Our local officials - zoners, commissioners, councilmen - have some pretty important decisions looming with regard to ethanol production.

At some point, an ethanol producer or two are going to come knocking, asking for permission to build ethanol plants in our county.

Their charge is to decide what's best for the county.

That's where opinions differ.

VeraSun is proposing an ethanol plant near Milford. The proposal is being met with resistance from area residents who think Milford is a bad place for plant.

They want the plant built somewhere far away - more than the two miles proposed near Milford - from things like schools and nursing homes.

They talk about pollution and spills.

Then there are people who raise ducks, chickens or hogs. They talk about short supplies of corn and higher prices for their feeding operations.

On the other side of the coin are plenty of people who say that ethanol production is a relatively safe and clean process that will help us become less dependent on foreign oil.

And there are those who say any spike in corn prices will be only temporary. They say as the market for corn grows, producers will respond and grow more corn - the free market will take care of itself, so to speak.

So who's right and who's wrong?

Frankly, I think it's impossible to know. We truly are in uncharted waters. Sure, there have been ethanol plants around for a long time.

There was one built in South Bend in 1977. (That one - with its somewhat outdated technology - tends to give ethanol plants a bad name. The new ones, I think, are a lot more neighborhood friendly.)

But right now, billions of dollars in government subsidies have touched off a biofuels boom. Investors are looking to spend money like crazy all over the Midwest - including, of course, Kosciusko County.

I had a nice chat with Purdue agricultural economist Chris Hurt this week.

He explained the ethanol boom.

The ethanol subsidy is a fixed subsidy at 51 cents per gallon that dates back to 1978. When it was put into effect it was assumed that oil wouldn't go much over $40 per barrel.

When oil was at $30 per barrel, ethanol was barely profitable.

There were ethanol plants making money in the western corn belt when oil was at $30 because corn was cheaper in the west. Also, several states like Minnesota, Iowa, Nebraska and South Dakota offered state subsidies along with the federal subsides.

Even with all the subsidies and the cheaper corn, ethanol was barely profitable when oil was at $30 per barrel.

Then, around May 2004, oil cracked $40 per barrel for the first time. Suddenly, ethanol profitability was raising investors' eyebrows.

With oil today selling at $58 per barrel, ethanol is profitable to make without a subsidy. With the 51-cent per-gallon subsidy and oil selling at $58 per barrel, ethanol producers could pay $4 per bushel of corn and still make a profit.

With today's corn prices around $3, profits are high. So high that the cost of constructing an ethanol plant can be zeroed out in less than three years.

Profit like that is quite enticing to investors who are all scrambling to see who can get the plants up and running first.

Another factor that is bidding up the price of ethanol is that it is being used as a replacement for MTBE. MTBE is blended into gasoline for oxygenation purposes.

You have to oxygenate gasoline to achieve the EPA's tailpipe emission standards under the Clean Air Act.

But now the EPA says MTBE is bad for the environment and wants it phased out as a gasoline oxygenate.

Enter ethanol. It's also an oxygenate. The gasoline industry needs about 10 billion gallons of ethanol a year to to get enough oxygen in gas to satisfy EPS requirements.

Right now the U.S. is only producing about five billion gallons of ethanol a year.

Hence, the boom.

We have the biodiesel plant in Claypool under construction. The same company, LouisDreyfus, has options on land near Burket for an ethanol plant, and there's Milford.

And we're not alone.

Hurt says there are 24 plants either proposed or under construction in Indiana right now.

And there are similar situations occurring in other states. The bottom line, he says, is that there is no way that all these plants can be built - or will be built - as investors see the realities of the ethanol market shake out over the next couple years.

That many plants simply couldn't all be profitable.

Even so, food prices are likely to rise a couple years from now as more corn is earmarked for ethanol production and corn prices rise. High corn prices also mean higher beef, pork and poultry prices.

What does this all mean with regard to ethanol in our county?

As to the issue of ethanol plants in our backyards, from my limited research, it seems modern ethanol plants aren't any more dangerous to the environment than any other grain-processing facilities. The new ones don't smell bad, either. Obviously, ethanol is flammable, so you have to be careful around an ethanol plant, but it's not like ethanol plants are blowing up all over the place.

As for the price of grain, seems to me it's going to increase everywhere, regardless of whether a plant is built in Milford or Burket. The plants will take the same amount of corn out of the market no matter where they're built.

My biggest concern about the ethanol boom is the potential for an ethanol bust.

The subsidy stays in effect through 2010. At that time, Congress will have to take another look. My guess is that the fixed subsidy will be replaced with a flexible subsidy linked to the price of oil. That will make ethanol less profitable.

Also, once production exceeds 10 billion barrels a year, the MTBE market advantage goes away, again, making ethanol less profitable.

And what if oil prices don't stay high? What if they drop below $40.

The other thing that's a bit bothersome to me is the fact that ethanol is lower octane than gasoline.

That means you get worse gas mileage. Running on 100 percent ethanol, cars get about 30 percent fewer miles per gallon than running on regular gas.

E85 cars get 25 percent fewer miles per gallon.

Also, we need to consider that gasoline usage in the U.S. last year was 140 billion gallons. The U.S. produced 4 billion gallons of ethanol. That's about 2.8 percent. If we converted every kernel of corn in America - 10 billion bushels - to ethanol each year, it would make 25 billion gallons. That's 17 percent of our gasoline usage, which, by the way, is increasing.

So the answer to the question of whether ethanol will end our dependence on foreign oil is a resounding "No."

I think the ethanol industry in America today is a lot more about profit than it is oil dependence or the environment.

That makes the reality of the situation pretty simple. If the plants aren't built here, they will be built somewhere else nearby. That die was cast when oil surpassed $40 per barrel. As long as building ethanol plants is profitable, investors will build ethanol plants.

Local officials must decide: Do we add the $160 or $180 million per plant to our property tax base, or send it to our neighbors? [[In-content Ad]]