Don't Slow the Ethanol and Today's Headlines
Wednesday, March 8th, 2006
Don't Slow the Ethanol!
A few years ago my neighbor's eight-year old son left his front gate
open, resulting in the family dog running away. For days the kid was in
tears. As would any child who lost his dog, especially knowing that it
was his fault for leaving the gate open. Fortunately, the dog was found
by the end of the week. And today, that kid is borderline obsessive
compulsive when it comes to securing the lock on the front gate.
This is a very typical story of a child learning an important lesson. He
made a mistake, acknowledged that the mistake was made, took
responsibility for it and has since ensured that the mistake never
happens again.
Now my question is - will Washington act with the same level of
responsibility and foresight as an eight-year old child?
Well my friends...we may soon find out.
You see, it's been more than six months since Hurricane Katrina
devastated New Orleans. And in typical bureaucratic fashion - Washington
egos and seasoned spin doctors are still playing the blame game while
scientists are warning us that our next hurricane season will be just as
bad.
Will the Gulf Coast be ready?
Your guess is as good as mine.
But as Mother Nature gears up once again to show us 'who's the boss' -
there's another potential disaster looming.
Though this one is not an act of God.
It's manmade. And while it doesn't pose the same kind of threat to human
life as a category five hurricane - it could still deliver the nation a
serious economic beat-down with results mirroring the losses racked up
after Katrina touched down in the Big Easy.
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_____
Katrina's Wrath
After Katrina pounded Louisiana and Mississippi, barge traffic along the
Mississippi was shut down - with no tankers or other cargo ships moving
in or out of the Port of New Orleans.
But because it was critical to have barges available during peak grain
harvest season, those barges had to be quickly unloaded so they could be
reloaded with newly harvested grains.
As a result, the Agriculture Department had to spend more than $10
million on private contractors to unload more than 100 barges over a
two-month period.
The agency also had to pay incentives to store excess corn and wheat and
reroute nearly 300,000 metric tons of corn, wheat and soybeans through
ports in the Great Lakes and Pacific Northwest.
There's no doubt that disruptions in agricultural shipments from Katrina
became very costly, very fast.
But if serious measures aren't taken soon, even more agricultural
shipments could be disrupted within the U.S.
And not only could that mean costly consequences for farmers and
exporters - but for ethanol producers as well.
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_____
Don't Slow the Ethanol!
It's estimated that over half of the U.S.'s corn exports originate in
states bordering the Mississippi and Illinois Rivers and move via these
transport arteries to lower Mississippi River ports. And over the
1998-2002 period, corn, soybeans and wheat comprised about half of the
tonnage moving on the upper Mississippi and 40% of the tonnage on the
Illinois waterway.
<http://www.wealthdaily.net/newsletters/images/barge_030806.jpg>
With so much domestic agriculture reliant upon these transport arteries,
you'd expect the lock and dam infrastructure on the Upper Mississippi
and Illinois River systems to be top-notch.
But that's simply not the case.
The fact is, these locks are more than 75 years old. Yet were built with
a life expectancy of only 50 years. And today, in order to accommodate
modern barge tows, modernization through new, 1,200-foot locks on the
Mississippi and Illinois rivers is desperately needed.
Existing locks are only 600 feet long, making them unable to meet
capacity of modern barge tows of 1,100 feet - thereby creating
significant and costly delays through a 'double-locking' process.
Back in 2002, Northwestern University economist, Michael Evans, found
that the cost of transporting corn and soybeans could increase by 65%
due to greater congestion if the locks are not updated. That would be an
average increase of $0.17 per bushel by the year 2020.
The current system, which was built in the 1930s, slows down grain
transportation at an increased cost to U.S. producers.
And certainly, that cost gets passed on.
The last thing the ethanol industry wants right now is increased
production costs caused by outdated lock and dam systems. Especially at
a time when Washington is so 'gung-ho' about pushing the renewable fuel.
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_____
The Water Resource Development Act of 2005 (WRDA)
On Monday I received word that during a joint meeting of the National
Corn Growers Association and the American Soybean Association,
Agriculture Secretary, Mike Johanns gave assurance that the
administration would not oppose the Water Resource Development Act
(which includes modernization on locks and dams on the Upper Mississippi
and Illinois rivers).
However, the WRDA still has to be in the Senate so action can take
place. Currently, 81 senators have written Senate Majority Leader, Bill
Frist, to ask that he schedule a vote on WRDA.
But it still gets a little tricky here.
You see, while Secretary Johanns assured the corn and soybean growers
that the administration would not oppose the WRDA, the President's
budget for 2007 did not contain money for the modernization of locks and
dams. And last month, Johanns defended the Bush budget and noted that
the budget did include money for maintenance on the locks and dams.
Not surprisingly, the National Corn Growers Association had serious
issues with this. Especially after the President promised to support the
modernization in his campaign statements.
So as you can see...it's politics as usual.
Now I'm not bringing this up to call out the Secretary of Agriculture or
the President. That's definitely not my intention here.
But the economic implications of disregarding the improvements needed to
our lock and dam systems are quite significant.
Failure to modernize these systems will result in costly delays that
could impede the ethanol industry's ability to help wean the country off
foreign oil.
And we all know how imperative that is at this point.
Of course this goes far beyond just ethanol too.
The nation's river system continually contributes to the nation's
economic well-being, bringing nearly $718 billion to the nation's gross
domestic product while ensuring domestic and international trade
opportunities. And the fact is, if modernization is not done, the
country could lose more than 30,000 jobs in corn growing and non
corn-growing states in addition to environmental, facility and continued
waterway damage, according to the National Corn Growers Association.
Granted, outdated locks and dams on the Upper Mississippi and Illinois
River system may not have all the intensity and fear of a category five
hurricane crushing the Port of New Orleans - but the economic impact is
still a devastating one.
Now I also realize that there's some opposition to the passage of the
WRDA as well.
Some have identified environmental concerns spawned from the Mississippi
River being used primarily as a navigation highway. With the river
providing habitat for 300 bird species and 260 species of fish, there is
concern that these species could be threatened by the WRDA.
However, Senator Russ Feingold has proposed under the Corps of Engineers
Modernization and Improvement Act, measures that would ensure that the
project would be environmentally sound.
Though who knows if these measures will even be considered.
Nonetheless, before you send me an e-mail criticizing me for my
environmental concerns or criticizing me for talking up the economic
benefits of the WRDA over the environmental risks (this, obviously
depending upon which side of the fence you call home), my intention here
is not to persuade or dissuade anyone in regards to the WRDA. I'm simply
putting this information out there so you, as an investor, are aware of
how this legislation can affect the ethanol industry. That's it.
The fact is, the outcome of the WRDA will have an impact on the ethanol
industry in one way or another.
And as we've certainly seen in the past - renewable energy momentum can
clearly be linked to decisions made on Capital Hill.
For more on legislation that is helping us profit from renewable energy
momentum, visit GreenChipStocks.com http://www.greenchipstocks.com .
Until next time...
Jeff Siegel
Managing Editor, Green Chip Stocks
Today's Headlines
March 08th, 2006
A Cool Ride That Saves Gas
http://www.nytimes.com/2006/03/07/science/07findings.html?_r=2&oref=slogin&oref=slogin
The Department of Energy's National Renewable Energy Laboratory reported
on Thursday that if every car and truck on America's roads was equipped
with ventilated seats, air-conditioning-related gasoline consumption
could be reduced by 7.5 percent.
March 08th, 2006
Clean production reduces cost and preserves environment
http://www.antara.co.id/en/seenws/?id=9832&g
The senior adviser of the Indonesia-Germany Environmental Program,
Novalinda, has called on small-scale manufacturing companies to
implement a clean production system not only to preserve the
environment, but also to reduce the production cost by 20 to 30
March 08th, 2006
'Green' chemists swap oil for renewable alternatives
<http://www.csmonitor.com/2006/0306/p13s02-sten.html>
Petroleum-based substances are in everything from lipstick to laundry
detergents, clothes to computers to chocolate bars - even fertilizers
and pharmaceuticals.
March 08th, 2006
Microgy Signs On to Develop Waste-to-Energy Facility
<http://renewableenergyaccess.com/rea/news/story;jsessionid=1BCAE697FE41
DCF04D548513BBBB6B66?id=44289>
Environmental Power Corporation's wholly owned subsidiary, Microgy, has
entered into a Letter of Intent with Swift & Company, the world's
second-largest processor of fresh beef and pork products, to develop a
waste-to-energy facility at Swift's Grand Isla
March 08th, 2006
PG&E Adds More Renewable Geothermal Energy to Electric Mix
<http://renewableenergyaccess.com/rea/news/story;jsessionid=1BCAE697FE41
DCF04D548513BBBB6B66?id=44290>
In a new agreement to provide enough renewable electricity for nearly
100,000 Pacific Gas and Electric Company (PG&E) customers, the company
has entered into a contract with Military Pass-Newberry Volcano Project,
LLC to purchase up to 120 megawatts (MW)
March 08th, 2006
DOE Solar America Initiative Set to Fund Solar PV Development
<http://renewableenergyaccess.com/rea/news/story;jsessionid=1BCAE697FE41
DCF04D548513BBBB6B66?id=44291>
Now, says the DOE, the emphasis is on funding industry partnerships to
accelerate market-ready PV using aggressive new goals, down-selects, and
a new focus on eliminating manufacturing and production R&D barriers.
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posted by Victor Lloyd Smith @ 3:52 PM
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