WisBiz In-Depth: Wisconsin Lags Neighbors in Ethanol Production
6/28/2004

By Gregg Hoffmann

Despite the largest international ethanol conference in the 20-year history of the industry organization -- a Madison event that recently drew some 1,500 people from around the world -- and the firm bipartisan support of the Doyle and Bush administrations, ethanol development lags in Wisconsin.

At the conference, state Transportation Secretary Frank Busalacchi sung the praises of ethanol and said Gov. Jim Doyle's administration stood solidly behind the industry. Dan Schooff, who is about to take over as head of the Department of Administration's Division of Energy, echoed Busalacchi. Badger State Ethanol in Monroe and Algoma Ethanol, also known as Utica Energy, were used as models during the conference, and tours were conducted of both plants.

But surrounding states have the edge on Wisconsin when it comes to this fuel alternative. Ethanol development in Wisconsin lags behind surrounding states like Iowa, Illinois and Minnesota. Wisconsin has four operating plants -- Badger State in Monroe, Algoma Ethanol in Utica, Ace Ethanol in Stanley and Central Wisconsin Alcohol in Plover -- and two more under construction, while plants number in double figures in the surrounding states. Listed capacities for the plants put state production at 79 million gallons annually, a small percentage of the 3.6 billion gallons that will be produced this year nationwide.

Why has support for the ethanol industry lagged in a state that still considers agribusiness a key part of its economy?

Some say the state simply was slow in getting into the industry. Others point to the tradition of the state as a strong environmental state, and opposition that ethanol plants have drawn. Yet others resent federal and state incentives to the industry.

Supporters of ethanol say critics are using outdated information about environmental concerns. They admit that Wisconsin lags behind some of its neighbors, but say the state can catch up and still become a player in the industry.

"Ethanol production is another component of fostering economic development in Wisconsin," said state Sen. Sheila Harsdorf, R-River Falls, when she introduced, along with state Rep. Steve Freese, R-Dodgeville, a bill that would modify a state grant program for ethanol plants during the first eight years of their production. The bill made it to the Legislature's Joint Finance Committee but failed to pass this session.

"It is a win for farmers as it expands market opportunities. It is a win for the environment as it is a cleaner burning fuel, and it is a win for consumers as it reduces our dependency on foreign oil," Harsdorf said.

Opposition continues

Still, the opposition to ethanol plants continues. A plant in Friesland in Columbia County faced nuisance complaints from neighbors concerned about odors in emissions. The plant officials said they could eliminate much of the odors by installing a thermal oxidizer.

Ace Ethanol in Stanley was accused of starting its plant before getting the necessary permits and before installing pollution equipment. It reached a settlement with federal and state agencies and faced orders to install the equipment and pay fines of $300,000.

Plans for plants in other parts of the state have met opposition from local groups.

Probably the most vocal critic of ethanol has been former Democratic U.S. Senate and gubernatorial candidate Ed Garvey, now an environmental lawyer in Madison. Garvey contends that ethanol producers are major polluters and that the industry is in the pockets of big money corporations.

In a 2001 op-ed piece in Madison's Capital Times, Garvey wrote sarcastically: "Today you should once again put up your dukes when you hear that ethanol is coming to help Wisconsin. Not only will it clean up our air, it will ‘reduce the dependence on imported oil' and save the family farm. Sounds so good you want to join in the applause for yet another governmental subsidy going to big business.

"It is fascinating to watch the big money boys operate. They begin with a plan, which always includes lots of lobbyists, a gaggle of lawyers and the ever-present public relations folks. Like rust, they never sleep.

"Ethanol. Corn. Family farms. Clean air. Wisconsin. It seems like a perfect 30-second spot. The deep voiceover, pictures of the farm, an aging farm couple on the porch watching the corn grow. Warms the heart."

Garvey has opposed subsidies in several media appearances within the last year. He also says the media have been duped by claims that ethanol has grassroots support.

"And then they form grass-roots organizations in support of ethanol," Garvey said. "That's right. Archer Daniels Midland and other producers of ethanol need to convince local editors and reporters that the grass-roots folks support their product. Who needs to know that the lobbyists are paying the costs, hiring lawyers for the ‘grass-roots' organization formed to advance clean, efficient, wonderful ethanol?"

Attorney Christa Westerberg, who has worked with Garvey representing opponents in several areas of the state, said there are some real problems with ethanol. "There is evidence that it really doesn't burn cleaner," she said.

"It might help reduce some types of pollution, but make others worse. You also have to consider the process of growing the corn and fertilizers, sort of take a cradle-to-grave look at it."

Westerberg said locations of plants are critical because of emissions, explosive materials in plants, smells, truck traffic and other drawbacks. "We feel plants should be located at least five miles from population centers," she said.

From a governmental standpoint, the subsidies paid at both the federal and state levels also raise economic policy questions, Westerberg said.

Outdated information

Those in the ethanol industry say Garvey is off-base and cites outdated studies to support his complaints. Gary Kramer, president and general manager of the Badger State Ethanol plant, said, "He's feeding off the fears of an uninformed public. He's taking old information and feeding that to people. It simply is not true. The process has changed.

"Old plants in the 1980s gave off more pollution. Thermal oxidation now really has changed things. Emissions without thermal oxidation could reach 149 pounds per day. Today, it is a quarter pound per day. A total of 99.9 percent of emissions is destroyed. Technology has continued to march on in this industry."

Kramer said critics also often bring up the amount of water used in the process. "We use 350 gallons per minute at the plant," Kramer said. "Monroe pumps 5,000 per minute. A farmer uses 1,000 gallons per minute for irrigation. If you run a quarry, you use 1,000 per minute. We also recycle most of the water we use."

The process of making ethanol also has become more efficient from an energy conversion standpoint, Kramer said. In the 1970s, 120,000 BTUs of energy were used to produce a gallon of ethanol with 80,000 BTUs of energy potential. Today, less than 30,000 BTUs are used to produce that 80,000 BTUs, Kramer said.

Kramer said many in the ethanol industry are philosophically opposed to subsidies, but consider them necessary for what still is a fledgling industry. "Subsidies in our industry pale in comparison to those in the oil industry," he added.

Many ethanol producers also point out that creating new markets for corn and other raw products for ethanol production can reduce government subsidies paid to farmers when crop prices are too low.

"Every dollar invested by the government in subsidies returns $7," Bob Dineen, president and CEO of the Renewable Fuels Association, the national trade association for the U.S. ethanol industry, said at the Madison conference.

"Ethanol creates economic activity and tax revenue. It reduces farm program costs. We will use 1.3 billion bushels of corn for ethanol. That creates markets. Ethanol factors out to a net savings for the government treasury."

Dineen acknowledged that Archer Daniels Midland and other large agribusiness companies have been leaders in ethanol, but added, "Grassroots support from farmers and others always has been a key for the ethanol industry and will continue to be."

Kramer pointed out that Badger State Ethanol has almost 500 investors, many who are farmers. The plant buys its corn from grain elevators, which often are run by cooperatives. "Nothing could be further from the truth," Kramer said in response to critics' claims that big corporations dominate the ethanol industry. Wisconsin's ethanol plants are investor-owned, controlled by either limited partnerships or small corporations.

Growing industry

The ethanol industry expects U.S. plants to produce about 3.6 billion gallons of ethanol this year. Predictions are for production to reach double figures annually within a few years. Wisconsin's production is approximately 79 million gallons.

A trade show at the Madison conference drew more than 160 vendors, ranging from equipment manufacturers to insurance companies.

Bruce Knight of USDA told the conference attendees that the Bush administration strongly backs renewable fuels and has pushed for incentives to ethanol production in its energy program.

The industry is international in scope. In fact, the leading producer of ethanol at this time is Brazil, which uses primarily sugar cane as its raw material. That country also has ethanol in all its gas, has some stations that sell only 100 percent ethanol and increasingly uses "flex" vehicles that can burn gas and ethanol.

In Wisconsin the amount of ethanol in gas varies by region -- the cleaner burning gas sometimes required in areas like Milwaukee, for example, contains ethanol at a higher rate than elsewhere. Additionally, the National Ethanol Vehicle Coalition lists 10 Wisconsin gas stations that sell "E85," fuel consisting of 85 percent ethanol and 15 percent gasoline that works only in specially designed vehicles.

Representatives of Brazil, Canada, the European Union and Australia spoke during a panel discussion at the Madison conference. Many other countries had representatives at the conference.

"The industry is in the right place at the right time in history," said Mike Bryan, president and CEO of BBI International, a biofuels resources company. "It is a point where we can claim the rightful place for renewable fuels."

Wisconsin needs to make sure it is part of this movement, according to supporters of ethanol. "Wisconsin's developing ethanol industry is important to our rural economy," Freese said when he announced his co-sponsorship of the state ethanol incentives bill. "In order to retain existing ethanol producers and attract new ones, we need to offer incentives that will ensure the ethanol industry is strong for Wisconsin for years to come."

-- Hoffmann is a veteran journalist and former writer of the Milwaukee Insight column for WisPolitics.com. His next WisBiz In-Depth will profile Badger State Ethanol, one of two plants highlighted at the recent international conference of the ethanol industry.


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