Editorial: Indiana Study Mulls Costs Of Producing Ethanol

A Purdue University agricultural economist and transportation specialist believes that Indiana, in its move to help make the United States energy-independent via ethanol, is likely to run into potholes, highway congestion and construction zones. In other words, there is a price to pay for producing fuel from something other than oil, and we don’t always anticipate what it is. But he does.

Hoosier Ag Today’s Gary Truitt cites from a report by economist Frank Dooley, who says that while the ethanol boom should reduce the nation’s dependence on foreign oil, delivering corn to production plants and the finished products to retailers could create a transportation problem in Indiana.

“The grain and transportation industries face dramatic changes over the next few years as a result of the growth of the ethanol industry,” Dooley wrote.

In his report, “The Effect of Ethanol on Grain Transportation and Storage,” Dooley examines the ethanol industry’s effect on grain shipping and transportation systems in the state. It is officially titled Purdue Extension publication ID-329 and can be found on Purdue’s BioEnergy Web site.

Dooley’s findings should serve as an alert to other states getting involved in ethanol production and movement of corn and the cattle feed that is a byproduct. Among Dooley’s findings is his conclusion that the transportation system simply will not be able to keep up with the demand and that “thousands more trucks carrying corn to ethanol plants will travel state and local roads, and for longer distances. Trucks will also transport ethanol from the plants to local or distant markets.” Dooley wrote, “In addition to causing traffic headaches, the increased road use could require additional road construction and repair.”

A total shock to some might be Dooley’s belief that Indiana could become a corn-importing state. The state is expecting to have a dozen ethanol plants in operation within three years, producing up to a billion gallons of ethanol annually. As it is now, 52 percent of Indiana’s corn is exported. Of the total crop, 70 percent is fed to cattle in and outside the state. To produce that billion gallons of ethanol a year, Dooley believes it will require an amount of corn equal to 38 percent of the state’s output—or 385 million bushels.

Who will be the losers? Dooley thinks the railroads will have the most to lose because he doesn’t think they will be able to replace their outbound corn shipments with outbound ethanol or DDGS [cattle feed]. If the state is not careful about monitoring changing traffic patterns and roads, it could be the ultimate loser, Dooley wrote. He suggests that it may become necessary to build more interchanges on the interstates to get corn delivered to new plants. As for barges, he thinks the results could be mixed—more traffic moving north and less to tidewater.

Well, so much for Dooley’s report. He raises very important issues, which would vary in intensity as they are applied to other states, which can vary in the amount of corn they produce and how many ethanol plants are built. Because the issue is to make the U.S. energy-independent, projects have popped up all over and farmers themselves have begun investing in the plants.

The issues of clean air and the environment are also important. These, plus the matters of increased danger on the highways and increased use of natural resources, are issues we have discussed numerous times before. For literally decades, the Maritime Administration and others have promoted the environmental benefits of barge transportation. These same benefits have caused leaders in the European Union to promote water transport wherever possible, even to the extent of helping to subsidize some changes in transportation.

If the construction of ethanol plants gets ahead of the ability to transport product, investors may be in for some surprises. Dooley believes that his state in particular may have bills not anticipated. If the construction of plants builds up too much of a lead across the nation, other states might find it necessary to import, rather than export, corn.

As Dooley wrote: “Some people are very concerned because the federal government and the grain industry have spent close to 50 years building export markets for U.S. grain. Now, almost overnight, a lot less corn could be exported.”

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