Fuel for Growth
Despite Controversy, Ethanol Is in High Demand, Lifting Farm Fortunes

By Justin Blum
Washington Post Staff Writer
Saturday, February 18, 2006

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.

Ethanol producers foresee steady increases in production -- thrilling corn farmers, who have found a new market for their crops. But the industry expects that in a decade it will max out available corn and grain crops, producing 15 billion gallons of ethanol a year from those sources.

The industry is hoping to eventually increase production using a different type of ethanol, called cellulosic ethanol -- using plant material and agricultural waste, including wood chips, stalks or the formerly obscure switch grass mentioned in Bush's State of the Union address. Though technology exists to produce cellulosic ethanol, the process is too expensive to be competitive.

In the address, Bush called for more money to be spent on research into cellulosic ethanol production. "Breakthroughs on this and other new technologies will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025," Bush said.

Energy analysts said ethanol reduces some oil use. But there have been conflicting studies about whether more energy is used to grow corn and produce ethanol than it provides as a fuel. Electricity -- typically produced from natural gas or coal -- is needed to operate ethanol plants, for instance, and farm equipment uses petroleum products.

Tad W. Patzek, a professor of geo-engineering at the University of California at Berkeley, said ethanol production uses far more energy than making gasoline and releases more greenhouse gases, which have been linked to global warming. He co-authored a study last year that said corn ethanol requires 29 percent more energy to make than it produces.

The industry disputes Patzek's conclusions, saying the making of ethanol is cleaner and more environmentally friendly than gasoline production.

Environmentalists have not been sold on ethanol. "The greatest thing to recommend it is that it's not gasoline," said David Hamilton, director of the Sierra Club's global warming and energy program. "What is oil dependence worth versus a very high amount of energy it takes to make?" Still, he said cellulosic ethanol holds more promise than corn-based ethanol.

There are other issues, as well. The additive does not include as much energy as gasoline and results in fewer miles to the gallon. Corn-based ethanol, the skeptics say, has been competitive on price only because of big corn subsidies and tax breaks for blending the additive with gasoline. And the logistics of supplying ethanol are complicated; it cannot be shipped in pipelines because ethanol can be contaminated.

Whatever the downsides, this much is clear: Ethanol has boosted local economies and the fortunes of corn farmers.

VeraSun opened its plant here in late 2003. The company has another plant in Fort Dodge, Iowa, and one under construction in Charles City, Iowa. And VeraSun is considering doubling capacity at its existing plants.

Farmers who supply the plant are excited about their prospects.

David Diedrich, who farms 4,500 acres about eight miles from the Aurora plant, is sending all of his corn to VeraSun, a change from several years back, when he sent corn to the West Coast for export to Asia. He said he makes more money selling his corn to the ethanol plant.

"It's just kind of a dream come true, really, for us," Diedrich said. "It's using our own resources, renewable resources, to produce energy. It's improving our economy here. The economy for the corn growers themselves has just been a huge thing to help support our prices and get demand."

Inside the Aurora facility, there are giant metal containers and a tangle of pipelines. Big industrial fans and motors create a constant buzz, requiring workers to use earplugs. Converted starch from the corn is fermented with yeast, giving off a pungent smell. A laboratory monitors the process; beakers are filled with fluorescent blue and yellow liquids.

Outside, workers pump the finished ethanol into the tops of giant rail cars, ready for shipping to the East and West coasts, where it will be mixed with gasoline at supply terminals and stations.

Endres of VeraSun sees E85 as a way to significantly increase ethanol demand and decrease dependence on foreign oil. Endres, who worked in the technology sector before founding VeraSun with several colleagues, said persuading consumers to buy E85 will take some time.

"We need to start working now to develop that market," he said. "We think it's a good, long-term demand driver."