My favorite article had to be about a new study arguing that eliminating federal tax deductions for intangible drilling costs and for US oil and gas production expenses would hurt oil production growth and devastate future US natural gas development.

The Wood Mackenzie study was commissioned by none other than the American Petroleum Institute. (nod, nod, wink, wink). Aren’t these the same companies (foreign & domestic) who were raking it in hand over fist from 2003 to 2008 and making record profits?

Excuse me but when any single company’s sales outpace the domestic national product of 120 nations as Exxon-Mobil’s did in 2008 I find it hard not to be a little skeptical regarding the Woods Mackenzie Study.

We have seen repeatedly that domestic oil price shocks are a result of refining and distribution problems more than even supply. Mix that in with inadequate competition in the oil industry and an ample dose of bad energy policy and you get a real mess.  Maybe this is why the petroleum giants have tried repeatedly to discredit the performance and viability of ethanol.

This might go a long way toward explaining why they have so energetically fought against “tax incentives for blending ethanol” that actually go the ethanol blender…once again oil. Forgoing short term gain for long term profit is not a new concept. It also would explain their reaction to the current effort to raise the amount of ethanol in a gallon of gasoline.

 Increased ethanol demand cuts into petroleum’s profits and their ability to manipulate the market.  The economic impact of being able to control a product we are addicted to from cradle to grave is heady and lucrative stuff.

I almost blew coffee out my nose to hear API President Jack Gerard say “tax incentives have increased US oil and gas production, and that other businesses get similar breaks.”  Tax incentives for ethanol will continue to do so too as well as providing the aforementioned market competition.

Absurdity #2 is pointed out by Peter Mass in the latest issue of Foreign Policy noting, “It’s not polite to say so, but if Americans understood just how many trillions their military was really spending on protecting oil, they wouldn’t stand for it.”

Mass continues…”To what extent is oil linked to the wars we fight and the more than half-trillion dollars we spend on our military every year? We are in an era of massive deficits, so it pays to know what we are paying for and how much it costs.”

And absurdity #3 is the U.S. imported 65 percent of its oil, or 388 million barrels in July 2010, sending nearly $29.6 billion or $663,231 per minute to foreign countries. This is the highest number of barrels of oil imported in one month since January 2009.

T. Boone Pickens responded to the increase in oil imports in his monthly update and stated,” President Obama has pledged to eliminate Middle East oil dependence in 10 years, but the latest oil imports statistics show we’re not making much progress.  In July we imported 388 million barrels of oil, which is the highest total since President Obama took office in January 2009.”

Just for the record the next full moon won’t be until August 24, so will everyone knock this off and get real.

Anti-ethanol folks, who have been receiving a lot of attention on this blog of late, made sure the study got plenty of media splash because it helped them further their own causes. Interesting they didn’t showcase the source of the funding for the study or point out how badly Brazil’s sugarcane ethanol industry lusts after access to the world’s largest ethanol market…the USA.

And in today’s budget conscious environment in Washington, DC their efforts are getting some traction. The direct cost of the ethanol incentives is being reviewed independently without any comparative assessment to savings in farm bill costs, how much we spend militarily on protecting our petroleum shipping lanes, or the economic fallout from depending on foreign oil. Federal tax revenue generated by the production and use of U.S. ethanol totaled more than $8 billion in 2009, $3 billion more than the value of the tax credit.

It is amazing how quickly some of our elected officials have forgotten the core rationale for putting the US ethanol tax credit in place. President Ronald Reagan, who was not exactly a political Dove, regularly noted it is in America’s best interest to reduce the world’s dependency on oil from unstable regions of the world.

That’s why Reagan and virtually every president since has asked domestic alternative energy producers like ethanol to step up. He also noted the expense related to America’s foreign oil addiction and how helpful bringing these energy jobs and the billions of dollars ($1 billion day) we send overseas could be for the U.S. economy.

Despite this clarion call the aforementioned detractors, which mysteriously enough include some environmental groups, like to preach the benefits of sugarcane ethanol; sometimes called “slash-and burn ethanol.”(See attached photo). It’s even more amazing some U.S. regulatory agencies actually tout Brazilian ethanol as an “advanced biofuel over the American made corn product.  In case you were wondering the photo shows a burning cane field in Brazil. The Sao Paulo area alone burns 8,000 sq miles of field producing incredible amounts of volatile compounds and particulates.

To make harvesting easier, which reduces manual labor costs, sugarcane fields are burned prior to harvest to remove the plants’ leaves. Considering the near slave labor conditions in some cane fields I guess this burning might seem a gift for the machete wielding masses, despite the obvious environmental costs of the massive burning.

If critics are truly concerned about our fuel needs and specific environmental and economic consequences consider the following:

Data from the Brazilian sugar organizations clearly shows they are planning, by 2020, to export 63% more sugar and export 336% more ethanol – all at the expense of increasing the land area required for sugarcane by 78%. Corn based ethanol is being provided with increased corn yields on the same acreage and using modern production processes throughout the production chain.

Sugarcane ethanol provides primarily ethanol, with some electircal cogeneration. Corn based ethanol provides ethanol, high protein feed for livestock, corn oil, and even captured CO2 from the fermentation process to carbonate soft drinks.

Sugarcane ethanol provides jobs that don’t meet subsistence level incomes, while jobs in the ethanol production chain are highly skilled jobs that provide long term employment and taxable income for local schools etc…

And the next time you want to get on a soapbox promoting sugarcane ethanol consider the following items below which are being ignored to make Brazilian product look better than it is:

• Ignoring direct and indirect emissions from crop residues;
• Use of inappropriately low fertilizer rates;
• Failure to account for energy inputs for dehydration of hydrous ethanol;
• Failure to accurately assess transport of ethanol from Brazil to U.S.
• Failure to assess actual cane harvesting practices and processing in Brazil

At the end of the day if the U.S. ends up importing more ethanol, then we will once again lose a domestic growth industry, export American jobs, and become dependent on foreign energy producers.

Before addressing some of the onerous points in your piece, please take a look at the attached photo. This is not from the BP spill in the Gulf but rather the latest incident in Michigan which has dumped a million gallons of oil into a river and is now 80 miles from polluting Lake Michigan. Oil is and always has been a loaded gun from an environmental perspective.  From leaking tanks at service stations to oil tankers grounded on coral reefs in storms. No more explanation needed on this one.

However, perhaps the biggest point you fail to address is wind, coal, and geothermal don’t make your car go. Natural gas can be used as an automotive fuel but it too is not renewable and has other issues I won’t go into here today. Solar….I’ll race you with my bicycle.

Will ethanol be made from other sources some day?  Undoubtedly. Other biomass sources show real potential and will come with the proper research and development, but corn-based technology and infrastructure is the very launching platform for this effort. Yet opponents would have us build our domestic energy house without a foundation.

Ethanol…dubious environmental benefit? Line up the hundreds of studies regarding ethanol, look at the funding sources and consider what is left. What you will find is a long trail of reputable scientists and institutions public, private and governmental that clearly shows the environmental benefits of ethanol.

When compared to petroleum especially, ethanol is a rock star in regard to cleaning the air, maintaining water quality, and soil management. On the oil side think tar sands.

Your reference to the land use issue is also comical. Incredible productivity on our existing corn acres is easily supplying the growing ethanol industry while also meeting the needs of other markets. And yield growth is accelerating.

And finally, I think we must aggressively pursue all forms of renewable, domestic energy given the finite nature of petroleum and do so in good conscience because of the legacy we stand to leave future generations. To suggest we put our entire energy investment in “maybe someday” sources while ignoring a viable and tested source like ethanol is shortsighted at best.

 He doesn’t have a farming background and isn’t invested in the ethanol industry so he is a neutral and somewhat uninformed observer. He is also one of the busiest guys I know so for him to notice it means the anti-ethanol crowd are now officially pervasive. Apparently, it’s not just me feeling paranoid.

 The conversation came back to me in a hurry this week with the latest “ethanol is evil” Tsunami rolling across the country once again. It started with the Wall Street Journal  (No link here because you have to pay for this tripe) and the Washington Post and worked its way across the country hitting the Chicago Tribune and Des Moines Register yesterday and likely making its way for the West Coast like some cheap traveling circus.

 And like the aforementioned Circus the anti-ethanol gang leave a trail behind much like Barnum and Bailey’s elephants only there is no guy with a shovel and bucket cleaning up in their wake. They leave their load of “misinformation” to fester in the road in full knowledge that most people are also too busy to check the veracity of their propaganda.

 The public lynching of ethanol began with the bogus food vs. fuel charade in 2008 and since then has continued to resurface over and over again in several different guises that get trotted out and recycled whenever opportunity presents itself.

 Several things remain consistent as the attacks continue. The noxious cocktail they serve up is made with equal parts of the best bad science money can buy and poor logic. And the olive on the toothpick seems to be just plain old avarice.

 That’s greed, materialism, or covetousness with a Capital “C.” The people fanning the fires of these attacks have rationale and motivation that are simple if not transparent. They are the folks that want the cheapest corn possible because it boosts their profits; want ethanol to be made from another source; or want ethanol crippled forever because the market share just got too big.

 So, for the next couple of days come back here and you will get a sneak peak each day of some of these players and the Machiavellian games they play and fund all to snuff out the only real competition that imported petroleum faces in the marketplace today…ethanol.

Is ethanol our energy savior or is it the biggest scam of the decade? Is it just plain smarter than drilling two miles down in the Gulf of Mexico or do we just have our heads stuck in the tar sands hoping it will all just go away? Michael Vaughan, who hosts a Canadian TV show called Car/Business tackles this question in a thoughtful manner in the latest issue of The Globe & Mail.

In true human fashion people are looking for silver bullet solutions to this environmental disaster, for black and white answers, when most big issues tend to be very grey indeed. Vaughan does provide an interesting perspective from someone outside our borders and offers lots of insights:

• Maybe more people will come to understand that anything made from oil can be made from crops and biomass.
• Close to half the world’s oil production and 25 per cent of U.S. production is expected to come from deep-water wells by the end of the decade.
• To get to The Green Highway we need technology that is coming from the auto industry but also a greater reliance on renewable energy
• After meeting all of the needs for corn in North America there was still 1.9 billion bushels of corn exported, half of it as foreign aid.

Corn Growers as an organization has been relatively low key on this issue because of the loss of life and the serious environmental implications. But how long can the public at large sit on their hands and wait for divine intervention on the energy front?

Personally I believe we have an obligation as Americans, as the world’s largest energy users, to work as aggressively as possible toward greener, long term answers. If someone wants to say this opinion is opportunistic, then so be it.

Family farmers have been loudly proclaiming the three “E” philosophy (energy security, economy and environment) for three decades.  Our voice is just being heard now because of this terrible development in the Gulf. Petroleum dependence has always had a terrible price. You only have to view another “Gulf situation” half a world away that has now cost more than 4,000 American lives.

Relying on imports for 60% of our oil needs has an incredible prices tag that keeps growing. It’s not just exporting capital and jobs, or even energy security, but the well known fact that every gallon of oil we use today has a higher economic cost than it did yesterday. The environmental cost is growing too as we seek oil in new ways and in new places.

I have little doubt we will continue to explore and drill for oil. This is a reality related to our modern lifestyle. But what will the public do when the CNN cameras go home and the memory of the Gulf oil catastrophe gets put on the shelf of history alongside the Exxon Valdez?

One thing seems certain, we will pay more for gas unless we change our ways. “This (the Gulf spill) just makes the long term outlook for oil that much better because there are going to be more restrictions on drilling for oil in the US and perhaps in other countries, and with less drilling or more restricted oil, that’s less oil. Less oil means higher prices,” says author and financial commentator Jim Rodgers.

 So, what is to be gained or lost by such skullduggery? Stockbrokers, bankers and oil investors jumping out of windows…sure, but what is the downside? (Insert sarcasm here).

 The comments in the UK’s respected Guardian stated that the IEA has inflated its 2009 report of oil reserves for fear that the truth would shock world markets into a reactionary panic. IEA is alleged to have put its role as an industry watchdog in the kennel for the time being to fend off a potential buying panic…even at the risk of being exposed for overplaying supplies and chances for finding increased reserves.

  On face value this might seem to be based on at least a modicum of twisted logic, but what are the ramifications for world governments who govern, plan and even invest based on IEA’s data? Consider that they also develop their own energy policies based on such essential information.

According to the Guardian’s high-level IEA source, estimates of global oil production growing from its current level of 83 million barrels per day to 105 million barrels per day are as bogus as the Tooth Fairy. The source said many IEA officials believe even 90 million barrels per day is unreachable, but the agency will not lower its forecast because it fears panic could spread through financial markets.

If we have indeed entered the “Peak Oil Zone” (that strange and unfamiliar place where we actually feel the pressure to get real about “energy policy” not oil policy) then it is time to fess up like an alcoholic at an AA meeting. “Hi my name is Joe Consumer and I have a petroleum problem.”

 Timing for such smoke and mirrors regarding oil supplies couldn’t be worse. How should this be coloring world climate talks in Copenhagen? Hmm…my noble indignation seems to be sputtering like my car as it runs out of gasoline.

 And then there is ethanol. The EPA is in the final stages of deciding if this nation should move to higher blend levels (15% ethanol). If the cheap oil petro palooza we have enjoyed for decades is over we might want to factor that into this critical discussion regarding the best/renewable, domestic solution available today.

 Corn farmers and the ethanol industry stand ready to produce and serve but they and the investment community need to get the word that it is full speed ahead for alternative energy sources. Given The Guardian’s report it would be foolish to allow big oil to continue to crank out just enough oil to manage their profits and squash emerging competition like ethanol.

 If the IEA is inflating oil production numbers then continued complacency is our worst enemy. So, call  your elected officials today…shoot, call your minister, your mother and your grocer for good measure and tell them we need higher ethanol blends now! Just don’t tell your banker or broker if you like them.

Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) debuted the “Clean Energy Jobs and American Power Act,” an 821-page bill designed to “create clean energy jobs, reduce pollution, and protect American security by enhancing domestic energy production and combating global climate change,” as well as creating millions of green energy jobs. Part of that includes reducing carbon emissions by 20 percent by the year 2020 and 80 percent by 2050 compared to 2005 levels.

“This is a security bill that puts Americans back in charge of our energy future and makes it clear that we will combat global climate change with American ingenuity. It is our country’s defense against the harms of pollution and the security risks of global climate change,” said Kerry. “Our health, our security, our economy, our environment, all demand we reinvent the way America uses energy. Our addiction to foreign oil hurts our economy, helps our enemies and risks our security.”

Senator Boxer said, “We know clean energy is the ticket to strong, stable economic growth — it’s right here in front of us, in the ingenuity of our workers and the vision of our entrepreneurs. We must seize this opportunity, or others will move ahead.”

However, reaction to the measure has been mixed. U.S. Senator Saxby Chambliss (R-Ga.), Ranking Republican Member of the Senate Agriculture Committee, is not a fan.

“As I have stated many times before, I want to support legislation that addresses climate change and provides a more secure energy future for America. Unfortunately, the legislation introduced today by Senators Boxer and Kerry follows the House-passed bill down the path of higher energy costs, job losses and economic pain for no benefit. Further, it would only hurt farmers, ranchers and forest landowners and provide them no opportunity to recoup the higher costs they will pay for energy and the other inputs necessary to work the land. I cannot support this bill.”

So, we’ll see where this one goes.

 The second article quotes the investment bank Morgan Stanley which has raised its forecast of U.S. crude oil price to $105 (U.S.) a barrel in 2012 from $95 due to tightening spare capacity and growing world demand.

Through its Clean Cities program, the Energy Department will use $300 million in economic stimulus money for “petroleum reduction projects.” According to the agency, the funded programs will “speed the transformation of the nation’s vehicle fleet” by putting 9,000 alternative fuel vehicles on the road and creating 542 refueling stations for them.

And then there are the “education projects.” The Alternative Fuel Trade Alliance won a competitive bid for a $1.6 million contract to hold events and workshops “to increase knowledge about alternative fuels and advanced vehicle technologies.”

 Instead of being critical of such projects API and the Washington Post apparently need to broaden their thinking and their list of selected reading.  It is estimated even a meager global demand growth at 1 percent annually for petroleum would still leave the market tight.

If you factor in “political wrangling over Project Kuwait, oil laws in Brazil, militant attacks in Nigeria and an array of issues with Iraq, Iran and Venezuela” the DOE seems to be taking a conservative approach to domestically produced alternative fuels indeed.

So, haw many “Farm-Belt Voters” were surveyed for this poll? 500? 1,000?

How about … 40. Of the 802 voters surveyed, only 5 percent were what the pollsters considered farm belters.

But what is truly ridiculous here is the transparency of the bias. Question Three of the poll gives a brief version of boths sides of the issue. But notice how the bias is toward one side:

“Supporters of this corn ethanol mandate say that the law promotes America’s energy security, reduces greenhouse gas emissions, and provides financial benefits for farmers and agricultural businesses.”

“Opponents of this corn ethanol mandate say that ethanol production is increasing food prices, produces more net greenhouse gas emissions than conventional gasoline, and contributes to world hunger by converting food to fuel, while doing little to promote energy security. It has been estimated converting the entire U.S. corn crop to ethanol would reduce gasoline consumption by only a few percentage points.”

And then Question Four adds information about the disputed land use research:

“Two new studies, one from Princeton University and the other from the University of Minnesota in cooperation with the Nature Conservancy, found that ethanol contributes more greenhouse gases than conventional gasoline to the atmosphere, while expanded ethanol production encourages habitat destruction.

“Now knowing this, do you believe the ethanol mandate should be…”

No attempt whatsover is made to offer an opposing viewpoint.

Well, it is a political season, and the pollsters are based in Washington, so maybe this survey is just one example of what we have to look forward to in the months ahead. But it’s a shame they stoop to this and cannot rely solely on arguing the facts.

“The RFS requires that increasing amounts of our motor vehicle fuel come from biofuel, such as ethanol from corn and biodiesel from soy,” said Committee Chairman Jeff Bingaman (D-NM). “Homegrown biofuels are good energy policy, good environmental policy and good national security policy. However, there is some concern that RFS as enacted risks taking the biofuels industry backward rather than pushing it ahead. I am particularly concerned about three aspects of the RFS: first, early year biofuel requirements could be too aggressive; second, mandates for specific technologies and feedstock could prove to be overly prescriptive; finally, the environmental restrictions may be too narrow.”

Witnesses at the hearing included Renewable Fuels Association president Bob Dinneen, American Coalition for Ethanol executive vice president Brian Jennings, Michael McAdams of the Advance Biofuels Coalition, Charles Drevna of the National Petrochemical and Refiners Association and Carol Werner with the Environmental and Energy Study Institute.