Straight Talk About Ethanol

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Reacting to inaccurate press reports of a comment I made earlier this month, at least one pundit has recently accused USDA of proposing a bailout of ethanol refiners affected by recent volatility in corn futures markets. I want to set the record straight. USDA is not engaged in refiner bailouts. We are not writing down or writing off bad debt or making distress loans to ethanol refiners. We are, however, committed to the accelerated development of biofuels, including but not limited to ethanol, as a strategic investment in America’s energy security.

The reason is straightforward. America needs to produce more of our own energy -- and of the many emerging technologies on the horizon, ethanol is among the most promising.

T. Boone Pickens is not the first person to point out the destructive effects of sending hundreds of billions of dollars abroad, much of it to countries that don’t like us very much, to pay for fuel that we can and should produce for ourselves.

As former CIA Director Jim Woolsey never tires of pointing out, we are effectively financing both sides of the war on terror. That needs to stop.

Nor should the American economy remain forever a hostage to OPEC, vulnerable to opportunistic manipulation of the markets by a foreign government cartel. That too needs to stop.

We have it within our power to transition to a cleaner, affordable, more secure, domestically produced energy supply -- not overnight, but over the next 20-30 years. We have set in motion a series of policies that will lead us in that direction. These policies are already paying dividends. They should be continued, and strengthened.

Specifically, President Bush has proposed to reduce U.S. gasoline consumption by 20 percent over ten years. Pursuant to that goal, the Congress has passed and the President has signed a Renewable Fuels Standard calling for the production of 36 billion gallons of biofuels by 2022. Coupled with significant increases in engine efficiency and widespread adoption of hybrid and plug-in hybrid automobiles in the years ahead, this has the potential to dramatically shift the balance of power in energy markets in favor of American producers and consumers.

This is a big undertaking, and it should be acknowledged that ethanol is not the sole solution to our energy woes. We need to expand domestic production of oil and natural gas. The United States and Canada have a very large tar sands and oil shale resource. Clean, safe, next generation nuclear plants and clean coal hold enormous potential for electric generation. Wind, solar, biodiesel, and other renewable energy resources will become increasingly important in the years ahead. At some point in the future, all-electric or hydrogen fuel cell vehicles may revolutionize the automobile.

But that day is yet to come. At this time -- and for the foreseeable future -- ethanol has a critically important role to play. In 2000, the United States produced 1.6 billion gallons of ethanol. This year, production will exceed 9 billion gallons. Our current ethanol production is corn based, but second and third generation biofuels utilizing non-food feed stocks hold even greater potential. In fact, as these new technologies become cost-competitive, USDA and the Department of Energy (DOE) have estimated that we can supply as much as 30 percent of the nation’s transportation fuel needs with ethanol. That percentage is likely to grow as current feed stocks are genetically enhanced and as entirely new feed stocks are developed.

Earlier this year, DOE’s economists estimated that ethanol is saving U.S. motorists 20-35 cents per gallon of gasoline. Our taxpayer’s investments to help develop the ethanol industry are already paying off as our citizens saved an estimated $20 - $40 billion this year alone from adding this renewable fuel to the blend of gasoline. Ethanol is already making a tangible difference to American households while reducing imports and slashing greenhouse gas emissions by an estimated 19 percent, as compared to gasoline. Ethanol is good for consumers, good for farmers, good for the environment, and good for national security, and USDA is proud to be a partner in helping to bring this strategic industry to maturity.

Mr. Schafer is the U.S. Secretary of Agriculture
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