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Investigative Report

Against the Grain

The Problems with Ethanol

Ethanol has been touted as an alternative fuel that will help the environment, reduce U.S. reliance on foreign oil and save you money on gasoline costs. But growing evidence indicates that corn-based ethanol is bad for engines, the environment and your wallet. So, why in the world is the federal government spending billions of dollars each year to encourage the production of something that is fraught with so many problems?

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Boaters returned to water this spring. Those who took steps in the fall to prevent fuel-related engine problems that are a direct result of a federal mandate for higher levels of corn-based ethanol in the nation’s gasoline sailed away smoothly. Those who failed to do so—or had no idea about the impact of the addition of ethanol to the gas in their engines—likely were stuck at the dock as they paid to fix damaged fuel lines, clogged carburetors and gummed up engines that ran roughly, if at all.

Unfortunately, it’s all a part of the hidden costs of a federal mandate to blend an ever increasing amount of ethanol into the gasoline that you burn, to 36 billion gallons a year by 2022 from 4 billion gallons a year in 2006. Known as the renewable-fuels standard, the requirement came under the 2005 Energy Policy Act and then was redoubled under the 2007 Energy Independence and Security Act. Last year, U.S. producers made 9 billion gallons of ethanol, which consumes about a quarter of the nation’s corn crop.

When Congress struck the bipartisan ethanol deal, which was supported by President George W. Bush and then-Sen. Barack Obama, it created a maddening scenario that sounds like a refrain that could have been sung by country singer Jerry Reed: Big agriculture, oil and automakers got the gold mine, and you—the consumer—got the shaft. They got the money and you got the expense of dealing with an ill-conceived, hastily passed mandate that doesn’t deliver the benefits that the ethanol industry and Congress promised.

FUELING FRUSTRATION. Here’s what happened when the federal government decided to prop up the ethanol industry: Big agriculture—particularly companies such as Archer Daniels Midland (ADM), the nation’s top ethanol-maker and a major food processor—got a guaranteed market. Oil companies received billions of dollars in tax breaks. With overly complicated logic along the lines of a Rube Goldberg–inspired contraption, Detroit automakers got credit toward meeting federal fuel-economy standards for flex-fuel cars that can run on any blend of ethanol and gasoline, even though mileage declines as the percentage of ethanol in gasoline increases. Automakers use the credits to offset the poor mileage of highly profitable sport-utility vehicles and pickup trucks in meeting the federal fuel-efficiency standard.

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You, the consumer, got a bill in the form of damage to small-engine equipment in your toolshed, higher food prices and an increasing taxpayer indebtedness to big industry to pay for the ethanol subsidies—contrary to what lawmakers and ethanol producers said—not to mention dirtier air.

Yet, even as these costs to consumers become abundantly apparent, lawmakers and the ethanol industry continue to mislead you. You might be familiar with some of this story—that ethanol frees you from the bad guys who control oil in hostile nations, saves you money, creates jobs, cleans the air and cuts gases that pose a global-warming threat to future generations. Yes, Congress can pull the plug on ethanol subsidies when they expire in 2010 or repeal the ethanol mandate altogether. But we don’t see that happening, despite a growing amount of evidence that it should send the ethanol industry packing.

The California Air Resources Board (CARB) limited the future of ethanol within the state’s borders in spring 2009 by passing a low-carbon-fuel standard that requires ethanol-makers to actually cut emissions that are related to the production of ethanol. In the farm belt, Minnesota Office of the Legislative Auditor recommended this spring that the state end public payments to ethanol producers. The payments totaled $93 million over the past 5 years, and $44 million more are expected by 2012. Ethanol doesn’t have enough environmental benefits to justify the subsidies, the office says.

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