Here’s the news: A $20 million ethanol refinery will soon be built next to Florida Crystals’ gigantic Okeelanta sugar mill in western Palm Beach County. And a U.S. Sugar Corp. subsidiary will break ground on a commercial-scale refinery in Clewiston this fall.

On the surface, Florida’s ethanol boosters—first and foremost our green governor and his cabinet, who have pushed a $60 million budget for ethanol promotion—should be relieved. Unfortunately, however, our ethanol cheerleaders in Tallahassee have a skeleton in their closet: They know that the state’s biggest sugarcane growers have not supplied—and will not supply—any sugarcane to ethanol refiners. This is a major drag if Florida wants to emulate the ethanol success story of Brazil, which makes the fuel mostly straight from sugarcane.

With the current state of technology, sugarcane—both chemically and environmentally—is the most meaningful feedstock for ethanol. Sugarcane yields eight to 10 units of ethanol energy per unit of fossil energy invested. Corn, which Florida’s ethanol boosters want to import from the Midwest, is a miserable feedstock. The starchy staple yields only between 1.3 and 1.5 units of ethanol energy for every unit of fossil energy invested. Cellulosic feedstock from mulch or switchgrass yields even less.

The abstinence of sugarcane suppliers has made large-scale ethanol production in Florida a long shot, at best. So will the two new refineries solve Florida’s feedstock problem?

Nope.

U.S. Sugar will build its refinery in Clewiston next to—no, not a sugar mill but a citrus processing plant. The Clewiston refinery will be using citrus peel and other waste. The Okeelanta refinery will only process bagasse—basically, sucked-dry sugarcane waste, not fresh sugarcane—which the Brazilians use so efficiently. What’s more, in the case of Okeelanta, it’s not even Florida Crystals’ parent, Flo-Sun Inc., that will pay for and operate the refinery. The plant will be run by the University of Florida’s Institute of Food and Agricultural Sciences, which obtained a $20 million state grant for the purpose. In other words, we taxpayers are subsidizing Flo-Sun’s toe-dipping into the ethanol business.

Why is Florida’s Big Sugar so reluctant it needs to be coaxed with our money?

Protection. Or corporate welfare, as you might call it. Thanks to a wall built by Washington around U.S. sugar producers, imported sugar is held to 15 percent of U.S. sugar consumption. Our government not only allots sugar import quotas to foreign countries, it tells each U.S. state how much it’s supposed to contribute. Flo-Sun and U.S. Sugar share 80 percent of Florida’s allotment. The net effect of these protections is that the price of raw sugar paid to U.S. producers has been holding fairly steady at 25 cents, while the global market price recently dropped to just above 10 cents, in spite of the ethanol boom.

This explains why Brazilian sugarcane processors are eager to expand their ethanol business, while some of their U.S. peers are only performing taxpayer-funded publicity stunts.

But now a small part of U.S. sugar producers’ country-quota protection is falling away. As of Jan. 1, 2008, the North American Free Trade Agreement will allow Mexican sugar producers to export as much of the sweet stuff as they want to the United States.

So will this maybe coax Big Sugar into ethanol? Don’t hold your breath. Democratic Rep. Collin Peterson of Minnesota managed to insert a small clause into the gigantic 2007 farm bill, under which Flo-Sun and U.S. Sugar could reap millions of dollars in taxpayer funds under the halo of ethanol production—even though they aren’t going to make even a drop of ethanol from sugarcane.

Huh?

Here’s how it works: Citing the Mexican threat, Peterson proposed to raise the minimum price under which the government must start buying U.S.-made sugar from 18 cents per pound to 18.5 cents. And he adds an ethanol twist: To get rid of what could be mountains of sugar, the amendment—already passed by the House—tells the federal government to resell this surplus to ethanol processors, at a loss. These processors will then mix the sugar with corn to make fuel.

This procedure makes about as much sense as the French deciding to run their Renaults on red wine and fermented baguette because their booze can’t compete with Cabernet imports from California.

The Senate has yet to vote on the Ag bill. But as I am writing this, Iowa Sen. Tom Harkin, the Democrat in charge of the Senate Agriculture Committee, said he supported Peterson’s measure.

If the Subsidize-Our-Hurting-Sugar-Corporations law passes, Big Sugar’s disinterest in making ethanol from sugarcane is guaranteed for many more years to come.