California Decision Blow to Nebraska Ethanol

It could impact 27% of state's production.

Published on: Jan 25, 2010
California's low carbon fuels standards were given final approval by the state's Office of Administrative Law last week and are set to have a major negative impact on Nebraska corn ethanol should the rules be rolled out as planned, according to the Nebraska Corn Board.

The Nebraska Corn Board estimates that 27% of Nebraska's ethanol with a value approaching $1 billion goes directly to California's fuel market.

"What California has done is over think its goal to use low carbon fuels and in the process rely on improper models filled with outdated data, and include a theory on indirect land use change," says Jon Holzfaster, Nebraska Corn Board farmer director from Paxton and chairman of the National Corn Growers Association's Ethanol Committee. "The result will be that Nebraska corn ethanol, and most all ethanol produced in the United States, will be shut out of an important domestic market. The economic impact will be negative for Nebraska's ethanol industry, rural communities and farmers."

While California is the largest fuel-consuming state, 11 states in the Northeast have essentially copied California's standards, Oregon is looking at following suit and others may be next. The bottom line, Holzfaster says, is that motorists will be forced to rely on more crude oil and, possibly, foreign sources of ethanol.

"The model California uses somehow concludes that ethanol from South America is 'better' and that crude oil is OK," according to Kelly Brunkhorst, director of research for the Nebraska Corn Board. "Yet the major producer of ethanol in South America is facing a shortage and common sense tells us ethanol performs better than crude oil on many levels."

The California ARB ignored the incredible advances in corn and ethanol production over the last several years, choosing instead to look backward on data instead of to the future, he adds.

"The lowest carbon fuel on the market today--which will approach 12 billion gallons in 2010--is corn ethanol," Brunkhorst says. "There is no other viable option available on that scale now, nor will there be next year or the year after that."

The notion that corn ethanol is not a low carbon fuel comes from the idea that corn ethanol production in the United States causes land to be tilled in other parts of the world, releasing carbon that is then assigned to U.S. corn ethanol. "This is quite unscientific, yet people have been led to believe it is true," Brunkhorst adds. "At the same time we're looking at record U.S. corn crops being produced on fewer acres. The whole land use idea is out of synch with reality. It's just a theory, and a bad one at that."

California's ARB is currently facing a lawsuit over the low carbon fuel standards. The lawsuit, filed by the two largest U.S. ethanol trade organizations and others, charges that the standards are unconstitutional, erecting new regulatory obstacles to ethanol, impacting the federal Renewable Fuel Standard and threatening the nationwide market for domestic ethanol. They also charge that the rules go against the Commerce Clause, which forbids state laws that discriminate against out-of-state goods.