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Initial loss is part of cellulosic fuel production - but how much is OK?

By ANN HINCH
Assistant Editor

DALLAS, Texas — The economic viability of commercial-sized cellulosic ethanol plants is perhaps the biggest roadblock to building them – in addition to the need for capital and ever-advancing technology, of course.

Abengoa Bioenergy, a Spanish company, has created Abengoa Bioenergy Biomass of Kansas, LLC to construct a cellulosic ethanol facility along with a grain ethanol plant in Hugoton, Kan. According to the U.S. Department of Energy – which could provide up to $76 million in funding for the project – this hybrid biorefinery would have a capacity of 100 million gallons per year (gpy).

Dana Peterson, producer policy specialist with the Kansas Assoc. of Wheat Growers, said the project may garner other funding, too. Only 15 million gpy of biofuel is to come from cellulosic biomass, she told the National Assoc. of Wheat Growers (NAWG) during one of its committee meetings at the Commodity Classic in Dallas Feb. 26.

Peterson said the environmental impact statement from the developer should be on file by this fall. She pointed out biofuel wouldn’t be the only end result of the facility, since co-products such as livestock feed would also be valuable to sell in livestock-heavy Kansas and Oklahoma.

Allowable removal

Several Kansas organizations, including hers, pooled their resources to come up with a list of potential impacts on growers should they be asked to contract with Abengoa to sell crop residue such as corn stover, wheat straw and sorghum stubble.

Their goal was to help farmers determine if it would be worth stripping their fields of this material – rich in harnessed nutrients and providing some erosion protection and moisture retention – and how much payment they should get, if so.

“As you can tell, there are a lot of issues we’ve talked about over the last two years,” she told NAWG officers and members.
One of the organizations overseeing this is the Natural Resources Conservation Service.

Peterson explained erosion is already a real problem in southwestern Kansas, where Hugoton is located – and where farmers within 30 miles of the facility would be asked to sell biomass that cuts down on it.

Even with what Abengoa is proposing to pay in sign-up bonuses and contract deliveries, Peterson said those farmers would suffer a loss of more than $20 per acre if they were to sell dryland wheat straw at the rate of one baled ton per acre.

This is based on scenarios that contrast farmers’ gains from selling – contract income, being paid for in-field storage and potential carbon credit payments, not having to pay for inputs on non-producing land – with the costs of doing it: the loss of erosion control and soil moisture retention, replacing stripped nutrients, resulting yield decreases, loss of income from crops not grown on in-field storage sites and harvest, handling and baling costs for biomass.

“The cost of water is too high to make this a good economic decision,” she said, indicating the loss figure on a projection screen behind her. “I don’t expect this to be zero, or (plus) $1 or $2, until the marketplace (for biomass) is secured.”

She said the next step is to talk with Abengoa about these proposed monetary losses for growers. Mainly, she pointed out, the problem is the arid land in that part of Kansas – in other parts of the state with plenty of precipitation, farmers regularly remove straw residue from their fields to speed the drying process for soil.

Prepare for losses

Taking a financial hit on initial production in the name of eventually establishing a new industry is what Maurice Hladik talked to the NAWG committee about after Peterson. He recently left Iogen Corp. in Canada to work as an independent consultant for biomass technology and has been a consultant to NAWG for some time.

Since 2004, he said Iogen has been producing truckloads of cellulosic ethanol from a demonstration plant in Ottawa, Ontario. Those who first produce cellulosic ethanol on any scale in the United States will suffer losses, though he phrased it more kindly.
“There has to be, for many growers, this interim step of getting to know your biomass,” he said – how to grow it, how to store it, how to process and transport it. (A plant being constructed in Vonore, Tenn., in fact – on which Farm World recently published an article – will begin doing just that in the next couple of years.)

He balanced this message, however, by pointing out now is a time ripe for trying new things in biofuel. Last year’s farm bill is offering financial incentives for research, mostly because the federal government is still mandating a renewable fuels standard for 2022 that includes at least 16 billion gpy of cellulosic ethanol. Hladik said as a result, there are investors with deep pockets willing to take chances they weren’t able to before. “The framework is there to kick-start the industry,” he said.

He suggested wheat farmers, for example, could set up small test communities to grow and test storage and production capabilities of cellulosic feedstock and crop residue, with each farmer dedicating as little as five acres to it.

“You people are probably thinking about (biomass fuel) more than most,” he said of NAWG.

“How easy is it to kill?” one NAWG member asked half-jokingly. Hladik laughed, but said the farmers he knew can easily burn down any excess with Roundup.

When cellulosic ethanol technology and production capability advances enough to allow companies to look for locations to build new, profitable plants in several years, those regions that know their own capabilities, he said, might get first selection.

“This industry’s got a lot of potential,” he said, adding that crop residue is just a small part of what would be needed for cellulosic ethanol – concentrated bio-crops would have to be grown, and could flourish even in marginal soil.

Mark Gaede, NAWG director of Government Affairs for Environmental Policy, said the Congressional ag committees are hesitant to fund test plots without a biorefinery nearby or the imminent promise of one. He explained it’s because it did so in the past and some recipients turned the land into a for-profit hunting area instead of tending it solely for biomass.

Hladik said if there’s any way to get past that, it should be done. “The product of this five acres (would be) knowledge how to grow switchgrass,” he said of his “community of farmers” proposal.

3/11/2009