Fuel facts
The nation uses nearly 15 to 20 percent of its total annual corn production to produce ethanol. Close to five billion gallons of ethanol have been produced this year nationally, up from a four-billion production last year. The United States, with an economy that is growing at about three percent a year, is the world's largest consumer of energy. The U.S. imports two-thirds of its oil from overseas.
Kate Meadows, Times staff writer
Biofuel production in Indiana is growing like wildfire. So is the excitement of farmers who see the potential of higher profits in the future. But is this biofuel craze geared more toward boosting a strong national economy, or fashioning a political agenda?
The boom in the biofuel industry is "heavily precipitated by several things," said, Chris Hurt, a marketing expert with Purdue University. He listed the main influences as rising oil prices and developing national policies.
High oil prices and moderate corn prices mean that ethanol is highly profitable. Wallace Turner, Professor of Agricultural Economics at Purdue, said this is because the cost of corn allows ethanol to be produced at a much lower cost than the price of gasoline, meaning a significant "pure profit" per gallon of ethanol produced.
"There's a rush of investment into the industry because the profits are so high," he said.
Hurt explained that biofuels fall into the general category of renewable energy. Ethanol and biodiesel are the two major forms, ethanol produced by fermented corn and biodiesel produced with soybeans.
"The renewability of biofuels is that we can raise these crops every year," Hurt said.
The alternative is fossil fuels, which takes years to produce.
Currently, 15 to 20 percent of the nation's total annual corn production is used toward ethanol production. Tyner said he believes that percent could double in the next three or four years.
The production of biodiesel has multiplied by a factor of 10 in two years, and Tyner said he thinks it's going to continue increasing "at a pretty rapid clip."
Thus far Indiana has one ethanol plant in production, the New Energy Corp. in South Bend, which opened in 1990. However, there are two ethanol plants under construction, with more on the way. Plants at Clymers and Linden are in the building process and are expected to be ready for production by spring of 2007. The Linden plant will have the capacity to produce 100 million gallons of ethanol per year, requiring about 36 million bushels of corn, Hurt said. The plant in Clymers will produce 110 million gallons of ethanol per year, requiring about 40 million bushels of corn.
"That's the equivalent of about two counties' worth of corn production," he said, or about 45 percent of the total corn supply in any given 45-mile area.
Another large biodiesel plant will be coming to the state soon, as well, to be located in the small town of Claypool.
"There is going to be a huge change in the ethanol landscape in Indiana in the near future," Tuner said.
Hurt echoed that enthusiasm: "It's a revolution. It's going to dramatically change things."
With the demand for renewable fuels comes the evolution of more jobs, where "everything is going to take a lot of community, a lot of people," said Robert Stinson, a local farmer. To him, the rising demand for biofuels is all about the "economy of community."
Stinson has already been visited by buyers who are taking a look at Indiana's farms to discuss commitments for grain production in light of the state's future biofuel facilities. Right now, Stinson said, buyers are "just developing relationships with farmers to get us to bring grain to them."
Indiana has yielded a surplus of corn for the past several years, and that has kept corn prices down. But, Hurt said, "with such a steep growth curve for the demand of ethanol ... this is the last year of cheap corn."
And with farmland increasingly being bought out by real estate and private investors, "land base is limited for corn and soy bean seed," Hurt said.
"This is a demand-driven price scenario," Tyner said. "What we have is a demand story. Demand is just running faster than supply can increase."
Energy prices in the past have been politically driven. But now, the tides are turning. In 2005, the Bush administration set a renewable fuel standard, challenging the country to be able to produce 7.5 billion gallons of renewable fuels per year by 2012. That would equal nearly 4 percent of the nation's total energy production. Both Tyner and Hurt believe the nation will reach that mark early, possibly by 2008 or 2009.
Not only would a rise in biofuel production signal an environmental benefit, as biofuels burn cleaner than gasoline; it would also decrease the nation's current dependency on foreign oil, dependency on sources that aren't always stable or friendly, both Tyner and Hurt emphasized.
The decision our policy makers have made mean that "taxpayers are helping to pay some of the incentives to get the industry really rolling," Hurt said.
There is speculation whether biofuel production can ultimately be a solution to today's high oil prices.
"There is no solution to today's high gas prices except a global recession," Tyner said.
He does not believe that gas prices will go down anytime soon. "The probabilities are that gas is going to stay high," he said. "It's a commodity."
In a sense, Stinson agrees. "It's just another market, and we hope that it helps raise our prices," he said. "Anytime you get a new buyer in a market for any commodity, the more profit you stand to make out of it. I don't think people are going out making big decisions. Right now it's just a hope. It all has to materialize."
Tyner emphasizes that it's important for consumers to be aware of future potential energy sources. With the growth and changes in technology and science, the world could see a mixture of all kinds of fuels and energy in the years to come, including liquid fuels from renewable energy sources and liquid fuels from coal. "If we play our cards right and get our energy policies lined up, we'll diversify our portfolio - so that we're not dependent on imported oil alone," he said. "What we're trying to do here is develop policies that will help us diversify so that security cost is not as high in the future."
"It is fascinating as well as dynamic, " Hurt said. "It's basically a whole new venture for agriculture."
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