Want to Pony Up for a Pipeline to Corn Country?

Monday, April 12, 2010

The surest way to ensure that second-generation advanced biofuels remain in their test tubes and never see the spark of an engine is to pass a piece of legislation recently introduced (Feb. 14) by Rep. Leonard Boswell (D-Iowa).

Boswell's reintroduced  H.R. 4674 would amend the 2005 Energy Policy Act to provide loan guarantees for a dedicated ethanol pipeline from corn-ethanol producing states in the Midwest to the East Coast. The government would guarantee repayment of 80 percent of  the financing for this "renewable fuel pipeline."

What's wrong with this little idea?

First, an immovable, taxpayer-funded ethanol pipeline will take many years to get up and running. But if cellulosic biofuels materialize at the production and price levels hoped for by their proponents, most ethanol production -- in a proper capitalist marketplace -- would shift to the Southeast and elsewhere, where the cellulosic feedstock grows. This northern pipeline wouldn’t be in the right place.

The intent  appears to be to keep as much ethanol production in the Midwest as possible. The project would dramatically lower the cost to ethanol producers -- though not to taxpayers -- of getting their product to East Coast consumers. Then we’ll be stuck subsidizing Midwestern ethanol to keep it price competitive with ethanol or other fuels from elsewhere and to make sure that production stays in the Midwest -- so there's something to stuff in that pipeline.

Or, and possibly worse, development of second generation biofuels like Missouri switch grass will be stunted in the face of the overwhelming financial and distribution advantage given to corn ethanol produced at the pipeline's mouth. Once you've put in place a massively expensive pipeline, backed by taxpayer-funded loan guarantees and anchored in corn country, the incentive to produce biofuels elsewhere could quickly vaporize.


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