Wednesday, April 08, 2009

Bio-fools

Willamette Week's cover story this week chronciles the rapid failure of the big Columbia County biofuels plant, Cascade Grain. Nigel Jaquiss does a great job detailing the events and market conditions that led to the failure of this $200 million project just seven months after it opened.

Guess who ends up holding a large part of the bag? You and me. The state of Oregon lent the company $20 million, and it got all sorts of tax credits ($13 million) as well as about $30 million in infrastructure improvements around the facility.

Poof!

Our elected representatives were so sure that biofuels was the next big thing, and Oregon had to take the lead. Sen. Jackie Dingfelder led the charge in the 2007 session to require 10% ethanol in Oregon gasoline, and giving all sorts of incentives for production.

And it took only seven months for the states largest investment ever in ethanol production to completely disappear. Great job.

Has anyone learned a lesson? HA! Remember: this is Oregon, where nothing succeeds like failure. So says the Governor's "expert" on energy:

Dave Van’t Hof, Kulongoski’s point man on energy and environment issues, says the governor believes the subsidies for Cascade and the ethanol mandate were good decisions and he would do nothing differently.

“We’re staying the course,” Van’t Hof says. “We’re not going to win on every investment, but on average we’re going to get a positive return.”

This is what happens when people who have zero understanding of markets and business decide that they are smarter than the markets. We get to pay for their colosssal mistakes. And they declare victory.

Again, Nigel Jaquiss writes the story that the Oregonian failed to write. They must be getting used to it.

4 comments:

Anonymous said...

With Jackie Dingfelder directing the state's "investments" we are in trouble. They won't even admit it when their stupid decisions cost us millions.

For the governor's energy dolt to be so cavalier about losing $20 million is just a crime.

Anonymous said...

This isn't the only stupid action from this moronic Senator. Sen. Jackie Dingfelder is in my district. I am going to do everything I can to make sure she does not get reelected next cycle.

David Appell said...

What would you have said, back in 2007 when gas prices were $3.25/gal, on their way to over $4/gal.?

Would you have had to foresight to deny funding to alternative fuels then?

If so, by what rationale?

Hindsight is 20-20. Let's see what you have today.

Rob Kremer said...

David:
You ask if I would have had the "foresight" to say no to subsidizing production of ethanol when gas was at $3.25 and on its way to $4.00?

Of course. Here is the rationale: Government should not be in the business of speculating with taxpayer dollars. Even with gas at $4.00, ethanol is not a cost effective substitute. So gas would have had to go quite a bit higher for unsubsidized ethanol to be a good economic decision.

If the government "investment" in the ethanol plant needed the price of oil to keep climbing for it to have any chance at succeeding, then that is the same exact thing as the government speculating in oil futures. A dumb thing to do, even if it worked.

And if oil DID continue to climb, government subsidies would have been unnecessary in the first place.