Let us begin with the money shot, courtesy BiofuelsDigest. “If it were up to me, I would put every cent into electric cars.” That would be the US Secretary of Energy, Dr. Steven Ch, at a  meeting on alternative fuels, according to “a source present at the meeting.” As a part of an administration whose election campaign received cash and free jet travel from ethanol producer Archer Daniel Midlands—not to mention political support from farming states for whom the term “pork barrel” seems to have been invented—Chu’s remarks were, shall we say, politically inadvisable. And so the DOE’s Director of Public Affairs swung into damage control mode: ”I can’t verify the quote you are using from an undisclosed source at an undisclosed meeting, which is at best wildly out of context,” Dan Leistikow backpedals. “Secretary Chu talks about the potential of biofuels in nearly every public speech, as well as on Facebook and Youtube.” Thanks for the YouTube link Danny. Meanwhile, the only Facebook page I can find is “The fans of Steven Chu,” which celebrates “the erudite hotness of Nobel Laureate/eco-warrior Steven Chu.” Strangely, there’s no mention of the torrid subject of bio-fuels to be found.

Our friendly neighbors to the north are starting to cope with a difficult and embarrassing reality. Canada.com reports on a briefing note prepared for Canadian Natural Resources Minister Lisa Raitt warning that hundreds of millions of dollars spent subsidizing e85 Flex Fuel technology have been a colossal failure. Not the least of which is the fact that a complete lack of convenient fueling infrastructure has resulted in people using “dirty” gasoline. According to the memo, obtained under public information laws:

Given that E85 (fuel) is not sold in significant quantities, these credits (to manufacturers) are not tied to actual GHG emission reductions because Canada’s FFVs are fuelled almost exclusively with gasoline

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The EPA’s goal of encouraging production of 100m gallons per year (gpy) of cellulosic (i.e. non-corn-based) took a bit of a hit recently, when it was found that the firm responsible for producing 70m gpy was actually showing investors petroleum-based fuels and lying about its production capacity. Whoops! But instead of drawing the conclusion that ethanol is the modern equivalent of snake oil, attracting hucksters and scams like mainstream car blogs to a special-edition Mustang, the government is keeping the sector well-stocked with taxpayer cash. Green Car Congress reports that the Department of Energy has awarded ethanol firm POET a $6.85m increase over its already-delivered $76m grant, with another $13.15m on the way. The funds were awarded through Project LIBERTY (Launch of an Integrated Bio-refinery with Eco-sustainable and Renewable Technologies in Y2009), which seeks to move ethanol past the tortilla riot-era bad press while keeping it chained to big agribusiness. The method? Ethanol from corn cobs!

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More than a year ago, the ethanol industry hit the “blend wall”: the difference between what they could produce and what the market wanted to use. This despite billions in tax credits: direct and indirect federal and state subsidies. All enabled by a federal mandate mandating that the ethanol boys brew nine billion gallons of renewable fuels in 2008, rising to 36 billion by 2022. And then the gas price bubble burst and environmental impact studies arrived, revealing corn-for-fuel as a carbon positive endeavor. The ethanol industry pretty much curled-up into the fetal position. The small players went belly-up. The big boys—including Archer Daniel Midlands (whose corporate jet ferried candidate Obama around the Midwest)—put their hopes into E20.

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Move over corn. There’s a new sheriff in Ethanol City and his name is Watermelon. Every year, famers leave about 800 million pounds of watermelons to rot; the fabled orbs simply weren’t perfect enough for persnickety melon buyers. According to Automotive Fleet, USDA scientists in Lane, Oklahoma are converting melon juice from the abandoned fruit into ethanol. Researchers have determined that a 20-pound watermelon can yield about 1.4 pounds of sugar, which can be converted into ethanol more easily than corn. Allegedly. Common Sense Agriculture, a small biofuels company in College Station, Texas, is developing an in-field, watermelon-to-ethanol conversion machine for next season. They don’t say how much ethanol the equipment will have to produce to offset the fuel used to get to the melons, make the conversion and transport the liquid back to base. Here’s hoping this doesn’t lead to any watermelon riots, as Fourth of July and Labor Day picnickers protest a shortage of their fruit of choice.

The E85 industry has a problem. Well, a bunch of problems: corn prices, water supplies, environmental impact, flagging political support for subsidies, limited access to the marketplace and profitability. Yes, there is that. Or, more precisely, there isn’t that. If only the feds could find a way to force the country to use the corn juice . . . I’ll see your mandatory E10 and raise however hell as much as I can get away with. The thing of it is: when there’s a choice, people aren’t buying E85. What’s left of the ethanol industry post-gas price drop has convinced itself that it suffers from a near-lethal perception gap. (Remember: no one ever died defending a corn field.) As we recently reported, the Department of Energy is spending $2 million of federal funds to help you discover that E85 isn’t really cheaper when you factor-in the mpg drop. Anyway, Evolution Fuels has announced that it wants some of that taxpayer loot.

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Now that the Department of Energy (DOE) has doled out some $25 billion to help automakers retool taxpayers—I mean, retrofit factories to build incrementally more fuel efficient vehicles than the ones built at the same locations previously—the agency is continuing its cash for anything environmental program. Our old friend E85 is the beneficiary of a $5.5 million handout as part of the American Recovery and Reinvestment Act. The money goes towards two noble goals sure to get the American economy on its feed—I mean feet. First up: “outreach.” Which is Fed-speak for pro-industry propaganda, presumably . . .

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Corn-based ethanol took another blow from the scientific literature this week. University of Minnesota scientists published an article revealing that corn into E85 could require three times as much water as previously estimated. The bottom line: it takes more than 2,100 gallons of water to produce a single gallon of ethanol. That’s bad news for corn-etoh’s partisans; water supplies in the US are not exactly ample (as the NYT Mag pointed out a couple of years ago in its article, “The Future Is Drying Up“). Ethanol has also been bashed for competing with food, and for raising carbon emissions over a period of decades, rather than reducing them. The researchers, led by Sangwon Suh, note that the water needs vary widely depending on irrigation practices. In a dozen Corn Belt states, production of a gallon of E85 requires less than 100 gallons of water. I still wouldn’t buy any stock . . .

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The Renewable Fuels Association (RFA)—the ethanol producer’s bestest best friend—is in a fight for its life. As the Wall Street Journal [sub] reports “The Environmental Protection Agency dealt a big blow to the ethanol industry earlier this year when it decreed that the corn-based fuel doesn’t have a much better carbon footprint than gasoline made with crude oil.” While the RFA lobbies the hell out of congress to subvert/get an exemption from the EPA’s final decree on the subject, they’re “counting the angels on the head of a pin” (quoth RFA CEO Bob Dinneen). Less poetically, what if peak oilers are right? If the supply of easily-extracted light sweet crude dries up, then it’s oil shale for us! And if you compare corn/theoretical sawgrass for fuel, well, then, huzzah! The RFA just happens to have a study that proves that ethanol beats the snot out of shale, carbon footprint-wise [download pdf here]. Unless you count the carbon needed to produce the tires of the tractor harvesting the corn. Unwind that!

Edmunds Inside Line reports that Alabama-based Cello Energy, which was supposed to produce 70 percent of the EPA’s 100m gallon/year cellulosic ethanol goal, has been convicted of fraud. A jury has awarded over $10m in damages to investors after witnesses testified that Cello’s supposedly biomass-derived fuel was actually petroleum based. Furthermore, it turns out that Cello only has the capability to produce 20m gallons of its putative biofuel per year. The EPA’s Renewable Fuel Standard (RFS2) had banked on Cello to produce 70m gallons per annum. The downside? If (when) America’s cellulosic ethanol producers fail to meet the 100m gal/year mark inn 2010, the EPA could sell credits which would increase the biofuel’s price to $3/gallon. Current futures place the fuel’s value at $1.77/gallon. Alternatively, the EPA could postpone the ramp-up to 100m gal/year… but who’s expecting that to happen? Meanwhile, so-called “second-generation” biofuels continue to act as a subsidy magnet for an industry that is wholly addicted to feedstock-based fuels and government assistance.