Monthly Archive for July, 2005

Ethanol and what you can learn from The West Wing

I just watched the season 1 episode of West Wing where the VP is asked to break a tie in the Senate by voting for the ethanol subsidy, a subsidy he strongly opposed while in the Senate. This issue came up again last season during the campaign between Alan Alda and Jimmy Smits – with the Democrat supporting in order to win the Iowa Caucus. So I wanted to know if the claims made in the show – particularly the claim that it takes more energy from fossil fuel to create a gallon of ethanol than that gallon delivers when burned – were true. Here’s what I found.

Corn Dog – The ethanol subsidy is worse than you can imagine. By Robert Bryce

Posted Tuesday, July 19, 2005, at 5:12 AM PT

Running on empty: Is ethanol the answer?
For the last generation, ethanol has been America's fuel of the future. But there has never been more hype about it than there is today. Green-energy analysts like Amory Lovins, environmental groups like the Natural Resources Defense Council, neoconservatives like James Woolsey, and farm groups like the American Coalition for Ethanol are all touting the biofuel.

Making ethanol, they claim, will help America achieve the elusive goal of “energy security” while helping farmers, reducing oil imports, and stimulating the American economy. But the ethanol boosters are ignoring some unpleasant facts: Ethanol won't significantly reduce our oil imports; adding more ethanol to our gas tanks adds further complexity to our motor-fuel supply chain, which will lead to further price hikes at the pump; and, most important (and most astonishing), it may take more energy to produce a gallon of ethanol than it actually contains.

The greens, hawks, and farmers helped convince the Senate to add an ethanol provision to the energy bill—now awaiting action by a House-Senate conference committee—that would require refiners to more than double their use of ethanol to 8 billion gallons per year by 2012. The provision is the latest installment of the ethanol subsidy, a handout that has cost American taxpayers billions of dollars during the last three decades, with little to show for it. It also shovels yet more federal cash on the single most subsidized crop in America, corn. Between 1995 and 2003, federal corn subsidies totaled $37.3 billion. That's more than twice the amount spent on wheat subsidies, three times the amount spent on soybeans, and 70 times the amount spent on tobacco.

The stickiest question about ethanol is this: Does making alcohol from grain or plant waste really create any new energy?

The answer, of course, depends upon whom you ask. The ethanol lobby claims there's a 30 percent net gain in BTUs from ethanol made from corn. Other boosters, including Woolsey, claim there are huge energy gains (as much as 700 percent) to be had by making ethanol from grass.

But the ethanol critics have shown that the industry calculations are bogus. David Pimentel, a professor of ecology at Cornell University who has been studying grain alcohol for 20 years, and Tad Patzek, an engineering professor at the University of California, Berkeley, co-wrote a recent report that estimates that making ethanol from corn requires 29 percent more fossil energy than the ethanol fuel itself actually contains.

The two scientists calculated all the fuel inputs for ethanol production—from the diesel fuel for the tractor planting the corn, to the fertilizer put in the field, to the energy needed at the processing plant—and found that ethanol is a net energy-loser. According to their calculations, ethanol contains about 76,000 BTUs per gallon, but producing that ethanol from corn takes about 98,000 BTUs. For comparison, a gallon of gasoline contains about 116,000 BTUs per gallon. But making that gallon of gas—from drilling the well, to transportation, through refining—requires around 22,000 BTUs.

In addition to their findings on corn, they determined that making ethanol from switch grass requires 50 percent more fossil energy than the ethanol yields, wood biomass 57 percent more, and sunflowers 118 percent more. The best yield comes from soybeans, but they, too, are a net loser, requiring 27 percent more fossil energy than the biodiesel fuel produced. In other words, more ethanol production will increase America's total energy consumption, not decrease it. (Pimentel has not taken money from the oil or refining industries. Patzek runs the UC Oil Consortium, which does research on oil and is funded by oil companies. His ethanol research is not funded by the oil or refining industries*.)

Ethanol poses other serious difficulties for our energy economy. First, 8 billion gallons of ethanol will do almost nothing to reduce our oil imports. Eight billion gallons may sound like a lot, until you realize that America burned more than 134 billion gallons of gasoline last year. By 2012, those 8 billion gallons might reduce America's overall oil consumption by 0.5 percent. Way back in 1997, the General Accounting Office concluded that “ethanol's potential for substituting for petroleum is so small that it is unlikely to significantly affect overall energy security.” That's still true today.

Adding more ethanol will also increase the complexity of America's refining infrastructure, which is already straining to meet demand, thus raising pump prices. Ethanol must be blended with gasoline. But ethanol absorbs water. Gasoline doesn't. Therefore, ethanol cannot be shipped by regular petroleum pipelines. Instead, it must be segregated from other motor fuels and shipped by truck, rail car, or barge. Those shipping methods are far more expensive than pipelines.

There's another problem: Ethanol, when mixed with gasoline, causes the mixture to evaporate very quickly. That forces refiners to dramatically alter their gasoline to compensate for the ethanol. (Throughout the year, refiners adjust the vapor pressure of their fuel to compensate for the change in air temperature. In summer, you want gasoline to evaporate slowly. In winter, you want it to evaporate quickly.) In a report released last month, the GAO underscored the evaporative problems posed by ethanol, saying that compensating for ethanol forces refiners to remove certain liquids from their gasoline: “Removing these components and reprocessing them or diverting them to other products increases the cost of making ethanol-blended gasoline.”

In addition to the transportation and volatility issues, ethanol will add yet more blends of gasoline to the retail market. Last year, American refiners produced 45 different types of gasoline. Each type of gasoline needs specific tanks and pipes. Adding ethanol to the 45 blends we already have means we will be “making more blends for more markets. That complexity means more costs,” says David Pursell, a partner at Pickering Energy Partners, a Houston brokerage.

There's a final point to be raised about ethanol: It contains only about two-thirds as much energy as gasoline. Thus, when it gets blended with regular gasoline, it lowers the heat content of the fuel. So, while a gallon of ethanol-blended gas may cost the same as regular gasoline, it won't take you as far.

What frustrates critics is that there are sensible ways to reduce our motor-fuel use and bolster renewable energy—they just don't help the corn lobby. Patzek points out that if we channeled the billions spent on ethanol into fuel-efficient cars and solar cells, “That would give us so much more bang for the buck that it's a no-brainer.”

Correction, July 20, 2005: The article originally stated that ethanol critics David Pimentel and Tad Patzek received no oil-industry funding. Pimentel receives no such funding, but Patzek runs the UC Oil Consortium, which does research on oil and is funded by oil companies. His ethanol research is not funded by the o
il industry. Return to the corrected sentence.

Robert Bryce, managing editor of World Energy Monthly Review, is the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate, which was just released in paperback.

Home won't sell? Some cancel and relist

Here’s more evidence that the Masachusetts real estate market is softening.

Home won't sell? Some cancel and relist
Agents aiming for fresh appeal

By Kimberly Blanton, Globe Staff | July 22, 2005

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To remove the stigma attached to a house that won't sell and make a fresh appeal to home buyers, some real estate agents reset the clock on the number of days a property has been listed — a practice critics liken to resetting the odometer on a used car.

Agents can cancel a listing and create a new one for the same house in the central database of Massachusetts homes for sale, the MLS Property Information Network. The ''new” listing is then dispatched, electronically, to agents who generate a ''hot sheet” for clients of new houses coming on the market.

''We see it everywhere,” said Patrick Lashinsky, vice president of California-based Zip Realty Inc., which makes regional MLS databases around the country available to customers, including home buyers. ''Agents know that if they're at the top of the list as being a new listing, that's when you generate the majority of your client traffic for the home you're selling.”

The number of canceled listings in Massachusetts has nearly tripled since 2001, a sign that one of the hottest real estate markets in the country is beginning to cool down, said real estate specialists. It ''tells you is the market is softening. Demand is declining,” said Karl Case, professor of economics at Wellesley College.

The practice of canceling and relisting a property, which shortens its days on the market, makes it difficult for analysts and economist to gauge the strength of the real estate market. ''I rely on that data,” Case said. ''I'd prefer they not do it.”

On June 30, Massachusetts houses sat on the market, unsold, for 70 days, on average, unchanged from June 30, 2004, MLS data show. But May home sales in Massachusetts were 11 percent below May 2004 sales, and agents are bemoaning a growing inventory of houses for sale in some Boston suburbs.

To improve information for its member agents, MLS Property Information Network and similar services in other regions, including the Washington, D.C., area, recently made it easier to determine total listing days, known as ''cumulative” days, to its listings. MLS Property's aggregate ''days on market” statistic continues to be calculated using the incomplete information for some houses.

MLS Property said 6.5 percent of all houses sold since January had been canceled and relisted with the same agent. ''That's very low,” said Melissa Lindberg, MLS Property spokeswoman.

Maggie Tomkiewicz, president of the Massachusetts Association of Realtors and a Dartmouth agent, said the practice is not widespread, because agents can look up a house's history on MLS and convey to a buyer how long it has been for sale.

''That's what they hire us for, to interpret the data and to know those things,” she said. Home buyers don't have direct access to MLS data; agents must look up a property for a buyer. Commissions for agents representing the buyer and seller in a transaction are based on a percentage of the sales price of the property.

Michelle Ferranti is ''shocked” that neighbor Christopher Daleo's house on Arbor Lane in Woburn has not sold. Another neighbor, Michelle Palumbo, says his four-bedroom home, with extras like underground sprinklers, a centralized vacuum-cleaning system, oak-spindled staircase and light fixtures purchased in Manhattan, is viewed as the best one on a cul-de-sac of similar houses.

It has been on the market since March 8. Yet, on July 9, it appeared as a new property on MLS, said Daleo's agent, Pam Dooley. She had canceled it July 8 and renewed it the next day, erasing in several keystrokes information that might cause house hunters to wonder why the house wasn't selling. ''When it shows up as new it catches people's eye,” said Dooley of Prudential Preferred Realty in Woburn. Her client, who is relocating to Alabama for a research position at a biotechnology institute, dropped his price five times. ''It's priced to sell,” Dooley said.

The number of MLS Property cancellations is rising, an indication that agents are refreshing listings on tough-to-sell houses or frustrated homeowners are pulling houses off the market because they can't get their asking price. MLS had 10,606 cancellations in the first six months of 2005 compared with 9,722 in the first six months of 2004, according to an analysis of MLS data by Bill Wendel, owner of The Real Estate Cafe in Cambridge. In the first six months of 2001, just 3,736 listings were canceled.

In a recent spot check of houses for sale on MLS in Middlesex County, Barry Nystedt, president of the Massachusetts Association of Buyer Agents, said one in four listings canceled between May 25 and June 25 was recreated by the same firm with a new MLS number. The problem for buyers is that if their agent is unfamiliar with a neighborhood, the agent ''may convey to your buyer, 'This is a new listing, let's go look at it,' when in fact it's not a new listing,” said Maribeth Boisvert, with Coldwell Banker Residential Brokerage in Shrewsbury.

Jonathan Cohen, who will relocate from New York to attend Harvard Law School this fall and was briefly house-hunting, said knowing how long a property has been for sale is essential when placing a bid. The securities trader said it is more important for houses than for securities, because ''every house is different, every neighborhood is different.”

MLS rules permit agents to cancel a listing if they and their client agree to cancel their sales contract. A newly created listing is assigned a new MLS number. John Breault, MLS director of customer support, said his organization doesn't control how agents do business. ''We just try to look at the data and make it as accurate as we can,” he said. In the past, agents had to dig into a property's history in the database to find cumulative days on market. Last year, MLS made cumulative days more visible. When members look up a property on the database now, they immediately see both the current number of days for a new listing and, next to it, cumulative days on the market.

Jim D'Angelo, Century 21 agent with Travis Realty in Billerica, said the strategy of canceling and creating a new listing worked for him in selling a Billerica split-level: The owner is scheduled to sign a purchase-and-sale agreement later this month.

He negotiated the sale in early July, days after canceling the listing on June 20 and putting the house back on the same day with updates to the interior. Since December, the price dropped from $434,900 to $398,900. ''After a house sits for a little while,” D'Angelo said, ''it gets overshown.”

Kimberly Blanton can be reached at blanton@globe.com.
© Copyright 2005 The New York Times Company

Maybe Now is not the Time to Buy

The 13 Riskiest Housing Markets

Beantown Bubble

In PMI's view, Boston is the riskiest housing market in the nation. PMI assigns a 53% probability that Boston housing prices will decline over the next two years. The city is at risk despite falling home prices between 1992 and 2001 and a relatively modest annualized appreciation of 7% since then. The problem, says Lawrence Yun, regional economist for the National Association of Realtors (NAR), is that the Boston area has lost 200,000 jobs since 2000 and that housing prices remain high, with a median home selling for $398,000. But David Lindahl, a veteran real estate buyer who runs a local investors' club, looks at the bright side of a possible price decline in Boston. That would mean, he says, “buying opportunities in the foreclosure market.”

Greening Commonwealth Road – Part 2

Today I talked to Daphne Collins in the Town Conservation Office
(617-972-6426). She explained the process for getting a new tree
planted on the median strip in front of your house.

The town allocates $50,000 a year for planting trees and it costs about
$400 to plant one, so about 125 trees can get planted. First the
homeowner has to contact Daphne and get put on the request list.
Currently only 75 requests have been made for the planting to be done
in October. After the tree is planted the town leaves instructions for
care of the tree with the resident and asks for a $95 donation.

Since the town is in the process of hiring a new Tree
Warden/Conservation Officer/Historic Preservation Officer and the new
person will be starting shortly before the tree planting, he may decide
to scale back the planting this year or do things a different way.

There is also an organization called Trees for Watertown, funded by
private donations. They will give residents $100 toward the costs of
planting a tree on the resident's property. Contact Sandy Howard,
617-926-3490

 I also talked to Frank Cerotti who is currently responsible for
Ridgelawn Cemetary, all the playgrounds in town, and all the trees. For
tree work he has a staff of two (with only one available much of the
summer becuase of vacations – though he does have a private contractor
coming for 10 days). He generously spent time on the phone with me
explaining about how tree maintenance is handled in town – which is
basically just constant triage. He remembered when driving along the
Carver Road delta was like driving through a tunnel because of all the
trees.




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