Market access critical for ethanol, CEO says

Source: Written by Peter Harriman, Argus Leader • Posted: Tuesday, September 18, 2012

POET, Lautt

 Jeff Lautt became CEO of the ethanol company Poet in April. He has been with Sioux Falls-based company since early 2005. / Jay Pickthorn / Argus Leader

Now it’s Jeff Lautt’s turn to try to scale the blend wall.

The Poet president in April followed one of the most significant figures in the renewable fuels industry when he succeeded Jeff Broin as Poet CEO.

Beginning in 1986, Broin built the company from a single plant in Scotland, S.D., to 27 plants in seven states with a production capacity of more than 1.6 billion gallons. He put Poet on the forefront of efforts to move the renewable fuels industry beyond ethanol made from corn starch to ethanol distilled from cellulose-based feedstocks. Poet is building the first commercial scale cellulosic ethanol plant in Emmetsburg, Iowa.

Broin will remain as Poet’s executive chairman of the board, and he will continue to serve on the board of directors of the ethanol advocacy organization Growth Energy.

“Obviously, Jeff Broin was an innovator and an industry leader,” South Dakota Secretary of Agriculture Walt Bones said. “I think his successor has got big shoes to fill.” But Bones adds, “I don’t see this as a one-person industry,” and the leadership change at Poet won’t send disturbing ripples through the ethanol industry.

Lautt has been around for much of Poet’s expansion. The company has more than tripled since he’s been there. He joined it in 2005 as a production executive and became executive vice president of corporate operations. He was named president in 2011. Before joining Poet, Lautt was president of the emergency vehicle manufacturer Crimson Fire in Brandon.

The blend-wall characterization reflects the history of ethanol production and of Poet.

In 2005, the federal government created the Renewable Fuel Standard, a mandate that escalates the percentage of renewable fuel in the nation’s transportation fuel from 4 billion gallons in 2006 to 36 billion by 2022. The RFS led to rapid expansion of the ethanol industry. The mandate is 13.8 billion gallons next year. But with the common formulation of ethanol, 10 percent alcohol and 90 percent gasoline, ethanol production has exceeded the capacity of the nation’s transportation fuel supply to absorb it.

Broin, as Poet CEO and a charismatic proponent of ethanol, was instrumental in bringing Poet and the industry to the happy point where it can sell all the E10 it can make. But ethanol leaders now are preoccupied with getting ethanol with higher concentrations of alcohol accepted to leap the blend wall and create growth in the business.

Widespread drought this summer has sent the price of ethanol’s major feedstock, corn, skyrocketing. But Lautt shrugs off that concern.

“There’s a lot of talk about the drought. But the biggest challenge is access to the market,” he says. The Environmental Protection approved E15 last year. However, representatives of the grocery, auto and oil industries sued to block the move. In August the U.S. Court of Appeals for the District of Columbia Circuit rejected the lawsuit.

Lautt said the decision “helped ensure that groups with ulterior motives will not derail the expansion of domestic, renewable fuel. E15 will allow ethanol to further lower gas prices, lower U.S. dependence on foreign oil and improve our economy.”

He noted the new cellulosic plant in Iowa.

“Crop residue could be used to produce almost 8 billions of gallons of ethanol for the U.S., but only if drivers are given the option to use it. E15 gives cellulosic ethanol a viable market.

“I look forward to seeing E15 become available at fuel stations across the country,” Lautt said.

But he acknowledges that persuading gas stations to install new pumps for E15 will be an ongoing battle, state by state.

Poet had almost $6 billion in revenue last year as a privately held company. Lautt is coy about whether he will be the CEO who takes Poet public.

“It does take capital to grow,” he said. “What the future holds no one knows.”

As a private company, Poet is nimble and lean, Lautt said.

“With public capital I can see the benefits, and some negatives. If we can remain private and support our growth, that’s an option.”

While pointing to the challenge of finding capital for growth, Purdue University agricultural economist Wallace Tyner seconds Lautt’s assessment that Poet is run efficiently as a private company. Tyner calls Poet “the Walmart of the ethanol industry. They do an incredibly efficient, excellent job of managing their facilities.”

Though it might take a century to complete the move, Lautt is convinced he is heading Poet at a point in history when the U.S. is transitioning from petroleum to renewable fuels.

“Our grandchildren will look back and say: ‘Wow. This was the right way.’ ”