Government and Profitability

I saw this column come up on my yahoo reader this week and it caught my eye for obvious reasons: DOE Doles OUt Bucks for Biofuel.  Not only does this article outline who is getting what from our government at a time when money seems to be no scarce object, but it also talks about the return our government is "getting."  

Novozymes said Wednesday it scored $12.3 million from the U.S. Department of Energy to develop enzymes that would help cut the cost of producing cellulosic ethanol.

Then

The government expects something in return for its investment. The deal calls for the Danish company to increase the efficiency of the enzymes by two folds.

Wow, the government is getting an increase in efficiency?  That does not sound like money for the taxpayer to me.  That sounds like a better return for the producer?

Then the article goes on to say...

This is the second time the company has received funding from the DOE. In 2001, Novozymes bagged $18 million from the federal government, again to improve enzymes used in producing biofuels.

So the government has now invested over $30M in this company, that is Dutch no less, and how much cellulosic-based ethanol is commercially available?  None.

Then the article finishes with this....

Ethanol producer Poet said Tuesday it is getting the total funding the DOE promised last year. In February 2007, the DOE said it would give Poet up to $80 million to build a commercial ethanol plant that makes fuel from corn as well as corn fiber and cobs. The first part of the deal with the government gave the Sioux Falls, S.D.-based company $3.7 million to help with the preliminary design of the plant and feedstock collection. Now, the company is getting the remaining $76.3 million for construction and plant operation. Upon completion, the plant will make 125 million gallons ethanol per year, 25 million of which will be from corn fiber and cobs. Construction on the plant will begin in 2009, and cellulosic fuel production could come as early as 2011, the company said.

The government is paying for the entire plant?  Where is the tax payer return on this one?  Oh yeah, there is not one.  This is exactly why government needs to stay out of business.  The US Taxpayers just flushed $80M down the drain.  Why is that, well ethanol producers all over the country are going bankrupt (see here and here) since the US is producing more ethanol than is demanded.  So government just throws more ethanol supply into the mix at a lower cost to produce.  The funny thing is most of these ethanol producers think government is their friend.

Our government should not be in the investment banking business.  As a matter of fact, it should not be in any business.