The war on oil

Fought in laboratories and farmers' fields, the fight to break us of our chronic oil habit won't be without its perils.

By Jeff Cox, CNNMoney.com contributing writer

NEW YORK (CNNMoney.com) -- Coming soon to a test tube near you: America's new war.

This war won't be fought with tanks and machine guns and improvised explosive devices, though. Instead, the generals in the War on Oil will employ techniques such as enzymatic hydrolysis and dry milling.

global_warming_cars.03.jpg
Finding fuels that burn cleaner and are produced domestically is a major priority of the 2007 Farm Bill.

Rather than the conventional bullets and bombs, combatants' weapons of choice will be switchgrass, wheat straw, corn and other material from the biomass.

The battle lines have been drawn and the objective is clear: Get the world's biggest oil consumers weaned from their generations-old addiction to oil and establish the United States as a self-sufficient producer of energy from alternative sources.

Political support seems strong, with elected leaders from both parties eager to cast themselves as heroes in the quest for energy independence.

Like many wartime leaders before him, President Bush has challenged the nation to sacrifice - in this case to make significant cutbacks on its oil consumption and hit targets for development of ethanol and other biofuels.

The Department of Energy has committed $385 million to build six new plants across the country whose sole purpose will be to develop alternative energy. The 2007 Farm Bill, meanwhile, is expected to allocate billions of dollars toward the same end.

We have seen the enemy and its defeat is near. But wait. Don't post that "Mission Accomplished" banner just yet.

For while the political will appears to exist, and the necessary weapons seem at our disposal, any number of obstacles could derail an American victory in this war on oil.

The government, for one, could hinder the biofuel development process by playing favorites with technology instead of giving the marketplace a fair amount of leeway in deciding which energy technologies will emerge.

Farmers will need financial incentives to grow crops other than corn that could be used to make ethanol but have little other purpose. Parochial concerns will weigh heavily on legislators who will have to decide where biofuel funds will go. Finally, more cost-effective means will be needed to produce cellulosic, or non-corn-based, ethanol.

In fact, about the only area of agreement so far is that the war must be waged.

National security

"Thirty years ago Jimmy Carter wrapped himself in a cardigan sweater and declared the moral equivalent of a war on oil imports. The only thing we've managed to do in 30 years is double the amount of oil we import from the Mideast," said Rep. Steve Israel, a Democrat from New York. "Reliance on oil is just as grave a threat on national security as the Cold War, the space race and World War II."

Israel, a member of the House Appropriations Subcommittee on Energy and Water, has put together a package of energy proposals called the Next Generation Energy Security Initiative. Among the legislation's goals are dedicating $200 billion of tax credits and enticements to develop advanced energy technologies.

Like many of his Democratic and Republican colleagues, Israel hopes the nation can loosen itself from oil's grip. Yet he calls the Bush energy goals - a 20 percent reduction in oil use and the annual generation of 35 billion gallons of ethanol by 2017, among them - a "press release" concocted by an administration whose primary constituency remains Big Oil.

Israel worries the government could further derail alternative energy's progress by not allowing the marketplace to determine which technologies will come to the forefront and instead picking its own favorites to promote and fund. It is a concern shared by Mark Emalfarb, CEO of Dyadic International (Charts), a Florida-based biotech company that's helping develop technology along with Abengoa Bioenergy, an operator of one of the new plants the Department of Energy will fund.

Emalfarb wonders whether the government will let private industry take the country where it needs to be energy-wise, or will fail to allocate the necessary resources and adopt the proper policies to move the process forward.

"Do we really want to solve our energy issues and become energy independent? If we do, we have the skills, the tools and modern biotechnology to solve the problems we have," he said.

"The issue is will the USDA, the Department of Energy, put enough money to work to speed it up? My hope as an American citizen as well as CEO of a biotech company is that we have the political will to make it a Manhattan Project. By doing so we do a lot of beneficial things for mankind and certainly America."

The quest for alternative energy and the goals of the 2007 Farm Bill, which allocates $1.6 billion for renewable energy programs, offer the Bush administration and conservationists the rare opportunity to operate on the same political page. Bush initiatives such as drilling for oil in the Alaskan wilderness have put the two sides at odds, but even environmentalists readily sing the praises of the administration's alternative energy proposals.

Brad Redlin, a director with the Izaak Walton League of America, one of the nation's oldest environmental groups, sees promise in the Bush proposals even if he is a bit skeptical as to some of the methods used to achieve them.

Among the major areas the Farm Bill looks to address is the development of cellulosic ethanol. There simply isn't enough corn available to meet the country's ethanol needs, so other products including switchgrass and various wood products will be used to extract sugar for conversion to ethanol.

Making cellulosic ethanol, though, remains a costly process, and in its present form probably wouldn't save Americans much if anything at the gas pump. Redlin believes that issue will have to be addressed while making sure cellulosic-friendly crops are produced in an ecologically sound manner.

"The technology (for cellulosic ethanol) I think is by and large there, but it's going to require some real rapid advancements to make it commercially viable," Redlin said. "We're certainly supportive of that whole idea. But until it's economically viable it's pure theory."

As an overall package, the 183-page farm bill with its 10 titles is making its way through a series of public hearings and town meetings with little fanfare outside its energy proposals. Sen. Tom Harkin (D-Iowa) has been ushering the plan through and is looking at a late-summer date for congressional approval.

But even with many lawmakers from both parties voicing broad support for the bill, Harkin acknowledged that much work remains on the details of alternative energy.

"There's a pretty broad consensus that we can produce large volumes of biofuels from cellulosic biomass feedstocks in the future, but we have a long way to go," Harkin said in a statement to CNNMoney.

Both Redlin and Neil Koehler, president and CEO at Pacific Ethanol (Charts), said the government will need to subsidize those farmers who produce the cellulosic products like switchgrass, a tall perennial used primarily for grazing.

Koehler, whose company makes mostly corn ethanol now but is planning to move steadily to more cellulosic ethanol, said the government needs to fund both efforts aggressively.

"There's a clear recognition that we have a major problem that will need to be addressed," he said of the U.S. energy issues. "That will require public support to make that happen. I do think the farm bill is very great opportunity to show that commitment."

But skeptics like Rep. Israel worry that politics as usual inside the Beltway could take the steam out of alternative energy development.

And he's not alone in his pessimism. A recent poll by the Center for American Progress, a liberal think tank headed by former President Clinton's chief of staff John Podesta, found that nearly 75 percent of Americans favor development of alternative energy but also believe the U.S. is on the wrong track with its energy policy.

"We've allowed our parochial favorites to get in the way of national progress," Israel said. "I guess I can sum it up by saying our energy policy is best described as 'my way or no way, my technology or no technology.'

"I think that the administration isn't taking us down any road. They're at a big stop sign. The administration enjoys this paralysis, because the result is a continued dependence on oil."

A White House energy official was not immediately available for comment. Top of page

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.