World’s Largest Producer of Rubbing Alcohol Can’t Manufacturer Hand Sanitizer

How many stupid, outrageous, maddening government failures can you document in just 500 words? Jim Doti and my former colleague Laurence Iannaccone should win a prize for this piece in the WSJ:

…the U.S. is, by far, the world’s largest producer of alcohol. That distinction is a result of the Energy Policy Act of 2005, which required fuel producers to blend four billion gallons of corn ethanol into their gasoline by 2006 and 7.5 billion by 2012. The immediate result was a spike in the price of corn and an increase in food prices world-wide. U.S. farmers soon solved this problem by diverting millions of acres of land to growing corn. Ironically, this increased overall CO2 emissions, much to the chagrin of the environmentalists who had championed the mandate as a way of fighting global warming.

Long before policy makers had seen their error, however, farm states had so fallen in love with ethanol that they successfully lobbied the federal government to raise the mandate to 32 billion gallons a year by 2022. Keep in mind that the oil industry would gladly pay billions of dollars in extra taxes each year not to use it.

The negative effects of this forced usage of corn-based ethanol in refined petroleum include higher gas prices (alcohol costs more than oil per British thermal unit) and more than 30 million acres lost to subsidized corn production — an area that vastly exceeds all the land lost to urban, suburban and exurban “sprawl” over the past century. And while the U.S. now has inordinate supplies of excess alcohol, fuel producers can’t use it, since adding any more to gasoline will damage car engines.

Surely now, with people clamoring for germ-sanitizing alcohol, this excess supply can be put to good use. Not so fast. The Food and Drug Administration and Bureau of Alcohol, Tobacco, Firearms and Explosives have prohibited the use of ethanol in place of isopropyl alcohol even though both are equally effective as germ-killers.

On April 3 the FDA announced that “ethanol made at plants producing fuel ethanol can be used as rubbing alcohol if it contains no additional additive or chemicals from the plants and they can ensure water purity and proper sanitation of equipment.” But it’s unclear how much supply will increase, since the FDA also stated that it would “consider each plant on an individual basis and grant approval only if a plant meets quality control specifications.”

Worse yet, the FDA reversed course on April 16, announcing additional restrictions that effectively prevent any sales, even though ethanol companies had already produced and shipped millions of gallons of high-grade alcohol for hand sanitizer. With U.S. ethanol inventories at all-time high of about 900 million gallons, you’d think the FDA would let us have a little for our hands.

Comments

I’m sure they’ll get it sorted out around the same time we have a vaccine ready.

So maybe 2021, maybe never

Yeah, the FDA is too heavy on the paternalism, but as we say, they have a job to do.

My recollection was that the ethanol mandate was to help achieve "energy independence," (remember the petroleum export ban?) sort of a precursor of those brilliant national security tariffs we now have.

I agree that this statement is unsupported, and I am pretty sure that the lack of environmental improvements from ethanol were well known by 2005. Check out this link that shows the yes votes were dominated by conservatives and the no votes dominated by liberals: www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=109&session=1&vote=00213

Please don’t upset Alex’ lazy narrative based on his strong priors.

Generally the lack of environmental benefits narrative is also flawed; estimates of ethanol lifecycle emissions published in the last 10 years have settled on about a 30% emissions reduction relative to pure gasoline use, and studies that do not do so tend to rely either on intentionally punishing assumptions or production and performance data that is very out of date. Similarly the cost argument is muddied as the volumetric price of ethanol is consistently lower than that of gasoline and prices tend to be tightly correlated. This doesn't make ethanol look good by any means but the WSJ definitely likes its viewpoint bias.

So call it healthy hand cream, call Fox News and do a quick feel good piece, and see if the government has the balls to sue you.

Glorious. I have not winced and facepalm’d so many times in one article. If there is a scenario more maddening, I haven’t encountered it this year. (And my beloved escaped a cult. The threshold for maddening is quite high.)

How bout that time we ran out of cotton swabs, couldn't test anybody, and let an epidemic outbreak grow to 10 million cases, because corporations made the "efficient" decision to outsource their entire supply chain in order to save a few pennies?

>How many stupid, outrageous, maddening government failures can you document?

You? Well, from 2008-2016, it was a grand total of zero. You've stepped it up quite a bit since then. Weird how the topic suddenly began to interest you. It wasn't for lack of material back then.

How long before Obama goes from a good, scandal-free President to an unindicted co-conspirator?

Never on this blog. Obama becomes more angelic by the day.

If you really want to make a mess of something give it to the government to run or regulate.

Parts of the Agricultural Adjustments Act Roosevelt signed into law in 1933 are still in effect today.
The Leviathan State keeps growing every minute of every day

First off, your title isn't really accurate is it?

Second, what is so hard to understand? An industrial producer of ethanol used as a gasoline additive suddenly wants to immediately switch to use cases where people rub the stuff on their skin, and you are objecting to any regulatory oversight? What could go wrong?

Perhaps the thousands of craft brewers that are going out of business could pick up the slack instead. I don't know. Perhaps the oversight here isn't that complex, and they could move forward in a week or two. Seems like you are looking for things to get upset about.

'regulatory oversight' meaning stopping it from happening.

Sorry we are quite busy right now. Half our staff hasn't shown up for work and we are drafting new regulatory procedures to deal with emergency time sensitive situations. Give us a call when things settle down and we can schedule an inspection of your facility.

Do you have any actual situational knowledge here you'd like to describe, or are you just having an imaginary conversation with yourself?

Anyone reading this thread can go to any liquor store and buy a bottle of cheap vodka, which I believe is approved for internal use by the evil regulatory oppressors and would be safer than getting it from a gasoline additive. It is not out of stock. It is exactly what Alex is complaining about. It's right there on the shelf. This is a non-problem.

“Cheap vodka?” Which? Are you confusing proof with % Alcohol By Volume (ABV)? Divide proof by 2 and you get % ABV in the US. CDC recommends ethanol greater than 60% (more than 120 proof) and iso- of 70% to sanitize COVID. Cheap vodka is 80 proof, or 40% ABV. Do you also protest on the steps of your state capital (ironically, while wearing a mask) and toting a big boy gun? Because all those people hate facts like these, among the many things they hate. But keep believing.

First, point, fair enough. There are several alcohols on the shelf that qualify, but I didn't look into the requirements and should have before I offered up an opinion.

My argument was not to debate hand sanitzer formulas, which it is now painfully obvious that I know little about. It was to push back on the criticism of the FDA here. It seems perfectly reasonable to me to insist on checking whether a product intended as a gasoline additive would also be manufactured to standards necessary for topical use on skin.

I have no idea how you ended up envisioning me protesting the lockdown, much less doing so with a gun. That was genuinely weird.

The order is also affecting the craft brewers because part of the FDA's concern is that product is backdoor for ethanol drinking.
https://reason.com/2020/04/02/the-fda-is-making-it-much-much-harder-for-distilleries-to-produce-hand-sanitizer/

Craft distilleries are generally producing hand sanitizer since they are already equipped to handle food-grade ethanol. Craft brewers are unlikely to get in on the action because the shortage is not in ethanol base stock but in distillation capacity.

The other problem with the WSJ narrative is that they don't go into why fuel ethanol standards are different from food-grade ethanol standards. You allude to this, but to put it plainly, a whole lot of fuel ethanol also contains fusel alcohols, antibiotics residue and metals contamination. Tellingly, ethanol producers that have the capability to produce food-grade ethanol but can optionally go into the fuel market, like Archer Daniels Midland's corn wet mills (most fuel ethanol is produced by dry milling) are already diverting ethanol distillate to hand sanitizer.

"How many stupid, outrageous, maddening government failures can you document..."

.

... calm down now

The entire U.S. government structure now wisely functions on the core principle that government experts know best in economic affairs.

A few temporary missteps are bound to occur, but the government experts will properly adjust their market interventions to produce much better national outcomes ... than would otherwise be attained by greedy oil companies, farmers, and alcohol-sanitizer price gougers.

(/s)

But don't worry, this cacophony of blunders is in no way representative of the agency as a whole, or bloated government bureaucracies as a class. Go back to your homes and shut up while you wait for the obviously competent government to come up with an effective vaccine, or at least implement test and trace....or at least get financial aid to you in a timely manner...

Oh, and on a totally unrelated note: you wouldn't mind if they ran the entire healthcare system, would you? Asking for my friend Bernie.

I’d say it was more energy security, not independence, behind the initial push for ethanol/fuel.

If we get in a serious war again, the military will need
fuel to fight. We’re a net importer even now.

Otherwise U.S. farmers aren’t hijacking jets into our buildings. There’s monetary value to that.

Externalities, people. They’re part of free market economics just like S and D. To say otherwise is to be a false prophet.

Still, FDA’s actions here seem pretty ridiculous.

I love how easy it is to over-simplify, especially when economists talk about government policy. Perhaps this story truly demonstrates how ridiculous the government can be. On the other hand, I know little about the medicinal/chemical issues involved. A little searching turned up this: https://www.ncbi.nlm.nih.gov/pubmed/19014531. Enough for me to think this may not be as simple as Alex's post makes it sound. But never let facts or other areas of knowledge get in the way of the economist's simple view of the world: Government is bad, markets are good.

Note that I'm not saying Alex is wrong in this case, only that I'd like a little more sophisticated and thoughtful analysis.

But why assume without evidence that there is thoughtful analysis from the FDA or other regulators behind their decisions?

The main issue is the difference between fuel-grade and food-grade ethanol. The FDA's regulatory oversight on the subject may be too harsh, but let's not confuse the fact that a given dry-mill fuel ethanol plant is equipped with the bare minimum level of equipment required to produce ethanol for fuel purposes. There's a shitload of corners cut relative to producing potable alcohol, and that's reflected in the composition of the output - antibiotics, fusel alcohols, lactic acid, molecular sieve column minerals, etc. None of that matters if you burn it, but if you're applying it to your skin? I dunno, maybe it's reasonable to be cautious - perhaps less cautious than we're being now, but still more reasonable than that editorial would have you believe.

Not that the WSJ's opinion section lets their political narrative be interrupted by inconvenient technical factors.

There is a rejoinder to this opinion piece by Prof Jim Doti and Prof Laurence Iannaccone: "Open Letter To Two Anti-Ethanol Professors - Jim Doti and Laurence Iannaccone" (https://www.theautochannel.com/news/2020/05/08/812415-open-letter-to-two-anti-ethanol-professors-jim-doti-and.html).
The rejoinder closes with "Have a great weekend, give it all some thought, and respond if you have the courage.".

That guy must have some stake in ethanol. He seemed awfully angry about those two professors linking ethanol to the 2005 act and their subsequent criticism of the effects of ethanol supplementation.

As for the FDA issue overreach, he is silent on that and offers no rebuttal.

What is also bizarre is that Rauch lets ethanol off the hook simply because the 2005 law mandates a bio fuel but not specifically ethanol. Determining whether or not the law of unintended consequences is explicit or implicit is not a proper defense. The law created extremely bad unintended consequences. On that question there is no doubt.

There's some other biofuel other than ethanol? Best of all the farmers that raise the corn that makes the ethanol aren't required to use ethanol to power their farm equipment.

Sugar cane works better for making biodiesel. At least partly because you can squish out the sugar and use the waste to create the fuel. Giving you at least some extra energy at the end of all this work, unlike corn which nets you almost nothing. (At least if I understand correctly. I'm no expert.)

One-third of the corn processed to make ethanol becomes feed for cattle, hogs and poultry.

Sugarcane doesn't make biodiesel, it uniformly makes ethanol. You don't use the waste to make the fuel; that's cellulosic ethanol and it's still largely a pipe dream. Cane bagasse is burned for power production, at least partly because in places like Brazil the grid in rural areas is unreliable.

Ethanol in cane production is from the sugar component, sourced from the third, fourth or fifth molasses produced from vacuum pan sugar crystallization ("strike"), of which there are usually between 4 and 5 in series. The first two pans produce higher quality crystal sugar that's suitable for use in sweeteners, but beyond the third pan and the sugar is only suitable for use in nucleating the other pans and is more expensive to recover, so it's often used in ethanol production. In Brazil you will see ethanol produced from the third molasses onwards during the crushing season; in India it's more common to use the 4th-5th molasses, also known as blackstrap molasses, to produce ethanol throughout the year.

Biodiesel is basically only made from fats, oils and greases.

If that's all they got, end the ethanol program.

Tabarrok's view seems to be that unsafe hand sanitizer is better than no hand sanitizer. "The U.S. Food and Drug Administration (FDA) on April 15 issued limits on certain chemicals permitted in alcohol-based hand sanitizer, updating temporary guidance it adopted last month as the health crisis deepened and more manufacturers registered to produce hand sanitizer. Since then, the FDA has notified several fuel ethanol companies that their product does not meet safety standards, forcing them to halt production and cancel supply agreements, according to a source familiar with the matter. The source requested anonymity to speak candidly about the situation. In one case, the FDA said it had found significant levels of the carcinogen acetaldehyde in ethanol supplied by a company for use in hand sanitizer, according to a recent email exchange seen by Reuters."

+1 Thank you for sanitizing this discussion and bringing facts into it.

Did it have more or less Acetaldehyde than kimchi, weed smoke, and craft beer?

I see they don’t give a PPM

Acetaldehyde is going to be in any ethanol distillate or natural product. Low in beer and vodka (single digit ppm), high in grappa (500 ppm!) but fuel ethanol has special production characteristics (e.g. use of antibiotics in ferments, ditillaton for proof and not for taste etc.) which may make it different.

Leave it to the lawyers to jump in to protect their turf.

Truth matters.

You don't have to be a lawyer to say that, as that is everyone's turf. Unfortunately, some people sh*t on the turf and people swallow it.

Ah, I see the problem here. You're supposed to rub it on your hands, not swallow it.

Americans these days drink fish tank cleaner and inject themselves with bleach. Sometimes at the same time.

Ahh nothing better than living through a crisis and having to maintain fealty to the perfect safety standards of the regulatory state.

Those that aren't willing to make tradeoffs in a pandemic are part of the problem.

Thanks for that. This article cites no references, gives no reasons for FDA's actions, and seems intended to stir outrage in people skimming by without providing any real background. Prime material for most of the commenters on here.

Also disappointed that Alex turns out to be one of the drive-by outragers.

Not to undermine Rayward's point that science matters .. but it would probably take a lot of acetaldehyde to be bad.

"Acetaldehyde (CH3CHO) is a naturally occurring organic compound that is found in everything from ripe fruit to coffee. ... Brewers yeast produces acetaldehyde as an intermediate compound in the conversion of glucose to ethanol, so it's found in every beer you make,"

And how much was found? Any references? meh.

I suppose they have to take the worst case scenario of someone slathering it on 50x a day.

Naturalistic fallacy; just because it is naturally occurring doesn't mean it is necessarily good.

That being said acetaldehyde is not a contact irritant and is also a product of ethanol processing in the liver of humans (through liver ADH enzymes). I've never understood why the FDA regulates acetaldehyde so harshly as a carcinogen while giving a pass to ethanol which is just as carcinogenic and toxic.

I can't get excited about this story since there haven't been instances where an applicant has been denied.

When an agency says ethanol can be used
With no additives and made
With clean water
Mad at a plant with proper sanitation
Some people really need this stuff
Because they just
Wet Their Pants
Over these regulations.

Did the author of the story look at the regulations applicable to rubbing alcohol plants and compare them to these regulations? Probably not.

Those that can't make tradeoffs in a pandemic are part of the problem. Speed is a limiting factor. Why is this so hard to understand? I guess we'll have to wait for the FDA inspectors to show up.

No proof of your claim. Just an assertion.

But, I will let you provide evidence of your assertion below, since you are making it. Post below as to FDA inspectors response generally, and during pandemic specifically. You notice that a complaining plant, if there is one, would have provided proof or substantiation.

Rubbing alcohol Is generally not used to describe ethanol in the U.S. And the reason why ethanol is rare in this context is taxes - why do you think a bottle of rum bought in St. Thomas costs much less than on the mainland?

Ethanol is easily manufactured - and very heavily taxed. Of course, TC would appreciate ethanol being even more punitively taxed, but his perspective is harder to blame on too much government regulation.

Ethanol is heavily taxed if it's used as a beverage. To discourage un-taxed beverage use, it's "denatured", adulterated with poisons that blind or kill those drinking it.

are liberal snitches hoarding hand sanitizer?

rasmussen poll proves -"liberals more likely to snitch"

I'd call these unintended consequences of people who can't think in systems, but I have a feeling the ethanol program and FDA red tape are doing exactly what they had intended: empowering/enriching a few at the expense of the many.

This link here: https://www.youtube.com/watch?v=za9FCiLhBD0 shows some of the underlying economics of an ethanol subsidy and why it can more effectively redistribute income to farmers than simply cutting a check.

Why would I want to cut a check to farmers?

Sounds like socialism.

It's similar to how the shysters' guild uses occupational licensing to redistribute income to themselves. It would be a tougher sale to taxpayers to just cut them a check.

It's that, but also the fact that cutting the farmers a straight check would actually reduce the amount of money they get. By utilizing some of the nuances of the ethanol market you can actually transfer to farmers more income than you could have otherwise by using a "market multiplier" so to speak.

That 30 million acres - yeah, what, maybe 10% of it might have been tallgrass prairie, never put to the plow, if that? - but since when does the Wall Street Journal care about tallgrass prairie?

"Lost" - yeah, in the sense that it might have grown wheat instead? Not really lost in the sense of ag or conservation land converted to population-growth-driven urban sprawl.

This is hardly cool, dispassionate reporting.

+1. In the last 40 years large portions of central and western Great Plains have been switched from wheat to corn. Corn requires more water than rainfall alone provides anywhere west of eastern Kansas, so farmers are emptying the Ogallala Aquifer in order to produce all that ethanol.

The land use hysteria argument never made sense to me. If you run the numbers from the USDA, your point is largely borne out. New acreage in the US has shown single-digit growth, and the vast majority of corn production increases have been from yield increases.

What annoyed me most during this period was the liberal headlines blaring out warnings about how the US was eating up tallgrass prairie "faster than the Amazon is being deforested" in order to bring up emotive memories of the deforestation of the '90s. Of course, if they had a shred of honesty, they would have provided the context that the successful Brazilian forest policy post 2003 had so reduced the deforestation rate that the comparison was just another way of saying "nothing much is happening."

Nah, open the floodgates, get the FDA out of the way of the market. What could go wrong?

https://www.usatoday.com/story/news/health/2020/05/04/coronavirus-fda-tightens-oversight-antibody-tests-after-fraud/3077512001/

Man, that's a new record for short memories.

Those that can’t make any trade offs in a pandemic are part of the problem. The safety-perfectionism is more deadly than the faulty tests...

Speed kills(hydorchlorquine hype-bad tests) in an epidemic. I won’t argue that point.

But a lack of speed kills even more. We can’t always live in nirvana regulation world.

Relative laissez faire capitalism of the 1860-1929 variety certainly killed a ton of people. We could talk about the pollution, unsanitary work environments, triangle shirt factory death, etc.

But let’s not forget, we completely remade the modern world in those 70 years.

Apparently the FDA regulation has only two settings: on and off. Which is stupid.

I for one would like SOME sort of vetting of drugs are are going to ingest. As well as chemical products that (1) we will rub on our skins and (2) that claim to kill germs.

The earliest societies we call civilized were based around the accumulation of a grain surplus. Using corn ethanol as fuel is literally setting fire to food. Setting fire to food is the opposite of civilization. Every person who ever made a buck due to corn-ethanol is a barbarian and deserves to be flogged and bankrupted.

Well hold on a second. Isn't the problem that one can drink Ethanol? Thus, if you use Ethanol as a sanitizer, there is a risk that people will drink the stuff? Isn't this the primary FDA concern here? Also, if one popularizes ethanol as a sanitizer, and people start drinking it, they might also confuse Ethanol and isoproyl (i.e., rubbing alcohol), and thus start drinking isopropyl by mistake. That wouldn't be good as I believe isopropyl is poisonous. These strike me as a valid reasons to not make ethanol into sanitizer.

+1 There's a long and understandable history of having a very bright line between beverage alcohol and other uses. Makes drinking Lysol look like's kid's play.

Every Tara Dick & Harriet thinks of something and says, hey you know what, the Government and their stupid regulations.

People often forget Chesterton's fence. There is a reason that fence is there. Ask the most important effing question: Why? And if you don't know, you know what, take time to go check why things are the way they are.

And the same TDH will come again in few months, Government takes so much in tax. Government is so big. Why couldn't they have prevented a mishap - because of the same thing they advocated for ago.

The problem with corn ethanol is not greenhouse gases -- the carbon you get when burning corn ethanol presumably comes from the CO2 the corn took in and photosynthesized while it was alive.

The problem is that it has a poor energy return on energy invested (EROI). You need chemical fertilizer, fuel and power for the tractors and all the equipment needed to process the corn crop into ethanol and ship it out. Estimates vary but almost everyone agrees corn ethanol has an energy return on energy invested ratio of less than 2.

Switchgrass and sugar cane make better biofuels but you still cannot power an entire modern, industrial economy on them.

For what its worth I've started seeing hand sanitizer appear on shelves again in NJ. It's made by brands I've never seen before (mostly distillers who retooled to get in on the business I think). Not as good quality as Purell but does the job nonetheless.

What’s next? World’s largest producer of dog food can’t manufacturer Hormel spam.”

In 2018, U.S. farmers planted about 90 million acres of corn, down from 100 million in the 1930s. The oil industry perhaps will not need to furlough as many members of congress if ethanol goes bust, but how well would 30 million acres of farm closures go over in Trump states?

Would prefer the question: "How many stupid, outrageous, maddening 'policy' failures can you document in just 500 words?" I've worked in and with the executive branches of local, state and federal government for many years. We are constantly struggling to keep up with the onslaught of new policy and figure out how to implement said policy reasonably well when the policies are not written reasonably well. "Government" also is an enormous umbrella that includes outrageous and maddening failures by private contractors.

"The Food and Drug Administration and Bureau of Alcohol, Tobacco, Firearms and Explosives have prohibited the use of ethanol in place of isopropyl alcohol even though both are equally effective as germ-killers."

I don't think that the above statement is correct. I'm sitting here looking at a small bottle of hand sanitizer that I've had for several years. I've refilled it multiple times, but the label says that the original contents contained 70% ethyl alcohol as the active ingredient. Perhaps the requirement is for the ethyl alcohol to first be denatured.

Jim Doti and Laurence Iannaccone had the opportunity to write and publish a legitimate editorial, asking legitimate questions about why rubbing alcohol is not available from the traditional manufacturers of isoprophyl and ethyl rubbing alcohol. They could have provided some really beneficial and interesting information. Instead, they chose to write nonsense about the ethanol fuel industry and incorporate totally ignorant information that must have been supplied by the petroleum oil industry. Doti and Iannaccone shouldn't win a prize for the editorial, they should be castigated by the university they work at and the students that they lecture to.

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