Marita Noon

Gas pump signage declaring “contains up to 10% ethanol” is so ubiquitous, most of us probably don’t even see it anymore—let alone think about why it is there, what it really means, or how it impacts the price of the gallon of gas being pumped. Despite its omnipresence, ethanol is suddenly center stage.

On July 24, the House Subcommittee on Energy and Power concluded a two-day hearing: “Overview of the renewable fuel standard (RFS): Stakeholder perspectives.” Just the week before, the Wall Street Journal (WSJ) published an interesting opinion piece that pointed to ethanol as an environmental elixir, whose “abstract idealism” is trumped by “real-world concerns.” Apparently, in the “liberal bastion” known as Cambridge, MA, clean energy is praised as “one of our best solutions for moving beyond dirty fuel,” yet a proposal to expand a nearby ethanol facility that involved shipping ethanol by train through Cambridge has been met with almost universal political opposition—not in my backyard.

The day after the House hearing, ethanol was in the news once again for a totally different reason: “Ethanol spills from derailed train near port of Tampa in Florida.” 35,000 gallons of ethanol were being transported by train from Chicago to the docks of the Port of Tampa. 4,500 gallons were spilled when 11 train cars derailed—closing the port and causing employees in the industrial area to miss work.

So why are we shipping ethanol hither and yon? Why does our gasoline contain 10% ethanol?

In 2005, back when global warming was still believed to be a manmade crisis and before the technologies of horizontal drilling and hydraulic fracturing combined to unleash a new energy boom in the US, the Energy Policy Act was passed—mandating that renewable fuels, such as ethanol and biofuel, be added to transportation fuels in increasing amounts over the next decade: the RFS. It was thought that growing our fuel would give America energy independence and reduce carbon emissions. Neither has turned out to be the case.

As usually happens when government decides to pick winners and losers, problems arise. Both sides of the aisle and both houses of Congress have concerns about the RFS. Rep. Fred Upton (R-MI), Chairman of the House Energy and Commerce Committee says; “The current system cannot stand.” The National Journal reports that Senate Democrats such as Ben Cardin (MD), Robert Casey (PA), Kay Hagan (NC), Thomas Carper and Christopher Coons (DE), and Chuck Schumer (NY) are worried about the RFS. While they do not support a full repeal of the RFS, they are questioning “their party’s steadfast support for a policy whose goal is to promote renewable-energy fuels over oil.” Senate solutions range from legislation to reform of the RFS to asking the Obama administration for a temporary waiver or modification of the portion of the law that requires increasing amounts of biofuels be blended with gasoline each year.

While ethanol and biofuels can be made from a variety of sources—though some, such as cellulosic ethanol (wood chips, switchgrass, and agricultural waste) and algenol (algae), have yet to be commercially viable, most ethanol in US is made from corn. However, last summer’s drought put pressure on the corn supply—raising questions about the viability of corn-based ethanol and making allies of the fossil fuel and livestock industries and environmentalists.

At Wednesday’s hearing, Bill Roenigk of the National Chicken Council said his producers are confronting higher and more volatile feed prices, the result of diverting corn into gas tanks. He sided with Jack Gerard of the American Petroleum Institute who described the RFS as “completely untethered from reality” and a “grave economic threat” that must be stopped. The high corn prices are making ethanol more expensive and raising the price of gasoline. Scott Faber from the Environmental Working Group said the corn ethanol mandate has increased greenhouse gas emissions and caused other environmental harm.

Ethanol has been made in the US for 32 years, yet 2012 production was 600 million gallons less than the previous year. Regardless of production, the law mandates that ever-increasing amounts of ethanol be blended into gasoline. The difference is being made up by importing Brazilian sugar-based ethanol—roughly 336.7 million gallons were imported in the first 10 months of 2012. In December 2012, the WSJ reported: “U.S. ethanol output will fall by 10% next year to about 12.6 billion gallons.” Seldon B. Graham, Jr., an energy engineer with 59 years of experience and the author of Why Your Gasoline Prices are High, says: “It is ludicrous to replace imported foreign oil with imported foreign ethanol.”

The House hearing addressed a range of topics including the RFS’s potential effect on fuel and food prices, blend-wall and compatibility issues, and impacts on the nation’s agricultural sector and the environment. But, it didn’t cover how much the biofuel mandates are costing the American taxpayer, the number of ethanol companies that have gone bankrupt while receiving taxpayer subsidies, grants or loans, or the potential for crony corruption.

As I’ve repeatedly addressed over the past year while covering Obama’s green-energy crony-corruption scandal with researcher Christine Lakatos, when government mandates something that doesn’t exist, it gives rationale to fund experimental projects (often involving Obama donors and/or insiders) designed to meet the need. The Department of Energy awarded up to $564 million in stimulus funds to 19 integrated biorefinery projects and since 2009 the Biorefinery Assistance Program has given out about $1.2 billion in treasury-backed loan guarantees for 10 biofuel companies.

Range Fuels provides a tidy case history. In March 2007, Range Fuels received a $76 million grant from the DOE and another $80 million from the Obama administration in 2009 to produce cellulosic ethanol. Vinod Kholsa, part of Obama’s election team and a big Democrat donor, was an original investor through his greentech venture capital firm. Despite the approximately $300 million in a combination of private, state, and federal funding, Range Fuels never produced cellulosic ethanol. The company filed for bankruptcy in December 2011.

In her newest post to the Green Corruption Files, Lakatos highlights three biofuel companies that are a part of Obama’s green slime fuel dream (there are others that she’ll cover soon). During an energy speech in Florida, he stated: “We’re making new investments in the development of gasoline and diesel and jet fuel that’s actually made from a plant-like substance — algae.” Right there in Florida is Algenol Biofuels—which Forbes calls “Obama’s favorite algae company.” In December 2009, Algenol Biofuels received $25 million in federal stimulus grants from the Obama administration and a $10 million grant in 2010 from Lee County’s Economic Development Committee.

Then there’s Sapphire Energy, which received a $50 million grant from the DOE and a loan guarantee for up to $54.5 million through the Biorefinery Assistance Program for their “Green Crude Farm” in Southern New Mexico. Surprise! Executives, board members and employees at Sapphire contributed almost exclusively to Democratic campaigns. Michelle Malkin reports: Sapphire's “website reads like a satellite White House communications office.” Even the Private funds raised for Sapphire have Obama connections: Bob Nelsen, a founding partner of ARCH Ventures—a Sapphire investor, served on Obama’s National Finance Committee during the 2008 campaign, and Microsoft’s Bill Gates is also a Sapphire investor. In 2008, Microsoft donated $852,164 and $814,645 in 2012—making them number four and number two, respectively, on the top Obama donor lists. In 2012, Bill and Melinda Gates personally contributed $71,800 to Democrats.

The really interesting story is Solazyme, as it got both a $21 million DOE stimulus grant in 2009, and then in 2011 was rewarded with a guaranteed government customer for its biofuel that will pay four to seven times the regular fuel price: the US Navy. TJ Glauthier is a “Strategic Advisor” for Solayzyme. Previously Glauthier held key positions in the Clinton administration and the DOE and served on Obama’s 2008 White House Transition Team. He is widely credited with helping to develop the energy provisions of the American Recovery and Reinvestment Act of 2009. Solayzyme’s officials, including Glauthier, contributed at least $360,000 to Democrats between 2007 and 2012. Other Solayzyme Obama/Democrat connections include:

  Drew Littman, head of Solayzyme’s Washington lobbying office, who was chief of staff for Senator Al Franken (D-MN).

  Jerry Fiddler, chairman of the board of directors, is a large Democrat donor, who contributed $24,000 to Obama’s Victory Fund.

  Sanjay Wagle, was a Solayzyme investor through VantagePoint. He was an Obama fundraiser for the 2008 campaign and joined the administration, as a “renewable energy grants advisor” at the DOE.

  Jonathan Wolfson, Solayzyme co-founder, sat on the board for the Center for American Progress (CAP) Clean Tech Council. CAP is responsible for crafting and promoting many key Democratic policies and is a major force behind Obama's green-energy agenda. 

No wonder Solayzyme got the deal for the “Single largest purchase of biofuel in government history” that Investors.comcalled a “two-for-one bad deal—swindling taxpayers while ravaging national security.”

Maybe ethanol’s part in the green-energy crony-corruption scandal will need its own hearing. There’s a lot more to cover! With Gina McCarthy as the new administrator at the Environmental Protection Agency there’s bound to be more as she’s reported to be “a consistent ethanol-industry defender.”

Ethanol is a dichotomy for the Obama administration, which has mandated higher MPG for vehicles and at the same time mandates the blending of ethanol that actually lowers MPG. Obama’s climate change policy calls for a reduction of carbon dioxide emissions, yet, according to the DOE website, ethanol increases them.

The RFS was ostensibly a move to combat the impact of fossil fuels and decrease imported oil, but it became a giveaway to agricultural interests in electorally important states and to those important to the president and the Democratic Party.

While several members of the Energy and Power Subcommittee agree: “There’s probably not enough congressional support for completely repealing the standard,” Upton concluded: “I hope we can start a discussion that considers a host of potential modifications and updates to the RFS, with the end goal being a system that works best for the American people. I am absolutely committed to ensuring we deliver workable reforms.”


Marita Noon

Marita Noon is Executive Director of Energy Makes America Great.