May 7, 2006
Gas prices are passing $3 a gallon and climbing, oil
companies are making record profits and there is serious concern about this
country’s dependence on foreign oil. Those things have sparked a lot of talk
about using something else, instead of oil, to fuel our cars.
As correspondent Dan Rather
faced similar problems and already has solved most of them
of gasoline, many Brazilians are using ethanol – which can be made from
plants into a kind of alcohol – to power their cars. It’s cheaper and
cleaner. As a result, Brazil has virtually stopped
importing expensive foreign oil.
So, 60 Minutes
wondered: Why can’t we do that here in the
United States? Farmers, automakers, Wall Street
investors and many scientists think it can be done
"Fifteen years ago Brazil made a commitment to burning ethanol made from
sugar cane as a primary vehicle crop. And lots of energy analysts have
scoffed at the idea," says professor Daniel Kammen, who heads the Renewable
Energy Lab at the Berkeley campus of the University of California, where he
studies ethanol and other alternative fuels.
Dr. Kammen watched Brazil's ethanol experiment for years. "They saw the
price trends of ethanol from sugarcane going down, and, of course, the
global price of gasoline going up," he says. "And so they emerged at this
wonderful time with a program that had been thought through. They made it
work — and it wasn't even that hard."
traveled to Brazil to see how they made it work.
Brazil had two problems: they grew more sugarcane than they could sell and
their economy was being strangled by the high price of imported oil.
Making ethanol out of sugarcane solved both problems. In cities like Sao
Paulo, with 18 million people, they call ethanol "álcool," and it’s sold at
every gas station, right alongside gasoline.
Ethanol really took off in Brazil when "flex-fuel" cars went on sale four
years ago. These cars gave drivers a choice: they can use gas, or ethanol,
or any combination of the two. Because ethanol is cheaper, the law of supply
and demand took care of the rest.
There’s already a substantial supply of ethanol here in the U.S., where the
fuel is made from corn instead of sugar-cane.
You might have noticed at your local gas station that ethanol is already in
the fuel. In some places, it's 10 percent ethanol. Oil companies add some
ethanol to gas because it boosts octane. But using ethanol as an additive
won’t replace much foreign oil, unless Americans switch to what’s called
"E85" — 85 percent ethanol and 15 percent gas.
But it's not a simple switch to make. Out of about 170,000 gas stations in
the U.S., only 650 sell E85. And, the engines in conventional cars may not
perform as well with E85, and could be damaged by it.
In Detroit, they’ve solved the car problem by making small modifications to
a standard engine’s fuel-supply and injection systems. That produces the
same kind of "flex-fuel" cars they’ve been selling in Brazil, and it doesn’t
cost any more than a conventional car.
Flex-fuel autos adjust automatically to whatever's put in the tank – gas,
ethanol, or any combination. You can convert a standard car into a flex-fuel
vehicle, but you would need a skilled mechanic and some parts to do it.
And ethanol isn’t new to the auto business: the first Model T's ran on it.
"We’ve been working on this ethanol fuel for a long, long time," says
General Motors head Rick Wagoner, who ran GM's Brazilian operations before
taking over the company.
"I think what we like about ethanol, in this case is that there are things
that we can really do right now. It doesn't require massive technology
breakthroughs, and it does legitimately reduce the amount of oil the country
has to import," says Wagoner.
Today there are about five million flex-fuel cars on American highways. A
third of them were made by GM, which now is spending millions to advertise
the flex-fuel cars it makes. But in the past, GM – and other automakers –
have touted other kinds of alternative-fuel cars, like electric and hydrogen
Asked if he is serious about ethanol, Wagoner says, "Fair question. The
direct answer is, yes. And we've got a million and a half units on the road
as we speak. We’ll be producing more than 400,000 this year. So we actually
think ethanol is a really good choice if we want to diversify the supply of
fuels in the United States."
That ethanol would come from America’s heartland, places like Steamboat
Rock, Iowa, population 300. Until a year or so ago, Steamboat Rock was
struggling with a stagnant farm economy, like many Corn Belt towns.
"I felt like the farming community was pretty dormant. I have a son that I
would like to get back in the farm, and there just wasn't enough income to
support two families," says Mark Seward, who raises corn on a farm near
Even though there's a bumper crop most years, the price of corn stayed low.
So some area farmers looked for another use for their corn.
They took a big gamble: they invested their life savings — and convinced
neighbors to do the same — to build a factory that would turn corn into
ethanol. 60 Minutes met with some of them recently, including
Larry Meints, who is a local farmer and the chairman of the board of the
Pine Lake Processing Plant.
Meints thinks some people may have thought the plan to get into ethanol
production was crazy, and he admits that not all of his friends and
neighbors invested in the project. But he says that was their loss. "I think
most of 'em that didn't [invest] now wish they would have," he says.
That’s because business is very good. The plant opened just a year ago and
quickly hit maximum capacity.
Larry Hansen, a member of the plant's board of directors, says the biggest
impact on the community has been that the price of corn in the area rose
from five to 10 cents a bushel.
"If you've got eight million bushels coming in, all that extra money that
was being sent down the river is now here in the community," says Seward,
who is also on the board.
Another board member, Polly Granzow, says, "There are oil fields in Texas,
and that is called their black gold. And I think Iowa, that’s our green
The folks at the plant showed 60 Minutes how they do it: huge
trucks filled with corn come into the plant every day and unload their cargo
into what is, in reality, an industrial-sized distillery.
In a maze of pipes and tanks, corn, water and yeast are mixed and fermented
into beer. Operators keep track of everything on computers.
"In 48 hours, each fermenter will make about 15 percent volume beer," Plant
manager Scott Dorow explains. It's not stuff you want to drink. "It's
non-filtered, and, but it's very sweet-smelling. And you can definitely tell
Then, under high temperatures, the mixture is distilled in a giant version
of an old-fashioned corn-liquor still. What emerges at the end is ethanol,
which is nearly pure alcohol. Trucks carry it to a nearby railroad line. For
the farmers who own the plant, ethanol is more than just a new way to make
"Ethanol has been one of the best-kept secrets that is out there. We know
it’s a good product. We know it's good for the economy. We know it’s good
for the environment," says Granzow.
And more and more people are seeing it that way. To meet rising demand, the
plant will expand to double its capacity by next year. But the farmers who
run the place are already thinking beyond that: to a new process of making
ethanol from cellulose, instead of corn. This would be much cheaper, because
cellulose is found in everything from prairie grass to agricultural waste to
"And if that becomes economically viable I think our plant could be
converted over to that way of producing ethanol, too," Meints explained.
Pine Lake isn’t unique – from New Jersey to California, about 300 ethanol
plants are in operation, or on the drawing boards. By 2012, the government
expects processors to make 7.5 billion gallons of ethanol a year. That’s
only drop in the American oil bucket, since the country uses 140 billion
gallons of gasoline a year.
But Professor Kammen at Berkeley says it's a good
first step. "Ethanol provides a wonderful short-term option because we can
use corn today to make it, and have significant savings in terms of
off-setting gasoline, and modest savings on a greenhouse gas level," he
says. "The big plus is it’s available today, so we could make this
transition starting tomorrow, if we wanted."
Oil industry executives, taking heat from Congress over their
multi-billion-dollar record profits, favor a different approach. They want
to spend billions find to new sources of oil, which is more expensive to
produce, instead of switching over to E85.
Red Cavaney, the head of the American Petroleum Institute, the oil
industry’s trade association, says it’s not the oil and gas companies who
are going to make the investment in order to sell E85.
He estimates it will cost up to $200,000 to bring E-85 to each station — and
the people who own the stations, he says, would have to foot the bill.
But, while oil companies own only a fraction of the nation's gas stations,
they have a huge influence over what's sold at most of them — and for how
"It's my understanding that the petroleum industry in general says "ethanol
— fine," but not in favor or E85. Is that true?" Rather asked.
"No, that's not correct," Cavaney replied. "The six largest refiners said
that they support the E85 in their facilities as long as the mixture arrives
and meets the government specifications for that. But we must understand
that the market is exceptionally limited."
Cavaney says that's because only 5 million of the country’s 133 million cars
can use E85.
"If all the focus is on E85, you’re gambling on starting with a very small
base and you’re gonna have to go very quick to get big volumes," Cavaney
"Why shouldn't I think, well, this is just a way for the oil companies to
slow or snuff out the growth of ethanol, and other alternatives?" Rather
"We think we've shown that we're strong supporters for ethanol where it's
appropriate," Cavaney answered.
But what the oil industry considers "appropriate" is limiting ethanol to an
additive and not moving quickly to something like E-85.
"What we don’t wanna do is over-promise to the American public what can be
done with these alternative fuels, and then under-deliver," says Cavaney.
But some states, like California, are already moving to deliver E-85 to more
gas stations by helping pay the cost of adding the E-85 pumps.
Professor Kammen from Berkeley says the process would
be a lot less expensive than the oil industry’s estimate of $200,000 per
station, and wouldn’t take that long.
"The transition is pretty easy. It looks like its $30,000 to $40,000 per gas
station to change over and have ethanol-dedicated pumps," he says.
"Are we talking three years? Five years? 20 years?" Rather asked.
"I think it's less than that, actually." Kammen
replied. "I would bet that we will have enough ethanol stations within two
to three years' time, at most. The reason is that the transition is so easy.
That doing the retrofit to have ethanol pumps available can be done in a
matter of weeks."
That just what the farmers in Steamboat Rock, Iowa, like Larry Meints, want
"It's a win-win thing for the nation, and for our local economy here to
create jobs locally, rather than sending the money overseas, and sometimes
to people that really don’t like us very well," he says.