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Wednesday, June 4, 2008 01:40 am

Pity the fuel

Corn-based ethanol continues to take a beating

Untitled Document Not even $4-per-gallon-gas has been able to resuscitate the nation’s corn-ethanol industry, which slumped in 2007 as the price of corn, the country’s main feedstock, rose to record levels. “These ethanol plants are making money, but they’re not making a lot, not as much as they were one or two years ago,” says Rodney Weinzierl, executive director of the Bloomington-based Illinois Corn Growers Association.
Although consumer demand and processing capacity at biorefineries have held steady, the price of corn, which recently topped $6 per bushel — rising from just under $4 in January — has depressed once-hefty profits from ethanol production. Weinzierl says the ethanol market would be doing better if ethanol prices could keep up with gas prices, which have climbed 33 percent in the past four months, from about $3 per gallon on average in February to $3.93 today. Compare that, he says, to ethanol, which has seen growth of 6 percent since February, from $2.35 per gallon in February to the current price of around $2.50 per gallon. Weinzierl also says ethanol has been unable to penetrate certain regions of the U.S. that have been closed off to ethanol markets because of limited infrastructure and refining capacity in these areas. Other industry observers cite growing hostility toward biofuels, ethanol in particular — which many believe have driven up food costs and created food shortages in some parts of the world — as the real cause for ethanol’s slump. At home, critics have long argued that ethanol was too heavily subsidized by U.S. taxpayers. The most recent Farm Bill, which Congress passed in May over President George W. Bush’s veto, may signal that even Washington lawmakers have soured on ethanol. The bill provides nearly $800 million to encourage the development of cellulosic ethanol and for other areas of biofuels research, such as expanding production of biofuels from animal manure, livestock and food-processing waste, as well as agricultural and forestry crops waste materials. As far as corn-based ethanol goes, the Farm Bill contained only a small appropriation to help existing refineries reduce their use of fossil fuels.
This isn’t exactly good news for the some 50 companies that have applied to the Illinois Environmental Protection Agency to build ethanol facilities here and hoped to cash in on sizable profits enjoyed during the initial ethanol gold rush of 2006. In addition, banks are reluctant to finance new endeavors, and some ethanol producers may begin to consolidate some operations this year, says Walker Filbert, president of Heartland Ethanol LLC.
He adds that although well-managed plants will likely maintain profitability, it’s unlikely that many new ones will come online this year. This includes Heartland’s proposed $300 million biorefinery in Waverly, which is being held up in a court challenge by local residents. “Nothing is going to happen with the Waverly plant before 2009,” he says.  

Contact R.L. Nave at rnave@illinoistimes.com.
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