Making ethanol still a good deal – Opinion

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Published: March 27, 2008

In the Feb. 28 Western Producer article entitled “Grain based ethanol ill-advised: economist,” agricultural economist Murray Fulton suggested Saskatchewan farmers were dreaming if they thought ethanol production was feasible using wheat as a feedstock.

Agventures at Lanigan, Sask., has been doing exactly that since 1991.

The integrated ethanol and feedlot facility has survived for 16 years and in that time has expanded and paid dividends. I am not a shareholder or have a relationship in any way but have visited their plant and it would appear that they have been very successful.

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There are also ethanol plants in Weyburn, Belle Plaine and Lloydminster all using mainly wheat as their feedstock. The fact that these plants are operating and in the case of Belle Plaine will soon be, speaks to the viability of these operations. It is troubling to think that an economist would have so little knowledge of an industry he feels compelled to write about.

I am chair of a committee made up of farmers and businesspeople who are investigating the possible building of an ethanol plant in our community of Bengough, Sask.

We see this as an opportunity to add value to our product, create jobs and provide a good investment opportunity. We take the view that value adding has positive impact on any community, whether it be feedlot, hog barn, pulse processing, or ethanol plants, and we are supportive of all.

The attitude of “let them do it. We can reap the benefits” is unacceptable. It is unbelievable advice from an economist to tell us to keep cutting wood and hauling water because today we are getting a good paycheque regardless of what tomorrow might bring. As a person who is involved with economic development and trying to bring industry, job creation and wealth generation to our community, it is frustrating reading these types of articles.

It would be easy to slough off one article as the musings of a myopic academic ensconced in the bowels of academia if it were not for the prevalence of other academics of one sort or other or are experts from some energy or agribusiness sector who feel obliged to tell people and investors of the real facts. For example, in the same Feb. 28 issue the article “Diverting grain from food questioned” quotes British maltster Tim Stonehouse as saying “burning food to make fuel is not acceptable.”

The article goes on to lament the fact that grain will be used in the biofuel industry instead of feeding starving people.

Stonehouse could not see the irony of himself, a person who takes grain and makes beer, castigating someone who makes fuel from grain. This illustrates the sometimes lack of thought in the debate when a newspaper would report his comments as a serious article, unless of course both think that beer is a food group.

In addressing the food for fuel debate, it appears that the concern is that Saskatchewan farmers, by selling product to ethanol plants, would be contributing to global hunger.

For 35 years I’ve been told by experts that as a grain producer, Saskatchewan production counted for little in the whole supply and demand balance. It now seems that Saskatchewan producers were all along an integral part of global wheat production, so much so that even diverting a small percentage of wheat production to ethanol could have catastrophic effects. Pardon me if I take these experts with a grain of salt.

Saskatchewan’s current ethanol production capacity will consume six percent, or 30 million bushels, of the approximately 500 million bu. of wheat produced annually.

One third of the wheat is returned to the market in high protein livestock feed (distillers grain), which is typically priced less than the cost of barley. It is likely that far from harming the feedlot industry in Saskatchewan, developing ethanol will more likely grow the livestock industry.

Another point that is often discussed is the net energy return of ethanol versus other fuel. The argument is that ethanol takes nearly as much energy to produce as it returns as a fuel. The truth is that any fuel actually needs more energy to produce than is returned. This is not news as the second law of thermodynamics makes it impossible not to be so. The energy that goes into any process is always going to be more than the energy return.

The difference with renewable energy, and in this case ethanol, is that the primary energy source is the sun, which is unlimited and free. Ethanol is really a solar fuel. In the case of gasoline, the drilling, transportation, refining, plus the actual fuel used, are included in calculating the actual energy used. The U.S. Department of Energy calculated this at 1:1.23, meaning that for every one unit of energy used at the gas pumps, it takes 1.23 units of fossil energy in total.

However, the real cost of crude oil is not the cost of pumping and refining but in the replacing of it. That cost is unknown.

In the production of ethanol, the energy used is in the growing and transportation of the grain, the natural gas for the production of fertilizer and additional energy for manufacturing. In total, 0.74 units of fossil energy are used in the production of one unit of ethanol energy not including energy from the sun. Again the calculations are from a study commissioned by the U.S. department of energy (University of Chicago September 2005).

Since 2005, improvements in design, technological advances and better management have improved the net energy returns in ethanol production. It is interesting to note that as efficiencies improve in the renewable energy sectors, costs will only increase in fossil fuel as low cost, easy to recover crude oil and natural gas are depleted and inevitably disappear.

I should be somewhat thankful that Mr. Fulton and other experts are so concerned. They, the experts, could be addressing all sorts of looming world crises but they seem more worried with my and other farmers’ investment strategies. It is nice to think they have my back, but I have to wonder where they have been for the last 35 years?

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