Don't call it a comeback: Ethanol is bigger than ever

Apr 11, 2012

The ethanol refinery for Carbon Green Bioenergy rises up out of the cornfields outside Lake Odessa Michigan.

The refinery was built in 2006. Mitch Miller, the CEO of the company, says a lot of refineries were popping up then.

“Five years ago, ethanol was a craze,” he says. “It was the next best thing.”

Now, not so much. Refineries aren’t being built. Politicians aren’t stopping by with platoons of reporters.

Seriously, when is the last time you heard anyone talk about ethanol?

Here’s the crazy thing though: When the ethanol hype went away, the ethanol industry got bigger than ever.

Miller leads me on a tour of the refinery, pointing out a storage bin as big as an office building. From there, the corn is broken down, starch turns into sugar, and well, the very simple version is that it’s basically like distilling moonshine. Chemically-precise, 200 proof moonshine.

Inside another massive room, there’s a dryer – just like your clothes dryer, except that it’s big enough to drive a truck through. The dryer is used to prepare the leftover corn mash for animal feed.

Miller says there’s plenty of demand to keep this massive plant busy.

“This was built as a 40 million gallon plant,” he says. “We’re running at 50 million gallons per year. So we have not reduced capacity at all.”

If you still have any doubt about how big ethanol has gotten, consider that last year, for the first time ever, more corn in this country was used to make ethanol than to make livestock feed.

“Ten years ago, we were using about eight times as much corn to feed livestock and poultry as we were to make ethanol,” says University of Missouri agricultural economist Ron Plain. “And now we’re using more corn to make ethanol. So it’s a dramatic change.”

Five years ago, the federal government projected that in 2012, ethanol production would reach 11.2 billion gallons, and it would use up 30 percent of the nation’s corn supply. The actual numbers last year were 13.9 billion gallons, and 40 percent of the corn supply.

Ethanol exceeded expectations by a long shot.

But it didn’t happen because of E-85, the blend of 85 percent ethanol and 15 percent gasoline that starred in political speeches and TV commercials. It happened because ethanol makes up about 10 percent of almost every gallon of gasoline sold in this country. You use it every time you fill up your tank.

Ethanol advocates hope the next step is a 15 percent blend, known as E-15. The EPA already approved it for use in all vehicles built after 2001.

E-15 faces some challenges though.

“I’m a pro-ethanol guy,” says Craig Hoppen, president of J&H Oil Co., a company that owns 36 filling stations in West Michigan.

But Hoppen says, he doesn’t think E-15 will make a huge dent in the market anytime soon. He says most gas station owners will put E-15 in more expensive, specialized pumps, like they do for E-85. And that will keep it from growing, like it did for E-85.

“It’s a higher number today than it was then.” Hoppen says of ethanol. “Is it a real up-and-coming business? No, no, it’s still a niche business.”

Plenty of people will be happy if ethanol stops growing. Many environmentalists say ethanol isn’t much cleaner than gasoline, when you consider what it takes to raise corn. And livestock farmers aren’t happy that corn prices have almost tripled in the past six years, which has made feed more expensive for them.

Hopes that corn stalks, or switchgrass, could replace corn as the feedstock for ethanol have mostly come up empty.

So for now, ethanol will continue to be made from corn. And maybe the biggest expansions in the industry are behind us. Then again, ethanol projections have been wrong before.