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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.

Amid this backdrop of growing doubt, a report by Environmental Working Group that was released in January 2009 shows that federal subsidies for corn-based ethanol are crowding out more-deserving forms of renewable energy, such as solar and wind power. Ethanol got 76 percent of all federal renewable tax credits in 2007, the group says. Tax subsidies totaled $3 billion for ethanol in 2007 and are projected to reach $5 billion in 2010.

What’s the ethanol-makers’ counterpoint? “The benefits have far outweighed the cost,” insists Tom Buis, who is CEO for Growth Energy, an ethanol industry trade group in Washington. In March 2009, the group petitioned Environmental Protection Agency to lift the cap on ethanol in gasoline to 15 percent from 10 percent, so makers can increase sales.

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But in May—not long after the petition—EPA announced that, like California, it intends to require ethanol-makers to show that gasoline that has ethanol reduces greenhouse gases more effectively than gasoline that doesn’t have the additive. That’s a step in the right direction, but the agency also made it clear that it has every intention of seeing that the amount of ethanol that is produced and sold at service stations continues to grow. To help that happen, the Obama administration devoted $2 billion of federal economic-stimulus and farm-bill money to the ethanol industry. In other words, nothing will change anytime soon, and it’s difficult to see how anyone but the ethanol industry will benefit from the status quo.

It’s particularly maddening to see tax dollars being dedicated to such specious endeavors during a time of economic crisis. There is a mounting body of independently conducted scientific research that outlines how ethanol blends—including the 10 percent maximum in gasoline today and the 15 percent maximum that likely will be allowed in gasoline soon—threaten to damage 500 million pieces of gasoline-powered equipment that are owned by consumers and valued at $2 trillion. That includes the lawn and garden equipment that you use to maintain your property, the boats and all-terrain vehicles that you enjoy on weekends and the small generators on which you rely in the event of power outages. In addition, gasoline that has 15 percent ethanol could damage even the car that you drive every day. Tests show that higher levels of ethanol can cause malfunctions on all of this equipment and create serious safety hazards.

Environmental promises ring hollow. Why? More than 100 independent assessments, most of which were conducted since Congress mandated ethanol in 2005, led EPA to conclude in May that more ethanol in gasoline increases emissions of unhealthful air pollution that you and your family breathe. In fact, the latest studies show that, despite what the ethanol industry has claimed for years, corn-based ethanol provides no real solution to global warming.

As for direct consumer benefits, there aren’t any. With today’s 10 percent blend of ethanol in gasoline, your gas mileage has declined by 4 percent, according to tests done by the independent Oak Ridge National Laboratory. At $30 a tank, you’ve already lost $1.20 before you hit the road. If your family fills up two vehicles a week, that’s a loss of mileage worth about $125 a year, and it will grow if gasoline prices rise!

Sure, ethanol might have tempered foreign-oil dependence—a bit. But it’s difficult to know how much of the recent 5 percent decrease in oil use is due to ethanol or the bad economy. What is clear is that the United States in 2008 imported 66 percent of its petroleum, up from 65 percent in 2004, which is the year before Congress passed the ethanol sales mandate, Energy Information Administration data show.

And ethanol production boosted revenues in many rural farm communities. But now the bloom is off that rose amid layoffs and the closing of 25 out of 170 ethanol plants nationwide that largely were built after the 2005 energy bill, because of an exuberant rush among farmers and companies to cash in on the federally mandated market. The ethanol industry hopes that its petition to lift the cap on the fuel in gasoline will reopen those plants. ADM refused to answer any of our questions, so unfortunately we can’t tell you how they can justify supporting an increase in ethanol limits at a time when there is so much doubt about the benefits of corn-based ethanol.

We agree with independent experts who say the more than $2 billion in additional tax credits for ethanol production would be better spent on increased tax breaks for consumers to buy new high-mileage cars, hybrid vehicles and, eventually, fully electric automobiles.

Ethanol-makers have “every right to go to government to tilt the pinball machine their way,” says Michael O’Hare, who is a University of California at Berkeley public policy professor who has studied the environmental impact of ethanol for California. “Government has the duty not to do it.”

PLAYING POLITICS. It’s outrageous (but not necessarily surprising) that lawmakers in Washington don’t seem too concerned about the potential damage that ethanol can have on your pocketbook or common equipment, including your car. [Emerging studies show that higher levels of ethanol could cause cars to fail the emissions tests that are required to register vehicles in many areas.] This poses a major expense, particularly as automakers warn that any higher level of ethanol might void your car warranty. You could be left alone with the cost of replacing your catalytic converter, which can run $500 or more. Or, believe it or not, you might even have to junk your car and buy a new one if it fails an emissions test.

“These laws are passed without the effects being studied,” says Mark Jacobson, who is a Stanford University professor of civil and environmental engineering and who has documented how ethanol increases air pollution. Yet, even as studies roll in that debunk the value of ethanol, lawmakers continue to maintain that everything is just dandy.

For instance, Sen. Richard Lugar, R-Ind., called ethanol “a premier high-performance fuel” when he and fellow farm-state Sen. Tom Harkin, D-Iowa, pushed for the 36 billion-gallon federal mandate in 2007. At the time, Lugar added: “It has tremendous environmental benefits and is a key component to energy independence for our country.”

But despite all of the evidence to the contrary, Lugar isn’t about to backtrack. Although Lugar supports more studies on the possible negative impact of higher blends of ethanol, he maintains that ethanol’s benefits outweigh the drawbacks, and he sees no need to change the mandate, says Andy Fisher, a Lugar spokesperson.

Fisher downplays the political influence of the ethanol lobby in Washington and says it pales in comparison to that of Big Oil. However, records show that the two top ethanol-making companies that are in the United States—ADM and  POET—gave $369,000 in federal campaign contributions to members of both parties between 2004, which is just before lawmakers enacted the initial ethanol mandate, and 2008. During that time, Lugar and Harkin each picked up $8,000, while Obama got $1,250 for his 2004 U.S. Senate campaign coffer, along with $2,315 for his presidential run.

That might not match the donations that flow from an energy powerhouse, such as Exxon Mobil, which gave $3.1 million over the same period to federal lawmakers, but it’s enough to buy the ethanol industry a seat at the table in Washington, one that you—the consumer—will never have.

ENGINE FAILURE. Ethanol’s problems stem from its chemical properties. It’s a solvent, it absorbs water out of the air and—when it’s compared with gasoline—it has a lower heating value, which means less energy in your tank, according to Brian West, who is deputy director of the Fuels, Engines and Emissions Research Center at Oak Ridge National Laboratory in Tennessee. West is the lead author of a study that came out in late 2008 that involved the testing of different blends of ethanol and gasoline—including 10 percent ethanol, or E10; 15 percent ethanol, or E15; and 20 percent ethanol, or E20. Researchers ran a variety of equipment, from gas string trimmers to cars, on the fuels and observed the effects. The ongoing testing is funded by Department of Energy.

Essentially, West and his team found that higher levels of ethanol can wear out engines prematurely and engines to run rough. For instance, West says ethanol can loosen dirt, gum and corrosion in fuel systems, which can cause fuel filters to plug up and engines to malfunction. It can pose dangers to operators, too. Because engines that use ethanol run hotter than those that burn gasoline, they pose a risk for burns when you touch them. This is particularly true for backpack leaf blowers. Higher idle speeds on some equipment, including hedge clippers, chain saws and string trimmers, pose an injury risk due to premature clutch engagement. In short, you could lose a limb, or even your life, if a chain saw’s blade starts spinning unexpectedly.

A study that was conducted by Minnesota with the ethanol industry showed that E10 and E20 pitted and corroded some metals that are used in gasoline tanks, deteriorated plastic that is used in fuel-supply systems for cars and small engines, and caused swelling and slight loss of strength in rubber materials that are commonly used in fuel systems for cars, boats and small equipment.

“We’re terribly concerned for our consumers’ interest, both from an economic standpoint and a safety concern,” says Kris Kiser of Outdoor Power Equipment Institute (OPEI). “We’re talking about hundreds of millions of pieces of equipment, none of which is designed or warranted for fuel above E10.” With enough lead time, the equipment-makers could retool their products to run on higher levels of ethanol, but that still leaves existing equipment vulnerable to damage, OPEI says. And that means possible cost increases for you when you have to buy new equipment.

Automakers share the concerns. Except for flex-fuel cars that tolerate ethanol blends of up to 85 percent, most vehicles are designed and warranted for E10 and nothing more, says Jennifer Moore of Ford.

Boaters were the first to experience the problems that are caused by blending ethanol into gasoline. Marine craft experience unique problems with E10, because they are used less frequently than cars. Fuel sits in their tanks for months, which allows the ethanol to absorb water. Once that happens, the ethanol-water mix then separates from gasoline to form a layer in the tank. The ethanol-water layer dissolves deposits and corrosion inside fuel tanks, which can clog fuel filters and gum up carburetors and engines, says Chuck Fort of boating lobbying group BoatU.S. Worse yet, as a solvent, once it is separated from gasoline, the ethanol-water mix can dissolve the resin that is used in fiberglass gas tanks on some boats and cause leaks to the bilge. The resulting vapors can build up and ignite if there’s an electrical spark. The tanks can cost $10,000 to $15,000 to replace, according to Fort.

When it first became widespread, E10 gasoline caught boaters off guard, because there are no consistent federal standards to notify consumers of the ethanol content in gasoline that is sold at stations across the nation.

Nearly all gasoline that is sold today includes some percentage of ethanol, but it’s a real challenge for you to determine exactly how much is in the fuel that you buy. Labeling standards that could identify the amount of ethanol that comes from each gasoline pump is left to states, which have a patchwork of requirements. In California and Virginia, for instance, there are no requirements that the presence of ethanol be disclosed. Even in places where labels that disclose ethanol are required, there is no language that warns that it might cause engine problems.

Why? Well, nobody wants to assume the liability for damage from ethanol that is blended into fuel. But while ethanol, oil and auto-industry officials fight over who’s responsible for letting you know about ethanol-related damage, attempts by state and federal authorities to test gasoline that is bound for service stations run into problems, too.

For instance, late last year, Iowa State Attorney General Tom Miller prosecuted the Pronto Markets convenience-store chain for selling gasoline that had more than 10 percent ethanol. The company sold E85 in its unleaded regular pumps (which should pump no more than E10 gasoline) to unsuspecting motorists and pocketed an extra 30 to 45 cents per gallon, because E85 was priced lower than conventional E10 at the time.

Blends of ethanol that are above E10, such as that sold at Pronto, could slowly degrade the catalytic converter in some cars, which makes automotive engineers and air pollution control regulators worry. EPA is examining the potential for premature wear after the Oak Ridge study showed that some vehicles have hotter exhaust when they run on ethanol blends than they do when they run on pure gasoline. “This could mean there are some vehicles out there that are sensitive and some that are not sensitive,” says Paul Argyropoulos of EPA’s Office of Transportation and Air Quality.  

In the limited but ongoing study at Oak Ridge, researchers also have found that “check-engine” lights have come on when they tested ethanol blends. This has the auto industry worried that E15 could trigger a recall if even a fraction of 1 percent of cars have their check-engine lights come on, according to one automotive executive who would discuss the issue with Consumers Digest only on the condition of anonymity.

TAXING TIMES. But we’re talking about a lot more than nickels and dimes when it comes to the tax breaks for ethanol. “The ethanol industry would not exist without subsidies,” says Wallace Tyner, who is a professor of economics at Purdue University and who has studied ethanol for California. Gasoline sellers—namely oil companies—get a 45-cent tax credit for each gallon of ethanol that they sell, which is taken right off of the top of what they pay Uncle Sam, Tyner says. It saved the big companies more than $4 billion last year. On top of that, despite lip service about free trade in Washington, the United States levies a 58-cents-per-gallon tariff on ethanol imports, Tyner adds. This keeps the price of domestically produced ethanol high by discouraging imports of cheaper ethanol that is made from Brazilian sugar cane.

If there’s any hope, it’s that the ethanol subsidy expires in 2010, so Congress will have to ask whether it should renew or modify the tax break and tariff or let them expire. We recommend that lawmakers let the tax advantages expire and do a few other things, particularly if they don’t simply pull the plug entirely on corn-based ethanol, a solution that, unfortunately, is highly unlikely.

First, at a minimum, Congress should require that clear labels appear on all fuel pumps that have fuel that contains ethanol. Those labels should specify the percentage of ethanol in the fuel and provide you with a prominent warning, such as: “Not all equipment is designed to run on ethanol. Make sure to consult your owner’s manual before fueling your vehicle or motorized equipment.”

Next, the federal government should set any increase in the ethanol blend far enough in advance to give the makers of cars and other gasoline-powered equipment enough time to redesign their products to run on fuel that has a higher percentage of ethanol. Congress also should specify continued and ready availability of E10, or even straight gasoline, until Americans have a reasonable amount of time to get the full useful life out of their cars and equipment.

In the interim, Congress should consider how to help you. One way would be to enact a tax credit for consumers who invest in new offroad equipment that is designed to run on a higher ethanol blend instead of giving another tax credit to the oil industry.

Another remedy would be to set up a rebate for those whose cars still run fine but no longer can pass an emissions test because of potential damage to pollution controls that are caused by ethanol. By scrapping their older car for the rebate, motorists at least can gain a down payment on a new or newer used car that runs cleaner.

Fortunately, that idea seems to have gained traction. At press time a proposed bill in the House would give motorists up to $4,500 toward a new fuel-efficient vehicle for turning in their old gas-guzzling, smog-belching clunkers. Congress should pass the bill straightaway to help clean the air and cut dependence on foreign petroleum.

Instead of mandating ethanol, Congress should strongly consider mandating better fuel economy for automakers, setting production levels for hybrid and electric vehicles and giving consumers more tax credits to buy such vehicles. In California, a state where electricity is relatively expensive, motorists can drive electric cars the same distance as a conventional car on a gallon of gas for between $1 and $1.33, depending on their utility. Now there’s a way to clean the air, stem global warming and save money at the pump, while cutting oil imports and eliminating conflicts between food and fuel.

William J. Kelly has written on the topics of  the environment and energy for 25 years. He is the co-author of “Smogtown: The Lung-Burning History of Pollution in Los Angeles”and currently is staff correspondent for the weekly California Energy Circuit. His reporting on the environment and energy has appeared in the Los Angeles Times, Scientific American, San Francisco Chronicle and LA Weekly.

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