy hail storm. The constant cacophony speaks to the boom in the ethanol business. There are 34 new plants under construction, according to the Renewable Fuels Association, an industry trade group in the District. Eight of the 95 existing plants are expanding. And 150 more new plants or expansions are in the planning stages.

Much of the activity is concentrated in the Midwest, near the nation's biggest corn-producing regions. Most domestic ethanol production comes from corn.

Demand is being driven by several factors, including declining use of another fuel additive, called MTBE, which was once favored by the nation's oil industry but is now being phased out because of state bans and lawsuits alleging groundwater pollution.

The ethanol industry also is being boosted by requirements in federal energy legislation approved last year that requires an increasing amount of the additive to be used. Lawmakers argued that the requirement would help decrease reliance on oil and help farmers. Some studies peg the federal ethanol subsidy to producers at $3 billion per year.

The United States last year consumed an estimated 4 billion gallons of ethanol, compared with 140 billion gallons of gasoline.

The typical ethanol-to-gasoline blend is 1 to 9, but now the ethanol industry is pushing for more widespread use of an auto fuel called E85, a mixture of 85 percent ethanol and 15 percent gasoline. The fuel is meant for use only in some "flex-fuel" vehicles that are specially built to accommodate regular gasoline or other blends, including the majority-ethanol mixture.

That concept faces hurdles. First, a small number of cars sold in the United States are flex-fuel vehicles. And of the 180,000 gasoline stations around the country, only an estimated 600 sell E85. Plus, stations charge more for E85 than gasoline, even though it carries cars fewer miles. The National Ethanol Vehicle Coalition lists four E85 stations open to the public in the Washington area.

VeraSun is trying to persuade some stations in the Midwest to sell its branded E85 with modest success. A BP station near the Aurora plant sells the fuel and has a video screen on the pump that gives information about E85.