Iowa closes the books on once-promising renewable fuels plant in Emmetsburg; no repayment required

Source: By Tyler Jett, Des Moines Register • Posted: Tuesday, October 20, 2020

Iowa officials have closed the books on an investment they once hoped would produce millions of gallons of ultra-green ethanol and millions of dollars in revenue for the state’s farmers.

The Iowa Economic Development Authority approved a settlement with Poet DSM Advanced Biofuels on Friday, ending a contract of incentives that helped enable construction of a massive plant to produce cellulosic ethanol — a fuel produced from crop waste like corncobs, husks and stalks instead of from corn, which could be put to other uses.

Poet, the nation’s largest ethanol producer, announced last November that it would “pause” production at the plant in Emmetsburg. The company had partnered with Netherlands-based Royal DSM, an enzyme manufacturer, on the project, At the time, it said it planned to continue on-site research. But Poet idled the plant completely in July, leading to a total of 52 layoffs since the end of last year.

A company spokesperson blamed the closure on federal waivers that decreased ethanol demand by exempting some oil refiners from a requirement that they blend renewable fuels into their products. The company also pointed to the overall drop in fuel use during the COVID-19 pandemic.

“We remain committed to paving the way for new advancements in renewable fuels,” Poet President and Chief Operating Officer Jeff Lautt said in a statement Friday.

Poet’s development of cellulosic ethanol once excited politicians, farmers and environmental activists. Ethanol-fueled planes flew over the site at the company’s 2014 plant opening, attended by King Willem-Alexander of the Netherlands.

The federal government provided $100 million for the project, while the state of Iowa kicked in about $20 million through grants, forgivable loans, sales tax refunds and tax credits. To receive the full amount, Poet needed to retain 35 employees at the Emmetsburg plant through 2024.

As part of the settlement, Poet will miss out on $2.5 million in tax credits it had not yet earned. The Economic Development Authority chose not to try to claw back benefits that Poet already received.

The authority’s compliance team leader, Paul Stueckradt, did not recommend that the board try to recover funds in part because the state’s laws have changed. When Poet signed the contract for the incentives in 2009, the state required companies to maintain jobs for 10 years after a project’s completion. Companies now must maintain employees for two years.

Authority Executive Director Debi Durham said the 10-year requirement had proven to be “just really unreasonable.”

“Poet actually had a great run,” she said Friday. “They actually built the plant that was operating for some time. You know, again, due to some unforeseen circumstances, it has shut down. We’re still hoping there will be another opportunity … . If that happens, we’ll treat that as a new project moving forward.”

Advocates had hoped the plant would contribute to cleaner energy while bolstering farmers’ income.

Compared to standard gasoline, experts say, cellulosic ethanol emits 86% less greenhouse gases. Unlike corn-based ethanol, it comes from products that people do not eat, satisfying critics worried that not enough farmland is used for producing food.

In 2014, Poet said it planned to produce 25 million gallons of cellulosic ethanol at the Emmetsburg plant every year. The company said it would pay farmers $20 million annually for corncobs, husks and stalks.

A 2010 study by a private company estimated the project could create 2,800 jobs in two decades. 

But government officials did not provide a welcoming environment for an experimental product, said Brooke Coleman, executive director of the Advanced Biofuels Business Council.

The U.S. Environmental Protection Agency granted 26 Renewable Fuel Standard waivers in the last two years of Barack Obama’s presidency, and 66 during President Donald Trump’s first two years.

Coleman said the waivers tanked the ethanol market in multiple ways. In addition to decreasing the actual sale of ethanol, he said, the waivers decrease the quantity of Renewable Identification Numbers that refineries needed to remain in compliance with federal law.

The RINs work like credits to support the renewable fuel industry. Companies receive them for each gallon of biofuel they purchase. If they buy more gallons than the federal government requires, they can sell them to counterparts who are short.

As the required number of RINs dropped, Coleman said, so did the value of those credits, from about 97 cents per gallon in November 2017 to 38 cents in March 2018.

That particularly hurt a second-generation product like cellulosic ethanol, he said. As a new offering still being researched, the product cost more to make than corn-derived ethanol. But companies like Poet could use profits from their sales of corn-based ethanol from their other plants to support their cellulosic ethanol business.

Hurting the overall renewable fuels business made development of the product difficult, Coleman said. DuPont, which operated a cellulosic ethanol plant in Nevada, one of the few others in the country, idled its operation in 2017.

The lockdowns tied to the beginning of the COVID-19 pandemic made the problem only more pronounced. In mid-April, according to the U.S. Energy Information Administration, Americans used about 13.8 million barrels of oil a day. That was the lowest figure that the EIA had recorded in data going back to the early 1990s.

“You’re taking on water because of two giant holes in your boat,” Coleman said. “One is because of a pandemic, and one is because of a policy response.”

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at, 515-284-8215, or on Twitter at @LetsJett.