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Ethanol Is Boon for Lobbyists

POSTED: 11:54 AM ET, 11/19/2008 by The Editors

Big corporate interests are lining up to battle for and against the expansion of the U.S. ethanol industry, producing a bonanza for lobbyists and public relations firms in the next Congress.

A new coalition announced on Tuesday that it had signed up at least 50 groups--including the Grocery Manufacturers Association, National Pork Producers, American Meat Institute, National Council of Restaurant Chains--to fight for the removal of tax breaks and tariff protections for ethanol. To map strategy, the coalition has hired Glover Park Group, co-founded by Joe Lockhart, former chief spokesman for President Clinton.

The food industry, including groceries, livestock producers and cereal manufacturers, contends ethanol is a main culprit in rising food prices because beef, pork, turkey and poultry producers have to compete against ethanol refineries for corn, raising animal feed prices.

But the ethanol industry has big guns on its side as well. Former Senate Majority Leader Tom Daschle, a close adviser to President-Elect Barack Obama, was a main architect of a federal law requiring ethanol use in gasoline.

Last week several large ethanol producers announced the formation of a new pro-ethanol group, Growth Energy, which plans ads in the New York Times refuting claims that ethanol is to blame for higher food prices. A leader in Growth Energy is Jeff Broin, chief executive of Sioux Falls, S.D.-based Poet, Inc..,a private company that is the largest producer of ethanol in the country. The company was represented by South Dakotan John Thune before he won a Senate seat in 2004.

The pro-ethanol group released an internal memo from the Glover Park Group outlining a campaign to "obliterate whatever intellectual justification might still exist for corn-based ethanol among policy elites."

Broin said the Glover Park memo exaggerates the impact corn-based ethanol has had on rising food prices. "The lies that the Big Food lobby has been spreading about clean, green biofuels have finally been exposed as an intellectually dishonest smear campaign," Broin commented.

Meanwhile, the Alliance for Abundant Food and Energy---whose members include Deere & Co., ADM, Monsanto Corp. and the Renewable Fuels Association--was formed several months ago to protect subsidies for ethanol that is produced with advanced, energy-friendly technologies.

The battle has produced strange bedfellows. Environmental groups and conservative fiscal watchdog organizations have joined with grocery chains and agribusiness to call for the scaling back of ethanol subsidies. At Tuesday's rollout of the Food Before Fuels Campaign, Environmental Working Group President Ken Cook--a persistent critic of the poultry and meat industries---stood next to a representative of the National Turkey Federation. Cook said too little was known about the impact of ethanol expansion on habitat, soil and water. "We should have gotten the science right before we started putting billions of dollars into ethanol," he said.

By The Editors |  November 19, 2008; 11:54 AM ET Harvesting Cash
Previous: Clinton to Help Wife, EPA Relaxing Rules, Cheney and Gonzales Indicted in Texas | Next: Lobbyists in the Transition

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My company Flex Fuel U.S. is the first and only company to ever receive an EPA certification for an E85 flex fuel conversion system, of course I support ethanol and government support for the industry.

As Americans we need to consider how we're going to meet future energy needs, and how those needs will affect our environment and our economy. Oil is not sustainable, and neither is natural gas -- At some point these non-renewable energy sources will run out. The other thing we need to think about is where does our oil come from? If we are to be honest than we have to admit that American dollars are going to countries that either do not like us, or at worse support terror organizations that are trying to destroy our way of life. Do we really want to send our hard earned dollars to these countries -- I think not...

We need a strategic plan to bridge our oil consumption to a cleaner sustainable solution. What that solution will end up being no one knows for sure. The one thing that we do know is that ethanol is here today, it's sustainable, it's carbon netral, and it's home-grown energy. There is no other product available to us that can move us from oil dependence as quickly and economically as ethanol. All of the myths that the API, and special interests like the Grocery Manufacturers created have been dispelled. The real truth is that ethanol is good for our country and bad for the oil sheiks.

If we want to really know what an ethanol economy would like like, all we need to do is turn to Brazil. Brazil took a courageous position twenty years ago, and started developing an ethanol industry. Today over 50% of the fuel sold in Brazil is ethanol, and Brazil no longer imports foreign oil, rather Brazil now exports its own oil to other countries. Brazil's transformation could be a model for America, and that is what the oil companies are afraid of...

It is time that we create our own destiny through energy independence. Instead of sending 1-2 billion dollars a day to foreign oil interests, let's change course and keep those dollars here in this country. With the current state of the economy and the huge loss of jobs we're experiencing, we need an economic stimulus that will create good paying jobs, and secure our energy needs -- Ethanol is the only answer today...

Respectfully,

Mitch Sremac
CEO
Flex Fuel U.S.
www.flexfuelus.com

Posted by: msremac | November 19, 2008 6:55 PM

Food Prices
Corn is used as the feedstock for approximately 98% of the ethanol produced in the United States. Brazil uses sugarcane as a feedstock, while China is focusing on using cassava and sweet potatoes as feedstocks for ethanol production. USDA estimates that 3.2 billion bushels of corn (or 24% of the 2007 corn crop) will be used to produce ethanol during the September 2007 to August 2008 corn marketing year. In January, 2002, the price for a bushel of corn was $1.98. In July, 2008, the price for a bushel of corn was $5.61.
Corn is a significant ingredient for meat, dairy, and egg production. However, while increased ethanol production is partially responsible for the increase in corn prices, the real factors driving up retail food prices are: rising demand for processed foods and meat in emerging markets such as China and India; droughts and adverse weather around the world; commodity market speculation; export restrictions by many exporting countries to reduce domestic food price inflation; the declining value of the dollar; and skyrocketing oil prices.

Record high prices for diesel fuel, gasoline, natural gas, and other forms of energy affect costs throughout the food production and marketing chain. Higher energy prices increase producers' expenditures for fertilizer and fuel, driving up farm production costs and reducing the incentive for farmers to expand production in the face of record high prices. Higher energy prices also increase food processing, marketing, and retailing costs. In 2005, the most recent year for which data are available, direct energy costs and transportation costs accounted for roughly 8 percent of retail food costs. These higher costs, especially if maintained over a long period, tend to be passed on to consumers in the form of higher retail prices.

Historically, food prices have surged during times of higher crude oil prices. Moreover, research shows that energy prices are quickly passed through to higher retail food prices, with retail prices rising 0.52 percent in the short-term for every 1 percent rise in energy prices. As a result, a 10 percent gain in energy prices could contribute 5.2 percent to retail food prices.

Please feel free to visit the Renergie weblog (www.renergie.wordpress.com) for more information.

Posted by: brianjdonovan | November 20, 2008 6:44 AM

GM 's sudden stewardship of the environment is simply a way to continue to make gas guzzlers thanks to E85 an extremely inefficient fuel. The CAFE standards call for all car companies to achieve an average MPG for all vehicles. I believe the most recent number is 27 MPG. Well if you make the biggest money off of 10 miles per gallon SUV's you would hate to say good bye to them wouldn't you?
The CAFE standards has a loophole, that being that an E85 vehicle operating on E85 miles per gallon are ONLY figured against the actual amount of gasoline in the blend (15%) if you divide 100% fuel by 15% gasoline you get the multiplier to the mpg (666) therefore a gas guzzling 10 MPG SUV is given credit for 66.6 MPG. If you sell one SUV like this you can have 5 vehicles only achieving 20 MPG and this gas guzzling SUV and you average more than 27 MPG overall while not one of their vehicles really met the standard.
GM is not the only one taking advantage of this free ride Ford and Chrysler are too. The big three are heading down the toilet and this is just their hands clinging to the rim.

Posted by: jlovshe1 | November 20, 2008 6:53 AM

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