The Other Energy Scandal: Ethanol

Prosecutors snagged their first guilty plea in the Enron energy scandal last month. Former executive Michael Kopper admitted to money laundering and conspiracy to commit wire fraud. He has promised to forfeit $12 million in illegal profits, which will be distributed to Enron victims.

Now, if only taxpayers could get some of their money back from a far bigger corporate energy fraud that continues unabated in Washington: Ethanol.

The corn-based fuel is backed by both Democrats and Republicans, who are hungry for contributions from agricultural conglomerate Archer Daniels Midland (which owns 41 percent of U.S. ethanol production capacity) and desperate for votes from the farm belt (where 98 percent of the nation's ethanol plants are located). According to The Washington Post, Senate Majority Leader Tom Daschle, D-S.D., supervised the writing of a section in the Senate-passed energy bill requiring gasoline refiners to nearly triple the use of ethanol by 2012.

After 2012, this anti-free market maneuver would guarantee ethanol a growing fixed share of the country's fuel consumption every year, no matter what consumers actually demand or what better methods of reformulating gasoline come along.

House Speaker Dennis Hastert, R-Ill., and Minority Leader Richard Gephardt, D-Mo., both from corn-fed states, support Daschle's corporate welfare mandate, as does President Bush. "Ethanol is good for our economy, it's good for our air," President Bush asserted earlier this week during a swing through Iowa and South Dakota urging passage of the energy bill.

That's not what a recent internal administration document showed. A little-noticed memo from the Office of Management and Budget reported in June that both Bush's own Council of Economic Advisers and the Federal Trade Commission believe the ethanol mandate "is costly to both consumers and the government and will provide little environmental benefit."

The panels concluded that a jump in ethanol consumption would increase gasoline costs and might create fuel supply shortages on the East and West coasts. Retrofitting refineries to produce an ethanol blend could add at least 3 to 5 cents to a gallon of gas. In California, the mandate could raise fuel costs by nearly a dime per gallon; in New York, it could mean a de facto gas tax hike of more than 7 cents per gallon.

The ignored advice from Bush's experts is consistent with reams of past findings on both the economic and scientific fraud that is ethanol.

Cornell University agricultural researcher David Pimentel, who chaired a Department of Energy panel that investigated ethanol production several years ago, published an analysis last year showing that about 70 percent more energy is required to produce ethanol than the energy that actually is in ethanol. "Abusing our precious croplands to grow corn for an energy-inefficient process that yields low-grade automobile fuel amounts to unsustainable, subsidized food burning," Pimentel concluded.

As for the environmental "benefits," the National Academy of Sciences concluded that ethanol had little impact in improving ozone air quality. While ethanol can reduce carbon monoxide emissions, it also increases emissions of volatile organic compounds and nitrous oxide, the most common precursors of smog.

When you add up all the targeted government subsidies for ethanol, including federal price supports, a generous federal excise tax exemption worth more than 5 cents a gallon at the pump, various tax credits, and subsidized grain exports, the taxpayer tab amounts to more than $7 billion over the last 16 years. (And ethanol still costs more than regular gasoline.) These government giveaways are on top of the abominable $200 billion farm bill signed into law by President Bush, which will pay farmers some $4 billion a year to grow more corn for subsidized ethanol production.

It's not the small family farmers that reap the rewards. It's the suits at ADM, whose every $1 of profits earned by ethanol operation is estimated to cost taxpayers $30.

This corporate bilking of the public, and the Beltway collusion that enables it, ought to be criminal. But instead of leading the ethanol crooks away in handcuffs, Tom Daschle and President Bush kneel at their feet -- waiting for the donations and votes to roll in while the corn goes up in smoke.

Malkin is a graduate of Oberlin College in Oberlin, Ohio. She lives with her husband in North Bethesda, MD.

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