Transportation impacts of increased ethanol production: A kansas case study

The rapid expansion of the U.S. biofuel industry has driven the Kansas agricultural transportation market into a new era. Nationally, fuel alcohol production rose from 1,630 million gallons in 2000 to 9,239 million in 2008, a 467% increase. The number of ethanol production plants increased from 54 in January 2000 to 170 in January 2009, a 215% increase. Many factors have contributed to the growth of the U.S. ethanol industry. Energy security and energy independence from unstable foreign countries has increased U.S. ethanol output. Global warming caused in part by combustion of fossil fuels has encouraged consumption of ethanol. Rural economic development related to corn and ethanol production has contributed to biofuel expansion. Federal energy policies have also played a role. The Energy Policy Act of 2005 includes the Renewable Fuel Standard Program (RFS) which mandates the minimum amount of renewable fuels to be blended into gasoline. The RFS doubles the use of ethanol by 2012. The Energy Independence and Security Act of 2007 further expands the RFS by requiring that 36 billion gallons of renewable fuels be blended into gasoline and diesel by 2022. The record high prices of oil in the first half of 2008 contributed to ethanol production growth. However, the substantial decline in oil prices which began in the Fall of 2008 has contributed to a slowdown in ethanol demand. These national trends have occurred in Kansas as well. At the end of 2009, there were 10 operational ethanol plants in Kansas with a combined annual capacity of 438 million gallons. Of the 438 million gallons of capacity, 81% became operational between 2004 and 2008. The growth of ethanol production in Kansas has affected the Kansas corn and sorghum markets in unknown ways with resulting implications for Kansas agricultural transportation. 2 Traditionally, Kansas corn was delivered by motor carrier at harvest to the nearest country grain elevators. Prior to the expansion of ethanol production in Kansas, the primary destination corn markets of Kansas country elevators were Kansas, Oklahoma, and Texas livestock feedlots with motor carriers accounting for all of these shipments. In Kansas, most of these corn shipments went to the western one-third of the state which accounts for 77% of the feedlots in Kansas. Some corn was shipped from country elevators by truck to alcohol plants in Kansas and Nebraska. About 15-20% of the Kansas corn was shipped from country elevators by truck to large terminal elevators in Hutchinson, Wichita, Salina, Topeka, and Kansas City, Kansas and then subsequently shipped by railroad to Texas Gulf of Mexico ports for export or to livestock feed locations in other states. While a large number of studies have been written on the economics of ethanol, very few studies have examined the impacts of increased ethanol production on regional agricultural transportation markets. The main objective and motivation of this paper is to contribute to this small but growing literature and in the process to indicate a useful methodology that can be used by researchers in other states. The specific objectives of the paper are: A. Investigate the transportation impact of Kansas ethanol production from the point of view of the Kansas ethanol production industry, the grain elevator industry, and the railroads serving Kansas. B. Investigate the impact of incremental truck traffic on state and county road conditions in the vicinity of Kansas ethanol plants.