answer to rising gas prices
of facilities growing nationwide,
including many right here in Indiana
Indiana Edition Cover
(February 2007) Anyone who has filled up at
the gas pumps in recent days has noticed an amazing trend gas
prices are dropping for the first time in years.
In late January, gas prices had fallen to under $2 a gallon for regular
unleaded, nearly $1 less than prices last summer when some stations
charged more than $3 a gallon.
The drop in prices is directly related to the increase in ethanol
and other biofuels production throughout the nation, said Indiana
USDA Rural Development Cooperative Specialist Jerry Hay of Deputy, Ind.
Simply put, when prices for foreign crude oil skyrocketed, renewable
energy sources became a more attractive alternative, and production
of these readily available American-made fuels increased dramatically,
As long as foreign entities keep crude prices high, ethanol production
is competitive. When gas prices were at $1 gallon, there was no incentive
in this country to find other energy sources, said Hay.
Indiana, already the largest producer of soybean-based biodeisel fuel
in the nation, has jumped on the bandwagon for ethanol production. Ethanol,
which can be mixed with gasoline to decrease the amount of crude oil
needed to fuel vehicles, is made from corn, a product in abundance in
Ethanol is an alcohol product produced by yeast from sugars. Regular
field corn is put through a fermentation process and is turned into
200-proof denatured ethanol. Even the by-products of the process can
be reused, including as animal feed. Fuel ethanol can be used alone,
such as the fuel used in Indy Racing League cars, or can be blended
with gasoline and used as fuel.
Production in the United States:
U.S. ethanol industry is the fastest growing energy industry in
Ethanol is blended in 30 percent of the nations gasoline.
As of August 2006, the United States had 1001 plants in
operation and with a capacity of 4.8 billion gallons per year.
Thirty-nine biorefineries are under construction and seven are
expanding that will add more than 2.5 billion gallons of capacity
Ethanol is blended in 40 percent of the nations gasoline
According to the U.S. Department of Agriculture, ethanol
yields 1.64 units of energy for each unit of energy it took to
produce. That compares to just 0.8 units of energy from gasoline.
The use of 4 billion gallons of ethanol in 2005 reduced
greenhouse gas emissions by 7.8 tons, the equivalent of taking
1.2 million cars off American roads.
Source: Kansas Ethanol Association
All cars and trucks on the road today can use gasoline-ethanol
blends of up to 10 percent ethanol, and any car built in the 1990s or
later can be converted to run on higher ethanol blends for around $300,
according to Hay. He said the more ethanol we use in the fuel blends,
the more our country saves on expensive crude oil.
The gasoline-ethanol blend of up to 10 percent is also called E10, and
most consumers in Indiana already use this type of fuel. Blends of up
to 85 percent ethanol, also known as E85, are available in vehicles
with slight modifications. These vehicles are called flexible
At this point, most of the ethanol plants are located in the northern
part of the state. There are 20 processing plants already producing
ethanol, with five more scheduled to be operational this year, according
to Hay. Although southern Indiana has been slower to take advantage
of this new economic opportunity, there are signs that the region is
poised to enter the ethanol production market.
A Harrison County, Ind., group, the Harrison County Independent Business
Alliance last year acquired a small scale ethanol plant to use as a
demonstration model to educate community and business leaders, investors
and farmers about the economics of ethanol production.
Steve Boehman, owner of the Fun Farm Recreation Park where the plant
is located, said the purpose of the project was to show how ethanol
production in this area could benefit everyone.
There is just an enormous economic multiplier with this situation,
he said. From the farmers who grow the crops to those who will
produce the fuel to the average person who buys gasoline everyone
He said the goal is to make locally-owned, full-scale production of
ethanol and bio-diesel a reality in southern Indiana. Producing
renewable energy fuels, such as ethanol, stops us from being held hostage
by foreign countries for fuel, he said. The more fuel we
produce in our own country, the less dependent we are on foreign governments
who set the prices to benefit themselves.
Last year, the model plant produced four batches of fuel
and is expected to produce more this year.
In the meantime, a new company, National Resource Enterprises Inc.,
has been formed to build the actual full-scale production plant in Harrison
County. A site for the new plant has not been selected yet; the company
is still looking into financial equity, which will include investors
and possibly government grant money.
NREs Larry Ott said, Once the equity gets in place, the
plant could become fully operational in 14 to 18 months.
Ott said the economic development impact on a community with an ethanol
plant is tremendous. The plant could provide as much as $53 million
a year to the local economy, he said. The plant itself could add
at least 35 high-paying jobs to a rural community, with about 280 additional
jobs in support as well.
Ott also said if the United States could replace 20 percent of the crude
oil bought from foreign governments with renewable biofuels, such as
ethanol, the country could put $50 billion back into the U.S. economy.
That kind of money would impact every citizen in this country somehow,
plants like this in Missouri
are springing up all over Indiana. Most
those operating in Indiana are
located in the northern part of the
state, but ethanol production is growing
in many areas of the country,
including southern Indiana.
Farmers across the state, and the nation as a whole, stand
to benefit dramatically from ethanol production, these proponents say.
In 2005, more than 13 percent of U.S. corn production went toward making
ethanol fuel. Approximately 11 billion bushes of corn were produced
in the United States during that year. Indiana produced 889 million
bushels of corn. Ethanol production in the nation topped 4 billion gallons
and consumed 1.4 billion bushels of corn, worth about $2.9 billion.
Corn for ethanol production was the third largest demand for U.S. corn.
With additional construction of ethanol plants and increasing demand,
fuel ethanol production should top 7.5 billion gallons by the year 2012,
according to USDA statistics. The increase in demand for corn means
more money for the farmers producing the corn.
While fuel ethanol production has substantial impact on the rural economy
and agricultural production, there are many environmental benefits as
well. According to recent government statistics, the use of 4 billion
gallons of ethanol in 2005 reduced greenhouse gas emissions by 7.8 tons,
which is the equivalent of taking 1.2 million cars off American roads.
Our environment is cleaner, said Hay.
He said even Madison Consolidated School Corp. has become involved in
the renewable fuels industry. Last year, the school corporation used
a 20 percent soy-diesel mixture. The mixture helped decrease the harmful
effects of the by product given off by the diesel fuel.
Although Hay said there may never be an ethanol processing plant in
Jefferson County, Ind., area residents will definitely see the benefits,
particularly at the pump.
Back to February 2007