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State Representative Michael Paymar
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-4199
For more information contact: Joan Nichols 651-29X-XXXX
Column/LTE
It’s Time to End Ethanol Subsidies
By Representatives Joyce Peppin and Michael Paymar
The Legislature is making difficult cuts to deal with a $1 billion deficit. Next year the financial problems of our State could be much worse. How is it possible that under such economic conditions, taxpayers are subsidizing a profitable industry to the tune of $15 million a year?
Since 1986, Minnesota lawmakers have encouraged the development of a sizable state ethanol industry. At the time, (seemingly well-intended) ethanol was conceived as way to help rural Minnesota while producing a less-polluting energy source that would reduce our dependence on foreign oil. The State began paying the owners of ethanol plants 20 cents per gallon in production incentives.
These per gallon payments are scheduled to end in 2010. However, during the budget crisis in 2003, the Governor and Legislature temporarily reduced the payments (for fiscal years 2003 through 2007) to 13 cents per gallon, with a pledge to make up the remaining 7 cents per gallon as funds became available. In 2004, these "deficiency payments" began flowing to 13 ethanol companies totaling $5.3 million through the end of the fiscal year 2007. The Minnesota Department of Agriculture predicts that by 2013 when the last scheduled "deficiency payment" is made and the ethanol subsidy ends, the total amount for the entire program will be a whopping $376 million in taxpayer subsidy.
While we don't necessarily agree with subsidizing any industry, we understand the sentiment to assist a fledgling business with huge potential. But twenty years later, how can we possibly justify continuation of the subsidy to an industry that is making a handsome profit? How is it possible the now defunct Gopher State Ethanol Company that was located in St. Paul continues to receive deficiency payments? Something stinks and it's more than the foul emissions that were emitted from that plant.
The subsidies are bad enough, but the myths about ethanol are even harder to swallow given what the research has exposed about the enormous energy used to produce ethanol and the negative impact on the environment.
According to a 2005 report by the U.S. Department of Agriculture, corn-based ethanol costs an average of $2.53 per gallon to produce. This is several times what it costs to produce a gallon of gasoline because ethanol must be transported by truck, barge or train, all being more expensive than pipelines, not to mention the energy required to grow corn and then transport it to an ethanol plant.
There is no conclusive evidence that ethanol improves air quality. Even if ethanol reduces some carbon monoxide, it increases nitrogen oxide that produces smog and has a direct impact on the ozone. Ethanol also results in nearly twice the greenhouse gas emissions as the oil it would replace because of land use changes, according to Princeton University’s Woodrow Wilson School of Public and International Affairs. The Princeton study showed that after taking account land use changes, corn-based ethanol increases greenhouse gasses by 93 percent compared to using gasoline over a 30-year period.
Noted conservationist, Ted Williams stated that no method of agriculture uses more insecticides, herbicides, or more nitrogen fertilizer. In addition, corn production erodes topsoil 10 times faster that it can accrete. Williams goes on to state that the production of ethanol requires 1,700 gallons of water and each gallon of ethanol also produces 12 gallons of vile sewage-like effluent.
The University of Minnesota and the Nature Conservancy suggest that converting existing prairie or peat lands to corn is a net loser, sending much more carbon into the atmosphere than is saved by cutting back on fossil fuels. They estimate that 7 million of 36 million acres enrolled in the Conservation Reserve Program could be converted to cropland primarily because of ethanol. The runoff of nitrates and other chemicals pollute our rivers and lakes and will reverse the progress we have been making in reducing harmful leaching into our waterways.
Another cost of increased ethanol production is the increase in food as a result of changes in land use. In 2006, Joachim Von Braun, the director of the International Food Research Policy Institute said this about food prices. “I do not just expect somewhat higher food prices, but new instability as well," he said. “In the future, instability of energy prices will be translated into instability of food prices.” The cost of food has skyrocketed because ethanol has driven up the cost of corn as farmers are diverting acreage from the production of other grains to corn to take advantage of subsidized ethanol. As one turkey farmer recently said, "I watched the cost of feed increase by a third or more. The one thing that would help would be to end federal and state ethanol subsidies."
Minnesota now has 18 operating ethanol plants in the state, with 10 more proposed and/or in the early planning stages. According to the Minnesota Pollution Control Agency, ethanol production in Minnesota is projected to nearly triple, climbing to two billion gallons per year.
We have both introduced legislation to end taxpayer subsidies to the ethanol industry and would like to see the Legislature act this session. We expect our rural colleagues, both Republican and Democrat, to resist. But it's time for common sense to prevail and the subsidies to the ethanol industry to end.
We support efforts to become energy independent. We believe we need to look at every possible avenue to meet our energy needs so that the United States reduces its reliance on foreign oil. But continuing to subsidize a profitable ethanol industry without looking at the negative budgetary considerations and environmental impact is misguided and should stop. If ethanol has merit, the industry should be able to stand on its own without subsidies from the federal or state government.
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