The product is ethanol, a fuel additive designed to clean up engine emissions. It is made from corn, other grain and just about anything else composed of carbohydrates.

Ethanol has been on the petrochemical scene for 30 years. But it is experiencing renewed interest because the popular additive MTBE, a chemical byproduct of the oil-refining process, has been linked to environmental problems and is being banned by 18 states (Georgia and South Carolina not among them).

MTBE, short for methyl-tertiary-butyl-ether, beat out ethanol in the late 1970s as oil producers, ordered by the federal government to reduce air pollutants, churned out the chemical and added it to their gasoline, essentially for free. Large U.S. cities declared "non-attainment" zones were forced to use the reformulated gas.

But environmental studies from the Environmental Protection Agency show that even in low concentrations, MTBE can foul the smell and taste of water. The additive has been found in both surface and groundwater, most likely leaking from old underground gasoline tanks.

Studies from the University of California found cancer in rats subjected to high doses of MTBE.

In California, one of several states to ban the additive, MTBE is scheduled to be phased out by Dec. 31. U.S. Sen. Diane Feinstein, D-Calif., said the chemical has contaminated water at more than 10,000 sites. Other states not permitting use of MTBE include South Dakota, Arizona, New York and Michigan.

MTBE's drawbacks set the stage for the resurgence of ethanol, which reduces emissions and MTBE and can be gulped down by humans and vehicles alike. And it can be grown on farms throughout the country.

Questionable subsidies

Carl King, the Dimmitt founder of Texas Corn Producers, has struggled to show lawmakers the wisdom behind ethanol for more than 30 years.

Although the Midwest has the water to produce corn, Texas is producing enough grain, in conjunction with corn, to manufacture its own ethanol.

States in the Midwest have the tax incentives to produce ethanol. Oil companies get a 54-cent-per-gallon subsidy on the federal gasoline tax for adding 10 percent ethanol to their gasoline.

Efforts to block ethanol in Texas have been largely successful.

"I found out how big that oil lobby was pretty quick," Mr. King said. "It's tough to get anything through in alternative fuels," he said.

During the 35 years Mr. King has advocated biofuels, he said, government handouts have never been on his agenda.

"My testimony to Congress has been, 'Look, we don't want your government checks. We just want a price for what we produce,"' he said.

Renewable fuels would reduce U.S. dependence on foreign oil, improve the trade deficit, boost farm income, create new opportunities for rural businesses and reduce farm program costs, said John McClelland, director of energy and analysis for the National Corn Growers Association.

The initiative is supported by rural lawmakers in the nation's capital.

"I believe renewable fuels such as ethanol and biodiesel should be the centerpiece of our future energy strategy because these fuels are home-grown solutions," said U.S. Sen. Tim Johnson, D-S.D.

But the ethanol industry has its skeptics.

Harry Parker, a chemical engineer and former oil-recovery researcher for Phillips Petroleum Co., said ethanol can't compete with reformulated gasoline because of its inherent high costs.

He contends that fuel ethanol relies on lobbying from agribusiness giants to maintain federal subsidies. The lobbying is done under the guise of protecting the "family farm," Mr. Parker said, but the profits go to stockholders.

Researchers at Texas Tech University say they doubt an ethanol industry would survive without subsidies.

"It's probably wishful thinking to believe ethanol could begin to thrive as a Texas industry without some kind of government influence," said Richard Tock, chairman of the school's Chemical Safety Office Faculty Committee and a member of the Society of American Military Engineers. "But at the same time, reducing ozone can't take place without government intervention."

Members of some conservative think tanks in Washington criticize incentives to agribusiness as being "corporate welfare."

In Marxism, American Style, Mark Schmidt, program director of the National Taxpayers Union Foundation, said that the federal 54-cent-per-gallon tax subsidy for ethanol is just one of the many federal subsidies to U.S. businesses that cost American taxpayers nearly $100 billion a year.

"Corporate America feasts on a steady diet of pork that includes direct grant payments, below-market insurance, direct loans and loan guarantees, trade protection, contracts for unneeded activities, and special breaks in the Tax Code," Mr. Schmidt said.

Growing industry

However, Texas state Rep. David Swinford, R-Dumas, an ethanol advocate, believes that advances in agricultural technology will help the ethanol industry take off.

For example, he cites genetic-engineering work at the National Renewable Energy Laboratory that has produced an organism to expand the biomass converted into ethanol by up to 50 percent. It requires less ethanol than MTBE to clean up gasoline emissions.

But he acknowledges getting farmer-owned cooperatives up and running would require taxpayer assistance, at least at first.

"Once you get the plant paid for, and you have that capital cost go way down, then you're talking about a whole new ball game," said Dumas corn grower Dee Vaughan.

Cooperatives chartered to run ethanol plants would probably need legislative approval to sell bonds as a way to raise enough money to build processing plants that can cost $31 million for a 15-million-gallon facility. But regardless of whether they got bond approval, the start-up costs would be the responsibility of the farmers involved.

Once the investment was paid off, the co-ops could stand on their own, Mr. Vaughan said, and a proposed 20-cent-per-gallon state incentive would no longer be necessary.

According to a report on the U.S. ethanol industry's ability to replace MTBE by 2004, which was prepared for the Governor's Ethanol Coalition, 7,800 new jobs would be created, including 2,300 in transportation; 1,300 in construction; 3,200 in retail; and 11,000 in service industries.

Federal officials estimate that the ethanol industry will at least double by the end of 2005, from 2 billion gallons a year to 4.4 billion gallons.

"So the question is, is Texas going to participate?" Mr. Swinford said. "Are we just going to let this huge industry just blow us by, and at the end of 2005, say, 'Gosh, I wish we'd done something?"'

A driving model

Farmers and oil producers in the U.S. corn belt haven't wasted any time hitching their wagons to ethanol.

Ethanol plants and co-ops have sprung up throughout the Midwest, where corn is plentiful and grain is cheap.

The industry has taken off in some states, where pumps offering gasohol - gasoline mixed with ethanol - line highways and country roads. An incentive program in Minnesota features a producer payment of 20 cents per gallon of ethanol.

Minnesota paid its farmers the 20-cent subsidy from 1989 to 1993. As a result, for every $1 that Minnesota put into the program, it received $14 to $18 in revenue.

The revenue returned to the state came from economic ripples when the value on corn increased, which allowed farmers to pay more in state income tax, and jobs were created, which kicked in still more tax dollars to the state.

Congress is mulling whether to increase oxygenate requirements. With the looming ban on MTBE in California, ethanol - subsidized or not - might be the fastest way to comply with those regulations.

Mr. Swinford offered a bill under which Texas would conduct a study to determine whether the state would profit from ethanol production. But the bill, along with one to phase out MTBE and replace it with ethanol, died in committee.

Representatives of Valero Energy Corp., a major oil producer that provides significant quantities of MTBE, showed up in force to kill the bill.

"If it's your No. 1 business, and you're big enough ... they're not likely to just roll over and play dead," said Mr. Swinford, adding that the state's limited water supply is at risk.

But Valero staff say the scares surrounding MTBE were knee-jerk reactions to claims of contamination that turned out to be either false or greatly exaggerated.

Valero, along with other oil companies, invested a lot of money into developing MTBE when that product had the EPA's support. Now, the company is converting its factories to produce ethanol in California, where MTBE has been banned. Unless California gets a waiver on the 2 percent oxygenate requirement, the only alternative to MTBE is ethanol.

Ms. Feinstein said she doesn't believe there is enough ethanol to meet demand in California and across the nation, and she fears a price spike.

However, a 2001 report from John Urbanchuk, an economist with AUS Consultants in New Jersey, said the U.S. ethanol industry is capable of expanding to meet the demand for oxygenates that would result after withdrawal of MTBE.

Because ethanol provides about twice the oxygen content of MTBE, half as much would be needed. By 2004, the U.S. industry would have a surplus of 313 million gallons a year, according to Mr. Urbanchuk's findings.

Future value

Economists say adding value to crops by making ethanol and other biofuels from them will be vital to the future of farm states.

"Just as the petrochemical sector developed to complement the Texas oil sector in the early 20th century, a larger agricultural-processing sector must develop to take advantage of its agricultural output," said Ray Perryman, an expert in monetary policy and econometric modeling.

Currently, 94 percent of the crops grown in Texas are processed somewhere else.

Mr. Swinford said the only way Texas farmers can improve their budgets is to take their crops to the next level of production - such as processing their grain crops into ethanol.

"The cost of a wrapper of a box of Corn Flakes is higher than the corn that goes into the box," he said. "Processing and refining is where the money is. It's not in the raw product."

Agriculture producers have historically received a smaller portion of the consumer's dollar than processors, but the farmers' share of the consumers' food dollar has dropped from 32 cents in 1970 to 21 cents in 1997.

Mr. Perryman said ethanol has a lot of potential to spur rural development because it adds value to products already supplied.

Mr. Perryman said there is likely to be increased interest in alternative fuels such as ethanol for several reasons, not the least of which is instability in the world's oil production.

"We're certainly in one of those times," he said.

A NEW STANDARD

A report from the Renewable Fuels Association, National Corn Growers Association and National Biodiesel Board said pending legislation to establish a standard by 2016 would:Reduce crude-oil imports by 2.9 billion barrelsIncrease farm income an average of $6.6 billion annuallyCreate 300,000 new American jobs in sectors such as transportation and constructionReduce direct government payments to farmers by $7.8 billion

Sunday: With stricter environmental laws and ongoing political unrest in the Middle East, many in rural America say the answer to the country's energy woes is ethanol, a fuel additive made from corn.

Tuesday: United Energy Distributors in Aiken is the nation's first "biofuel retailer," according to the National Ethanol Vehicle Coalition.

Wednesday: The United States depends on foreign oil while many other countries, including Brazil, have vehicles burning 100 percent ethanol.

Thursday: Energy company Diamond Shamrock was talking about building an ethanol plant in rural Dumas, Texas, but things got quiet after the company was acquired by a major oil producer.

Friday: Researchers say they are improving ethanol to the point where the natural fuel performs as well as gasoline.

Saturday: An expected increase in ethanol demand has Midwestern states vying to be the market leader.

Reach Deon Daugherty at (512) 482-9429