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Ethanol: One Key to Energy Independence


Remarks by Bruce I. Knight, Chief, Natural Resources Conservation Service at the 20th Annual International Fuel Ethanol Workshop and Trade Show

Madison, WI
June 23, 2004

Thank you, Bob. Good morning, everyone. Congratulations on twenty years of Fuel Ethanol Workshops.

As you know, increasing the availability and affordability of energy is a national priority. In only his second week in office, President Bush established the National Energy Policy Development Group, which included the Secretary of Agriculture. The Group was charged to develop a National Energy Policy to secure our nation’s energy future.

The Group presented 106 recommendations to the President, which he adopted and immediately began to implement. The report had an entire chapter on renewable energy, entitled “Nature’s Power.” It presented the case as to why a sound national energy policy should encourage a clean, diverse portfolio of domestic energy supplies, including renewable energy.

Approximately 75% of the recommendations were administrative in nature, and the great majority of them have been completed. Twenty-six of the recommendations called for or led to legislative recommendations, and most of those are included in the House and Senate agreement on comprehensive energy legislation: The proposed Energy Policy Act of 2003.

I think it is also correct to acknowledge that this process set the stage for unprecedented, productive discussion between ethanol, petroleum, and highway sectors that previously spent more time fighting and fussing than discussing an inclusive, common future.

One key priority in this legislation is to increase domestic energy supplies and protect the environment, specifically to increase the use of domestically produced ethanol and biodiesel as a transportation fuel. As you all know, the bill contains a Renewable Fuel Standard – or RFS – which would set a minimum for ethanol use of 5 billion gallons per year by 2012. The RFS could nearly double the number of bushels for ethanol production from over 1 billion bushels today to about 2 billion by the year 2012. USDA’s chief economist, Dr. Keith Collins, estimates overall positive benefits – with net farm income for agriculture as a whole rising $2 billion to $4 billion by 2012, if the RFS is enacted.

The Energy Bill also creates tax credits, providing a streamlined solution to the historical dispute between the ethanol and highway lobbies over the production tax incentive. These tax credits will continue the economic activity in rural areas and create jobs.

The whole executive branch is helping the President in his effort to get an energy bill passed. In March, David Garman, the Assistant Secretary for Energy Efficiency and Renewable Energy at the U.S. Department of Energy, took his turn on the “Ask the White House” forum on the Internet.

He answered one question by saying, “We hope Congress will soon pass a comprehensive energy bill that contains some of the elements the President has asked for, including Production Tax Credits for renewable energy, such as wind and biomass.” He also pointed out that the President's budget for renewable energy is up 4.8% this year over last year's appropriation.

But even without the Energy Bill, we've seen tremendous increases in ethanol use and corn production used in ethanol plants. Ethanol from grains now accounts for almost all of U.S. biofuel production. There were only about 30 plants when I first started in the corn industry. But there has been a rapid expansion of plants over the past few years.

In 2003, about 2.8 billion gallons of ethanol were produced by 72 ethanol plants located in 19 States. This year, production is projected to increase to 3.3 billion gallons, and we believe ethanol demand will continue to increase in the United States.

We believe strong oil and ethanol prices, improvements in ethanol production technology, Federal and State support programs, and the phase out of MTBE in gasoline will continue to expand that demand. For the 2004 crop year, USDA estimates that over 12 percent of our overall U.S. corn crop will go into the production of ethanol. That would be 1.3 billion bushels, which is more than double the 628 million bushels of corn used for ethanol as recently as the 2000-crop year.

Continuing the ethanol tax incentive is also important for ethanol’s continued growth. That was a campaign promise of President Bush four years ago, and it is one the recommendations in the President’s National Energy Policy report.

We are pleased that Congress has taken steps in the transportation bill and again last week in the jobs creation bill (H.R. 4520) to extend and modify the tax incentive. The modification will generate revenues for the Highway Trust Fund, thus removing one of the key issues used by ethanol critics.

At USDA, under Secretary Veneman’s leadership, we are working hard to promote the growth of ethanol. The expanded authorities in the farm bill, supported by the authorities in the healthy forests initiative, have propelled USDA from a supporter and promoter of renewable energy to a strong player in energy and environmental policy and implementation.

Just as I am leading a transition of our conservation portfolio to a working lands policy of conservation, USDA’s energy role is evolving into a working, renewable platform. Our programs help you make renewable energy happen. We have used our value-added grant program to help with plant feasibility studies, our rural credit programs to help with construction, our Renewable Energy and Energy Efficiency Program (Section 9006 of the 2002 Farm Bill) to support specific plants, our Biomass Research Initiative (run by theNatural Resources Conservation Service) and our basic research programs (in the Agricultural Research Service and the Cooperative State Research, Education, and Extension Service) to improve production efficiencies and increase the value of by-products, and our Commodity Credit Corporation Bioenergy Program to stimulate plant expansion.

In Secretary Veneman’s words, “We're very supportive of this technology and think it's a very important way that we should proceed in the future, both for our farmers that are involved in participating and for a cleaner environment.”

During his State of the Union Address in January, President Bush once again urged the Congress to pass this legislation to make America less dependent on foreign sources of energy. The President said, “Consumers and businesses need reliable supplies of energy to make our economy run.”

A little over two years ago, President Bush came out to my home State of South Dakota and gave a speech at the ethanol plant in Sioux Falls. On that occasion, he repeated his continuing support for developing ethanol as a fuel source. He said ethanol is important both because it can contribute to the agriculture and rural sectors of our economy and because it helps us become less reliant on foreign sources of energy.

He also praised efforts in Congress to help increase both the demand for – and the supply of – ethanol. In the President’s words, “It's good public policy for America. It's good for our air, it's good for our economy, and it's good for our national security.”

As practitioners, you all know, the way to energy security is not a single road, but a network of paths, including promoting conservation, developing renewables, and producing more oil and gas at home. The farther we go down all of these paths, the less reliant we will be on foreign sources of crude oil, and the better off we will be in America.

America's energy needs are more critical than ever before. U.S. farmers and ranchers need reliable sources of affordable energy. And, U.S. farmers and ranchers stand at the beginning of a new future, where they can also be the important suppliers of plentiful and environmentally sustainable sources of bioenergy and bioproducts.

Thank you.