Controversies Continue to Swirl over Corn Ethanol
Progress is being made on next-generation biofuels , but for the traditional corn ethanol industry, times are tough. Industry's facilities are 20% idle, taking 2 billion gallons a year worth of capacity off line. Bankruptcies are up. The biggest bankrupt producer, VeraSun Energy ( VSUQ ), was forced to sell seven of its plants, which were bought by oil refining giant Valero Energy ( VLO )at bargain prices. "It's frustrating," says Rodney M. Weinzierl, executive director of the Illinois Corn Growers Assn. "The impact on the rural economy is tremendous."
Why the stumble? After all, corn ethanol was once heralded as a savior—a way to reduce dependence on foreign oil while slowing global warming and helping farmers. And until the troubles kicked in last year, new facilities were being built at a rapid pace.
Part of the reason is the recession, which has driven down the demand for gasoline, and thus, for the ethanol blended into gasoline. "Demand has not kept pace with supply," says Bob Dineen, president of the Renewable Fuels Assn. To make matters worse, the cost of making ethanol soared in the first half of 2008 because of dramatic climbs in the prices of both corn and energy. While those prices have since dropped, some producers continue to be hurt by long-term contracts they signed, which locked in high corn prices as a hedge against even higher possible prices.