Ethanol backers push transition

Source: By Gene Lucht, Iowa Farmer Today • Posted: Friday, June 15, 2012

EMMETSBURG — When Feike Sijbesma talks about the reasons his company joined forces with ethanol maker POET, his eyes light up.

“What we are doing is transforming a fossil-based economy, going from a fossil age to a bio age,” the CEO of Royal DSM says. And, he doesn’t quit there.

When asked about the slow progress of cellulosic ethanol production, he says the industry is actually moving very fast. What’s more, he says, it is laying the groundwork for the future.

“Five hundred years from now they will talk about those strange people (who were) living in the fossil age,” he says.

But, despite the optimism from Sijbesma, whose Dutch company is in the business of making biological products, there are hurdles facing not only cellulosic ethanol production, but also corn-based ethanol production. Some of them are market-based. Others are political.

“I think it is a real winner,” Paullina farmer Bruce Rowher says of ethanol. But Rowher, vice president of the Iowa Corn Growers Association, says there are several challenges.

The biggest short-term challenge is the effort to move toward 15-percent blends of ethanol (E15).

“That represents a 50 percent increase for our product (over E10) so there’s a push-back from oil companies,” Rowher says.

Bob Dineen, head of the Renewable Fuels Association in Washington, D.C., says E15 faces a couple challenges. First, he says, are several items now being looked at by the Environmental Protection Agency (EPA). The most frustrating of those items, he says, is the issue raised by E15 opponents about the approximately one-third of a gallon of fuel left in a hose at a filling station gas pump from the previous customer. That issue hasn’t been raised with any other fuel mixture, he says, so it is unusual for it to be raised now.

“It’s just gotten bizarre,” he says.

After that there will be fights over various state regulations and other barriers to getting E15 to the marketplace, he says.

“It’s going to be urban warfare for a while, going from station to station and battling misinformation,” Dineen says.

Of course, the main item is nobody is mandating E15, he adds. The EPA regulations are only aimed at allowing its use.

A second political battle on the ethanol front will be maintaining the renewable fuel standard (RFS). That standard, which does require a certain level of usage of some type of renewable fuels, has been under fire from oil companies ever since its passage, Dineen says. But, he argues it has been a tremendously successful policy that has helped the United States reduce its dependence on foreign oil in a very short time.

Less of an issue is the VEETC, commonly known as the blenders’ credit. That credit expired at the end of last year. While its expiration did create some ripples in the ethanol market, reducing profits for some blenders early this year, Dineen says it has been a non-issue for most ethanol-makers.

Those ethanol-makers did see lower profits in the first quarter of 2012, he adds, but that was in part due to a drop in gasoline prices and gasoline usage. The industry is also expected to export about 900 million gallons in 2012, he adds.

Most ethanol will continue to be made from corn in the near future, Dineen says, but efforts such as those by POET-DSM in Emmetsburg are paving the way toward the use of cellulosic ethanol. POET CEO Jeff Lautt says the company will begin using corn stover and cobs to make ethanol at Emmetsburg by the end of 2013.

It has been experimenting and storing the bales of cellulosic material for a while. And, it announced last week the company plans to collect approximately 85,000 tons of corn cobs and light stover from the Emmetsburg area this fall.

That would be 24,000 tons more than was collected last year.

Once in production, the plant is expected to produce about 20 million gallons per year of cellulosic ethanol. Once that plant is in full production, the plan is to replicate the efforts at other existing ethanol plants. By adding cellulosic production at existing ethanol plants, the manufacturers can take advantage of some synergies, Lautt says. And, he adds the side-products of the process are different at a cellulosic plant than at a corn-based facility.

Still, Lautt and Dineen expect the ethanol industry to continue to grow.

They say it won’t expand at the breakneck pace it grew at in the early 2000s and won’t see the high profit levels of those earlier years, but it will continue to grow and remain profitable.

Of course, they also don’t expect the pushback against ethanol to end soon. And that means the growth will come with occasional political battles and headaches, like the present fight over the third of a gallon in the fuel pump hose or the larger fight over acceptance of E15 blends.

“Ultimately you need the larger demand E15 gives you if you’re going to continue to grow,” Dineen says.