Tuesday, May 01, 2007

Coal + Corn = Bad Policy

In 2005 and 2006 Heron Lake Bioenergy, a coal-fired, corn ethanol plant with a capacity of 55 million gallons per year was embroiled in litigation hoping to slide in as a "minor source" of pollution under the Clean Air Act. This past April 12th the EPA relaxed regulations so that ethanol plants, such as Heron Lake, will easily avoid new source review under the Clean Air Act. Under the new regs, a fuel ethanol plant may emit 250 tons per year of any criteria pollutant (NOx, SOx, CO, etc.) before it needs to be classified as a major source. Prior to this rule change, the EPA classified fuel ethanol plants as a major source as soon as they hit a threshold of 100 tons per year for any criteria pollutant. Furthermore, the new rules excuse ethanol plants from counting fugitive emissions towards the 250 tons per year they're allowed.

The EPA claims that this rule change rectifies a disparity in treatment of ethanol plants. That is, the old rules were a little harder on fuel grade ethanol plants. Now the EPA thinks that similarly situated ethanol plants should be treated identically under the law. I personally think that this ethanol plant discrimination would have easily passed a rational basis test, but that's just me. Furthermore, I think that the disparate treatment of our nation's ethanol plants would have flown under the radar a little longer if it weren't for the current ethanol boom. And so follows the EPA's next reason for amending the rule . . .

In the preamble to the final rule, EPA wrote:

We continue to believe that supporting our nation’s efforts toward energy independence is an important national goal, and that this consideration is appropriate in deciding how to balance our nations (sic) economic growth with environmental protection. The Energy Policy Act of 2005 (P.L. 109-58) established a renewable fuel standard (RFS) that requires an increasing use of renewable fuels in our nation. It is clear that continued growth of the ethanol industry will play a vital role in achieving our nation’s energy and environmental goals.
The EPA commented that removing this regulatory burden would allow ethanol plants to get permits faster and reduce the cost of emissions controls. I think it might be time to eliminate the "P" from "EPA".

So what effects will this rule have on the ground? I think the biggest effect will be more coal. More plants will choose to fire up with coal rather than natural gas because it is cheaper. Commenters made note of this potential outcome during the comment period. In response, the EPA flatly acknowledged the likelihood of new coal-fired ethanol plants and stated that CO2 emissions will likely increase due to this regulation.

This regulatory change exposes a few facts about the political motives behind the ethanol push. If the administration and the EPA are pushing coal-fired plants, environmental protection and greenhouse gas reductions do not make the short list. After all, running a car on ethanol
produced in a coal-fired plant results in greater greenhouse gas emissions than gasoline. See Alexander E. Farrell, et al., Ethanol Can Contribute to Energy and Environmental Goals, 311 Science 506, 507 (2006). This leaves energy security and farmer finances as the two standing motives for corn ethanol development.

Using coal to fire ethanol plants probably will increase energy security. According to the Energy Information Administration, the U.S. only imports around 3% of its coal and domestic production will continue to rise through 2030. On the other hand, we import about 16% of natural gas and imports are expected to rise. Therefore, firing up an ethanol plant with coal furthers energy security goals, although at the expense of global climate change and air quality.

The sad fact is that corn ethanol can only increase energy security by an infinitesimal amount. In a Washington Post article, scientist David Tilman noted that if we used all of the corn
produced in 2006 for ethanol, we would only displace 12% of gasoline use. When one factors in the fossil fuel inputs to make the ethanol, the energy gains plummet to 2.4%, and that is if we devote all land in corn production to energy.

What I am not so sure about is the last reason to streamline ethanol plant permitting - will it help the American farmer? Ethanol is certainlly upping profits for corn farmers, but this means higher feed prices for livestock and poultry farmers. Moreover, even if the new ethanol plant rules indirectly help farmers, would it be worth the environmental sacrifices? Personally, I think it is possible to develop an energy policy that increases farmer well-being, but this political back-slapping, slipshod rulemaking is not the way to do it.


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