Sen. Norm Coleman’s proposal this week to establish a strategic renewable fuels reserve is unfortunate, and clearly puts special interests ahead of the public good.
To put it simply, the United States doesn’t need a strategic reserve of ethanol or vegetable-oil based fuel.
We already have a national fuel reserve — the Strategic Petroleum Reserve — containing about 600 million barrels of crude oil stored in salt caverns in Louisiana and Texas.
There is little evidence that this petroleum reserve benefits our nation in any important way, particularly since global petroleum production has become more geographically dispersed in the quarter century since the reserve was established.
But if U.S. citizens want a fuel reserve, this is the way to do it. Place a low-value form of the resource in low-cost storage such as salt domes.
Storing biofuels would inherently involve putting high-cost resources into very expensive above-ground storage facilities. Moreover, the quantities involved would be a drop in an oil tanker in comparison to use.
The evidence on the environmental benefits of biofuels is clear. Ethanol and vegetable-oil diesel are clean fuels, but they do very little to reduce pollution. Ethanol’s benefits, in particular, are limited to reducing carbon monoxide levels in urban areas during half the year. It has no effect on oxides of sulfur or nitrogen.
As far as greenhouse gas emissions go, gasoline blended with ethanol is worse than pure gasoline.
Despite the claims of the ethanol lobby, it is hard to find an environmental scientist or serious environmental organization that supports current ethanol programs.
That said, critics of ethanol clearly have lost the political battle thus far.
While existing biofuel programs make our society poorer, the losses are smaller than in some other abusive programs. But they certainly should not be expanded, particularly under the guise of some sort of “strategic reserve” program.
Those words are intended to conjure up the idea that there might be some national defense benefit to storing ethanol or its ingredients, an idea that is preposterous. This is just a barehanded attempt to get a hand into public funds.
In other words, it is what economists call “rent seeking.” Rent seeking occurs when private entities try to gain wealth, not by producing a good or a service, but rather by securing some government program that will render monetary gain.
Lots of individuals and firms engage in rent seeking, but historically few have done so with more energy than Archer Daniels Midland. ADM has always stood out from competitors in the amount of money it gives to political candidates.
ADM’s founder and flamboyant owner, Dwayne Andreas, always was bipartisan in his donations, bankrolling Minnesota Democrat Hubert Humphrey and Kansas Republican Bob Dole, among others, for decades. While the small cooperative-owned plants subsidized by the state of Minnesota put a Ma and Pa Kettle face on ethanol programs, the bulk of public funds for ethanol flow to ADM. Reciprocally, money from ADM, or its officers or the Andreas family, flows to those members of Congress who support ethanol and other federal programs that benefit ADM.
ADM itself passed out about $1.6 million for 2002 political campaigns. Most went to various Republican and Democratic committees. Only two individual candidates, Elizabeth Dole and Norm Coleman got funds directly.
The $50,000 Coleman got directly from ADM was supplemented by contributions by Andreas family members and funds that flowed through various Republican campaign committees. Now apparently, it is payback time.
Sen. Coleman clothed his proposal with pious language about keeping “these plants farmer-owned.” This is moonshine.
Ethanol, biodiesel and the crops used as inputs to making them are all fungible commodities. It is impossible to segregate the benefits from any program to subsidize their production or use. Most ethanol is produced by ADM and a couple of other firms, and most of the benefits will flow to these large firms.
To paraphrase Dorothy Parker, Sen. Coleman’s proposal for a biofuels strategic reserve is not one to be tossed aside idly, rather it should be hurled with great force.
(Read Senator Coleman’s response to this column in an op-ed published June 16, 2003 in the Pioneer Press.)
© 2003 Edward Lotterman
Chanarambie Consulting, Inc.