For the first 6 months of 2007, U.S. ethanol production totaled nearly 3 billion gallons—32 percent higher than the same period last year. As of August 29, there were 128 ethanol plants with annual production capacity totaling 6.78 billion gallons, and an additional 85 plants were under construction. U.S. ethanol production capacity is expanding rapidly and is currently expected to exceed 13 billion gallons per year by early 2009, if not sooner. Ethanol demand has increased corn prices and led to expanded corn production, which is affecting grain transportation as corn use shifts from exports and feed use to ethanol production. Most ethanol is currently produced in the Nation’s heartland, but 80 percent of the U.S. population (and therefore implied ethanol demand) lives along its coastlines. Transportation factors to consider as ethanol production continues to expand in the Nation’s heartland include: • The capacity of the Nation’s transportation system to move ethanol, feedstock, and co-products produced from ethanol. • The availability of corn close to ethanol plants (~ 50 miles). • The location of feedlots relative to ethanol producing areas. Ethanol production capacity expansion is occurring faster than originally anticipated. In May, USDA issued a report analyzing the effects of an expansion in biofuel demand on U.S. agriculture. The analysis focused on two ethanol expansion scenarios in relation to the Baseline long-term projections issued in February 2007. Under Scenario 1, U.S. ethanol production increases to 15 billion gallons per year (bgy) by 2016. Under Scenario 2, U.S. ethanol production increases to 20 bgy by 2016. AMS applied its modal share analysis to the three USDA scenarios: baseline (February 2007 long-term projections) and the two scenarios described above to evaluate the impact of ethanol production expansion on grain transportation. The 5-year 2000-2004 modal share rates were assumed to stay constant over the projected period. • Transportation impacts vary for each scenario and transportation mode due in part to modal share differences. • Rail and barge demand could decrease if corn exports decrease, but in the short-term increased ethanol and DDGS shipments could offset decreases in rail grain shipments. • Truck demand increases under all scenarios. In 2005, rail was the primary transportation mode for ethanol, shipping 60 percent of ethanol production or approximately 2.9 billion gallons of ethanol. Trucks shipped 30 percent and barges 10 percent. The growth of ethanol production and the construction and expansion of new plants have not been hampered by logistical concerns. Railroads have kept up with ethanol growth in 2006. As ethanol production grew by 26 percent in one year, railroads’ shipments of alcohols (most of which is ethanol) increased by 28 percent. Rail freight is forecast to increase from 1,879 million tons in 2002 to 3,525 million tons by 2035, an increase of nearly 88 percent—before ethanol production expansion. Truck freight is forecast to almost double from 2002 to 2020, while driver shortages are projected to reach 219,000 by 2015—before ethanol production expansion. In 2004, there were 1.3 million long-haul heavy-duty truck drivers.