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26 October, 2008 - Ethanol Producers Embattled Again

I guess this really shouldn’t come as a surprise to any of us who, for the past three decades, have been strong supporters of ethanol and alternative fuels produced on U.S. farms, but the anti-ethanol people are at it again; this time, taking a different approach.

To those of you who are supporters of ethanol, let me tell you what you are up against this time by sharing with you a quote from Andrew Moylan of the National Tax Payers Union who said “Ethanol has demonstrated that it is truly the fuel to nowhere.” He goes on to say “the U.S. government would waste it’s money on ethanol if it uses a loan guarantee program to prop up struggling ethanol makers”. Sharing the thoughts of the National Tax Payers Union are groups like Tax Payers for Common Sense, Citizens Against Government Waste and the American Conservative Union, all of them saying there should not be any additional help for the ethanol industry.

But let me describe the program that has them upset. It is a ‘loan guarantee’ program, limited by the USDA budget to $25-million dollars, that would be available to companies in rural America, including, but not limited to those that produce ethanol and alternative fuels. If they qualify, they would be able to secure a bank loan that the government would then guarantee. It is not a grant program; it is not an outright gift program; it is simply a loan guarantee program. When you look at the $700-billion dollars or the $1-trillion dollars being talked about to fix the overall economy, $25-million dollars isn’t very much.

It certainly isn’t a ‘bail out’ for the ethanol industry, but like other industries, ethanol producers have been challenged by high input costs. Some of them probably could use a loan for operating costs until the industry stabilizes again. I discussed the program with Secretary of Agriculture Ed Schafer a few days ago and he was puzzled by the current furor, saying this program has been in place and used by agribusinesses in rural America for decades. He said it looks like another attempt to discredit ethanol by those groups who are opposed to building a home-grown alternative fuels program.

There is one more ingredient to this story that really bothers me. Supporting the groups I mentioned was the National Grain and Feed Association, an organization whose members derive their income from America’s grain producers; it urged the Department of Agriculture to “reconsider this ill-conceived idea”. That makes no sense to me at all and we certainly don’t need that kind of division in our agricultural community. What we do need is a strong alternative fuels program in this country with energy produced by American farmers and processed by American workers.

My thoughts on Samuelson Sez.