Oregon Public Broadcasting

With gas prices hovering near record levels, you’d think it would be a good time to be an alternative fuel producer.  But the West’s ethanol and biodiesel industries are in a pinch. 

Prices for their product have gone up even faster than for petroleum.  Plus, some consumers are questioning the true benefits of fuels made from food crops.

Correspondent Tom Banse reports government policy makers are standing by the industry.

The City of Portland offers a preview of what’s probably in store for all Northwest drivers soon.  The Rose City just celebrated the first anniversary of a requirement for filling stations to sell biofuel blends.

Sequential Biofuels station in Eugene, the first all-biofuel station in Oregon.

In Portland, gasoline has to contain at least 10-percent ethanol.  Ethanol comes from corn these days.  Diesel fuel must contain at least 5 percent biodiesel.  It’s refined from vegetable oil.

City commissioner Randy Leonard says even if biofuels cost more, it’s worth it.

Randy Leonard: “There are no contingents of U.S. forces in foreign countries losing the lives of young Americans to secure a gallon of biofuel.  This is locally produced, locally controlled.  I think the highest priority of the United States ought to be replicating this model.”

The replicating is happening at the state level first.  Oregon has taken the 10 percent ethanol mandate statewide. 

After Thanksgiving this year, Washington State will require fuel distributors to blend in low levels of ethanol or biodiesel.  Next year, it goes national.

Biofuels were embraced by government after a grassroots start. But back at the pump, enthusiasm is tempered. 

Customer Kerry Leek says he stopped at the bank to make sure he had enough money before coming to this station in Eugene.

Kerry Leek: “I’m not sure I’m sold on biofuels.  You know, everything I’m hearing, it’s like the carbon footprint seems to be pretty high.  Plus it’s driving up the cost of food.”

Customer Carol Metzler says she’s paying attention to the rising doubts about biofuels.  But she’s also motivated to reduce the country’s reliance on petroleum.

Carol Metzler: “I’ve continued to buy here and continue to focus on biofuels because I still think it is part of the solution.  But I will be more pleased at buying biofuels when they aren’t using food to make it with.”

This should’ve been the dawn of a golden age for biofuels.  Instead, producers and sellers are having to scale back their business plans.  Refiners are getting hammered by rising crop prices. 

For example, soybeans have doubled in price over the last year.  That translates into around five dollars a gallon at the pump for pure biodiesel.

Sequential Biofuels assistant station manager Mason Goche says the price increases are “really hurting business.”

Mason Goche: “I always thought – this is my belief -- I was hoping we would be the next big thing, go nationwide.  It looks like we’re just going to grow organically and do it the right way the first time.”

The minimum blend requirement is just one way governments are trying to shore up the fledging biofuels industry.  Another way is with fleet purchases.

Seattle’s Metro Transit had been using 20 percent biodiesel to fuel its buses.  But this spring, they let the contract expire.

Transit director Kevin Desmond says paying a few cents extra for renewable fuel was tolerable.  But today’s nearly a dollar a gallon differential forced his hand.

Kevin Desmond: “In effect, you spend two million dollars to continue to pay for biofuels, but cut service to pay for that.  Or do you continue to provide the service for the thousands and thousands of people that are clamoring now for transit service?  We made the pretty obvious choice.  We’re going to preserve service and we’ll set aside the bio-program for now until things settle out a little bit better."

Portland area transit agency Tri-Met is also feeling the budget pinch.  Its ambitions to use more biodiesel than the current 5 percent blend are on hold.

A Tri-Met spokeswoman expresses the widely held hope that prices will go down when more supply comes onto the market.