Which alternative fuel for cars should Indiana policymakers back? Ethanol? Electricity? Or both?

The role biofuels might play in the Hoosier economy dominated the quarterly meeting Thursday of the Indiana Economic Development Corp. The commission, chaired by Gov. Mitch Daniels, met at the Poet Biofuels LLC plant in North Manchester.

Daniels said biofuels are becoming more important and the commission must plan for the role their production will play in Indiana’s economy.

Critics say ethanol – a gasoline additive usually made from corn – doesn’t save energy compared with fossil fuels and drives up the cost of food. They say farm-state politics, not sound economic policy, drives its development.

Poet CEO Jeff Broin disputed that argument.

“Ethanol has been the victim of a vicious smear campaign by people who are losing money off of their income statements,” Broin said, explaining that ethanol last year made a $24 billion dent in U.S. oil revenue.

Through advances in biochemistry and other technologies, Poet has slashed the amount of energy it needs to make ethanol to the point that it now requires half the British thermal units gasoline does.

“In the future, we can be at zero carbon emissions,” Broin said. That calculation subtracts the carbon that is removed from the atmosphere by corn plants used for biofuels.

And, thanks to genetic engineering, Broin predicts dramatic increases in the productivity of cropland.

“There is no food-versus-fuel issue,” he said.

Food prices spiked last summer, but that was the result of spiking fuel prices, Broin said.

Indiana Agriculture Secretary Ann Hazlett said that as the nation’s fifth-largest corn producer, Indiana stands to gain handsomely from biofuels production.

“This has brought significant capital investment to places like North Manchester,” Hazlett said. “This has brought jobs to our rural communities.”

Poet, based in Sioux Falls, S.D., invested $130 million in Wabash County when it opened its biofuels plant there in 2008. It employs 40, according to its Web site.

Statewide, the industry has grown from one ethanol plant in 2005 to 11 that employ 800, Hazlett said.

Those plants represent a $2.3 billion capital investment. But they also give Indiana corn growers higher margins on their crops, Hazlett said. That means, at least in Indiana, ethanol production is driving up the price of corn despite what Broin said.

Indiana biofuel plants currently enjoy about $100 million in state tax credits.

Daniels didn’t take issue with Broin’s arguments that ethanol is much cleaner than gas and that it doesn’t compete with food. But he said policymakers must weigh which alternative energy source will power tomorrow’s vehicles.

Indiana also is investing in electric-car technology, Daniels noted.

“We have to determine if the two can coexist and if so, how,” the governor said.

mschladen@jg.net