The feasibility's done; legislation is passed. Time to put ethanol into our gas.

As America's dependence on foreign oil continues to increase and prices for gasoline, diesel, natural gas and other petroleum-based products undergo seasonal jumps to near record levels, it behooves the country to find a means to improve energy independence.

Recent actions by the Texas and Oklahoma state legislatures and the U.S. Senate, in addition to completion of a feasibility study into building an ethanol plant, move the country a little nearer that goal.

Last month Texas and Oklahoma passed bills that would provide a per-gallon incentive for ethanol. Incentives could come as a tax credit offered after an ethanol plant is in production.

The Texas incentive is 20 cents per gallon, beginning in the year 2005. Many states, primarily in the Midwest, already have such incentives and are far ahead of the Southwest in constructing ethanol plants.

Hard on the heels of the Texas and Oklahoma legislation, the U.S. Senate passed an amendment to its comprehensive energy bill that would triple renewable fuels use by 2012. This is the second year in a row that the Senate has overwhelmingly passed a renewable fuels standard (RFS).

And as legislators were considering incentives, the Farmers Co-op Elevator in Levelland, Texas, announced completion of a $300,000 ethanol feasibility study for building a 40 million gallon a year ethanol plant valued at about $60 million. This facility would be the first in Texas.

Beneficiaries of intensified interest in ethanol and other bio-fuels production include farmers and ranchers who use thousands of gallons of fuel annually to produce crops and heat their homes and livestock facilities. They also use fertilizers produced with energy from natural gas.

But there would be other benefits as well. The most obvious would be the U.S. economy, which could trim its dependence on foreign energy, reducing potential for fuel shortages created by unrest in oil rich but politically unstable countries. Trade balance would improve.

Rural economies also would improve as plants, most likely built close to raw material sources, would stimulate tax bases, provide employment and create a bigger demand for crops such as grain sorghum and corn.

Officials with both the Oklahoma Sorghum Commission (OSC) and the Oklahoma Grain Sorghum Association (OGSA) hailed the ethanol legislation as an all-around victory for farmers, the state's rural economy and the environment. The Texas Grain Sorghum Association (TGSA) labeled the legislation a victory for both grain producers and the rural communities they represent.

James Wuerflein, a Garfield County, Okla., farmer who chairs the OSC, says farmers in areas near ethanol plants may see higher prices from increased market competition for grain sorghum. About 12 percent of the U.S. grain sorghum crop goes into ethanol, and that figure has jumped about 23 percent in the last two years.

Wuerflein says the Southwest should take advantage of increased interest in bio-fuels. “Nationwide, a record number of new ethanol plants were constructed last year and many more are scheduled for completion in 2003. “This legislation allows Oklahoma to compete with other states for new development.”

Steve Simpson, president of OGSA and a Garfield County farmer, cites the positive economic impacts a single, 40-million gallon ethanol plant would have on a rural Oklahoma community, including:

  • A one-time boost of $142 million to the local economy during construction.

  • 41 full-time jobs at the plant and a total of 694 jobs throughout the entire economy.

  • An average of 5 cents to 10 cents added to each bushel of grain.

  • A boost to state and local sales tax receipts by an average of $1.2 million.

Texas Grain Sorghum Association (TGSA) President Bill Kubecka of Palacios, says the legislation, “coupled with other work done on a national level, improves potential for additional off-take of grain sorghum.” He says an increase in grain price usually follows construction of an ethanol plant in a region.

Dale Artho, chairman of Texas Grain Sorghum Board (TGSB) points out that an economic feasibility study conducted by the State Energy Conservation Office indicates an ethanol plant processing from grain sorghum has a high probability of profit. A plant would generate $1.29 million dollars in additional sales tax revenue, add 30 to 35 jobs to an area and generate $41 million for a local economy.

“Ethanol is a win for everyone,” says Kubecka. “Producers have another market for their product, the environment gets a break from pollution, and rural communities get a shot in the arm from value added production.”

Dave Frederickson, president of the National Farmers Union, says the renewable fuels standard makes sound economic sense for the country.

“America needs a comprehensive energy plan that will address energy shortages and utilize renewable resources,” he says. “The Senate is right on target with its renewable fuels standard.”

He points out that natural gas prices have more than doubled over the last year and are expected to mushroom in 2004.

The task is incomplete, however. In April the House of Representatives passed its own renewable fuels standard that Frederickson says “needs work.”

With the House plan, the RFS would reach five billion gallons in 2015 and would not ban methyl tertiary butyl ether (MTBE). National Farmers Union prefers requiring the increase by 2012 and a total phase-out of MTBE, as provided in the Senate's plan.

Even as the political wrangling was in progress, the Farmers Co-op Elevator in Levelland was completing its study.

“We are extremely pleased and excited to be at a point where a decision to build an ethanol plant or put plans on hold are only a few weeks away”, says Randy McLarty, general manager of Farmers Co-op Elevator.

“Our board of directors and our consultants will take all the information into account and scrutinize all aspects of the 250-page study,” says McLarty. “There are things in the study that look very positive, but on the other hand logistical issues need to be addressed. We want to make sure that what we are doing is good for everyone involved.”

Co-op officials say they are cautiously optimistic about constructing a plant in Levelland.

Ethanol production in the United States has grown to 2.6 billion gallons a year with 70 plants currently in operation and another 10 under construction. Ethanol, an oxygenate, is added to gasoline to replace MTBE and make a cleaner burning fuel.

One bushel of grain will yield one-third ethanol (2.67 gallons), one-third distillers' grains and one-third carbon dioxide.

rsmith@primediabusiness.com