E85 Boondoggle Of The Day: What's Good For Ethanol Is Good For GM Is Good For America

This time the bearer of good news is retired General Wesley Clark and his “ Growth Energy” K-Street advocacy group. The special K says increasing the ethanol blend limit to E15 could create 136,101 new jobs and inject $24.4b into the US economy annually. How? According to the firm’s appalling report, bumping the federal blending mandate to E15 would double the “demand” for ethanol. As the report notes, in the mother of all Freudian slips “6 bgy of production capacity would be required to produce 20.4 bgy of ethanol (including current reserve capacity). This level of expansion could be met by the construction and operations of 60 100 bgy corn ethanol plants (emphasis added).” Of course they meant 60 100 mgy plants, but numbers have just become so darn confusing since billion became the new million.

The logic of bailout nation pervades the entire report, which is presented entirerly in terms of “economic impact.” Using data from their clients and government Regional Industrial Multipliers, they throw direct and secondary economic impacts into battle for King Corn.

The upshot? 136,101 new jobs and $24.4 billion “injected” into the US economy annually. They say. Oh, and if you like that, ask us about our all-new E20 blend. Or perhaps E30 for double the economic benefits?

The glaring omission from the report: any mention of how doubling ethanol production will actually happen. They just wrote the EPA and asked for a waiver ( PDF). But the answer is clear. Having hit the blend wall on its much-beloved “blenders credit,” the ethanol industry is out of growth room. Since real demand has nothing to do with subsidy programs, Growth Energy simply wants the EPA to “allow” their specific ethanol-blending clients to blend E15. Oh yeah, and cash in on the 51 cents per gallon of ethanol blended money shower.

Ethanol blenders already received $3b in 2007 from the blenders credit alone, an amount that dwarfs all other renewable fuel subsidies. Expanding blending mandates (volume, not percent ethanol) will push that number upwards anyway, rising from 7b gallons in 2007 to 9b in 2008, and peaking at 11b gallons in 2011.

If allowing E15 at the current “blend wall” would bump production to about double current levels, by 2011 things will be out of control. And don’t forget that the Renewable Fuels Association has already called for an ethanol bailout of $1b in short-term credit and $50b in long-term loan guarantees.

Green Car Congress notes that Ford and GM are standing by their corn, proving that ethanol is yet another underwater chunk of the auto bailout iceberg (see also: dealers, captive finance, suppliers). GM’s Beth Lowery notes that “GM has been, and continues to be, one of the strongest advocates for ethanol use.”

Because friends with K-Street teams are the best kind of friend in the world.