Ethanol plant exec: Change to fuel mandate would hurt Iowa cellulosic plant

Source: Written by CHRISTOPHER DOERING, Des Moines Register • Posted: Monday, April 22, 2013

A meaningful change to the country’s renewable fuel mandate would drastically curtail the market opportunity for a cellulosic ethanol plant being built in Emmetsburg by ethanol producer Poet and Dutch-based DSM Advanced Biofuels, a DSM North America company official said on Friday.

Hugh Welsh, president of DSM North America, said without the Renewable Fuel Standard — an 8-year-old law that requires biofuels to be blended into the country’s gasoline and diesel supply – there would be no incentive for refiners to use ethanol. The damage would be especially severe for cellulosic ethanol, made from crop residue, grasses, wood chips and other materials, that has been slow to grow. Currently, most of the ethanol produced in the United States comes from corn.

“The reason we invested that $150 million in Emmetsburg, Iowa, was because of the RFS,” Welsh said in an interview. Without the Renewable Fuel Standard “there would be a market for cellulosic ethanol but that market would be much smaller. It would be the end of investment in cellulosic ethanol in the United States because the market won’t be there.”

Sioux Falls-based Poet and DSM Advanced Biofuels are constructing a cellulosic facility adjacent to Poet’s corn-fed ethanol plant in Emmetsburg. The initial capacity is expected to be 20 million gallons in the first year, growing to approximately 25 million gallons per year.

There are cellulosic plants in the late stages of development or under construction in more than 20 states and other countries, a promising sign for the next generation of biofuels. Locally, DuPont Industrial Biosciences also is building a 30-million-gallon-capacity refinery in Nevada that is expected to open in 2014.

The EPA has proposed 14 million gallons of cellulosic fuel to be included in motor fuel this year, up from 2012, when it set the mandate at 8.7 million gallons. The 2012 level proved to be overly optimistic with about 20,000 gallons actually being produced as production of the advanced biofuel has struggled to get off the ground.

Welsh said DSM is in talks with Poet about building another cellulosic plant. He declined to say the location being discussed or how far the talks have advanced. “We may consider building another one, but that’s still something that’s under discussion.”

During the interview, Welsh said there is a “lot of noise around the RFS” created by the American Petroleum Institute, the trade group that represents 500 oil and natural gas companies, and other groups. He touted the benefits of the RFS including its role in reducing the country’s dependence on foreign oil and its ability to save consumers money because ethanol is cheaper than gasoline.

API “is doing a great job of getting their message out there even if it is couched in misinformation at times,” he said. “Those of us that are working in the advanced biofuels field or in the industrial biotechnology field can do a better job of telling our story as well.”