Minnesota’s Love Affair with Ethanol

Remember the last time you filled up your car at the pump. Did you notice the signage about ethanol? Even if you didn’t, you added to a segment of the Minnesota economy worth over $5 billion, and supported over 12,000 Minnesota jobs in the industry. That ethanol in your gas tank will also contribute less nitrous oxide and particulate emissions to the air you breathe than gasoline would.

Keen Minnesota followers of the Iowa Caucuses every presidential election cycle might think of ethanol politics as a kind of corn-belt third rail. As recently as this week we’ve seen how ethanol stirs up energy policy and political tensions at the federal level, when Iowa Senator Chuck Grassley threatened Environmental Protection Agency (EPA) chief Scott Pruitt over EPA requirements that refineries blend ethanol into gasoline.

Ethanol has long enjoyed bipartisan support in Minnesota, which has led the country in ethanol-supporting policies that more than quadrupled the size of the industry from 2000 to 2012. Those policies have jumpstarted a multi-billion dollar industry, brought dollars at the pump home to Minnesotans, reduced reliance on foreign sources of oil, and decreased pollutants—including greenhouse gases.

From: “How is Ethanol Made?” at http://www.ethanolrfa.org/how-ethanol-is-made/v

The state’s twenty ethanol plants (and one biobutanol plant in Luverne) produce over a billion gallons annually. All 2,100 or so gas stations in Minnesota pump a blend of at least 1 part ethanol to 9 parts gasoline, known as E10. In addition, the state leads the country with 320 stations that offer higher-ethanol E85 blends that can power Flex-Fuel vehicles.

Source: http://www.mda.state.mn.us/ethanol/

A study published for the Minnesota Bio-Fuels Association, an industry trade group, claims that these twenty ethanol plants create $1.6 billion in annual income for Minnesota households from ethanol, over 18,000 full-time jobs, and $93 million in annual local taxes. While that study calculates a significantly higher contribution to Minnesota’s economy than does the state Department of Agriculture (MNDA) study cited above, either calculation points to the enormous economic impact ethanol has on Minnesotans. A federal Department of Energy (DOE) report finds 977 Minnesotans employed directly in the distillation of ethanol—excluding, unlike the other studies, corn production itself.

When we consider also that roughly half of the state’s ethanol facilities are farmer-owned cooperatives, then the economic roots of homegrown fuel deepen for the average Minnesotan. Consider further that finished ethanol flows through the petroleum refining industry in Minnesota before it gets to your tank. Finally, according to the most recent data available, Minnesota exports four fifths of the ethanol produced here, but imports all its crude oil.

Those economic advantages have arrived in Minnesota by way of aggressive policies and state-level subsidies for the ethanol industry. Minnesota became the first state in the Union to require E10 in 2003, and had subsidized ethanol production in some way—either through a tax credit or a direct, per-gallon payment—from 1980 to 2012, at a total cost of $345.5 million.

These investments yielded environmental benefits too. Ethanol and ethanol-gasoline blends burn more cleanly on the whole than pure gasoline—less nitrous oxide, less carbon dioxide, less particulate emissions, and less benzene. However, they likely contribute to low-level ozone, depending on weather conditions. Ozone accumulates most severely in urban areas; Minnesota’s largest city, Minneapolis, continues to meet EPA standards for ozone.

The argument that ethanol is more political boondoggle than fuel often relies on the claim that too much energy goes into ethanol production compared to what is wrung out at the pump—rather, that the energy return on investment (EROI) from ethanol doesn’t justify the effort to convert food to fuel. EROI calculations vary by methodology, year of the calculation, and comprehensiveness of input, but in some instances barely scrape by 1:1.  

The United States Department of Agriculture, in a 2015 study, concludes that ethanol returns at minimum twice its energy input, and up to four times EROI in places with dense, efficient ethanol infrastructure, like Iowa and Southern Minnesota.

Southern Minnesota comprises the northern portion of the ethanol refining industry in the Upper Midwest. Map from EIA data, at https://www.eia.gov/state/?sid=MN

Minnesota’s ethanol industry may not see much growth in its future. In its most recent yearly forecast, the Energy Information Agency (EIA) projects corn ethanol and other liquid biofuels to stagnate as a share of energy production, even as the country becomes a net energy exporter in the early 2020s—for the first time since 1953—on the strength of natural gas production.

Without any natural gas or oil of its own, Minnesota’s contribution to the potluck that is US energy independence from foreign oil will have to come from homegrown corn.