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Farm Energy

by Jeff Johnson
May 7, 2007 | A version of this story appeared in Volume 85, Issue 19

More Ethanol
Credit: iStockPhoto
Biorefinery owners have much to gain in farm bill reauthorization.
Credit: iStockPhoto
Biorefinery owners have much to gain in farm bill reauthorization.

Energy does not usually come to mind in discussions of agriculture, but times have changed. This year, the chairmen of both the House and Senate Agriculture Committees have said that energy is likely to be a primary driver in the 2007 farm bill reauthorization.

Credit: EESI
Credit: EESI
Credit: Poet
Credit: Poet

Today, farm energy means corn, and corn-based ethanol has redrawn the U.S. farm landscape. Both chairmen, Sen. Tom Harkin (D-Iowa) and Rep. Collin C. Peterson (D-Minn.), hope to pass a farm bill that walks a thin line between developing noncorn cellulosic ethanol without upsetting the current buoyant corn market, which has so greatly benefited farmers and rural communities.

Every half-dozen or so years, Congress takes up a farm bill. The first was in 1933; the most recent, in 2002, was the first bill to carry specific energy provisions. In the next farm bill, which legislators hope to pass this year, energy and ethanol will most certainly play a big role.

Lloyd Ritter, now an agricultural and energy consultant, helped pen the energy provisions in the 2002 bill for Harkin when he was a committee staff member. "The farm bill's provisions were very forward-thinking," Ritter says. "Harkin saw that agriculture could be a major player in energy."

The 2002 bill was intended to develop biomass-based products, conserve energy, and encourage use of renewable energy and energy conservation. Funding was modest, Ritter says, estimating the authorization for energy to be around $800 million for six years. Much of the authorized funds, however, were never spent.

The bill established a federal requirement that government agencies purchase biomass-based products; it created loans, grants, and loan guarantees for farmers to purchase renewable energy systems and make energy efficiency improvements; and it called for creation of several programs to encourage research and development of biofuels and biomass-based products.

Programs such as these, Ritter says, are likely to be included again and will be the basis for the energy components of the 2007 bill. Particularly, he'd like to see a much greater emphasis on requiring government agencies to buy biomass-based products, which might be one of the most popular and least expensive provisions to implement. He also wishes to see requirements that will help expand ethanol production beyond corn to include cellulosic feedstocks; such an initiative would be more expensive to implement and would have far-reaching consequences.

"The cellulosic ethanol industry is definitely moving," says Jetta Wong, an energy and agriculture analyst with the nonprofit Environmental & Energy Study Institute. "But we need time to actually build the plants, and that is going to take a few years. Meanwhile, we don't have an industry or a market ready for cellulosic materials."

She wants the 2007 farm bill to be a "transitional bill" that will help usher in diversified ethanol feedstocks other than corn. Corn, she says, is tough on the environment, and some cellulosic feedstocks literally grow like weeds.

Corn-based ethanol, however, has been very good for farming. Corn productivity is up, and corn prices now are nearly twice those of a year ago.

Almost 20% of today's U.S. corn crop goes to making ethanol. A month ago, the Department of Agriculture estimated that 90.5 million acres will be devoted to corn this year, 15% more than in 2006 and the highest acreage for corn since 1944. Corn output per acre is also rising, as are gallons of ethanol per bushel.

Owners of corn-based ethanol biorefineries plan to more than double ethanol production—a record 5 billion gal in 2006—within two years, taking the U.S. total capacity to 12 billion gal per year. That volume of ethanol would consume at least one-third of the nation's corn crop.

The growing demand and high prices for corn is great news for corn farmers but not for corn consumers and buyers. The latter includes pork, poultry, and beef producers who use the grain for feed and who are powerful members of the farming community. Also, an increasing number of agricultural economists worry that high U.S. corn prices will continue to raise the global cost of other grains, to the detriment of the world's poor.

USDA and industry observers expect that production of corn-based ethanol will level off at 15 billion to 18 billion gal per year. That volume would take around half the current U.S. corn crop. But the Bush Administration and members of Congress are aiming for some 35 billion gal of ethanol to be produced annually by 2020. Of this volume, they hope that 20 or so billion gal would come from cellulosic feedstocks—switch grass, corn stover, and biomass of all sorts.

But the U.S. has no biorefineries that make ethanol from cellulose, and while money has been flowing into cellulose-to-ethanol research, most of it has been at the research lab level. Some in the biotechnology industry would like to see the farm bill expand that support to the farm.

For 2007, the Bush Administration has put together a farm bill package that would spend $1.6 billion in energy-related funds over 10 years. Most of the spending would go to developing bioproducts and an infrastructure to encourage biofuels production.

Of the $1.6 billion, $500 million would be grants to farmers, ranchers, and rural businesses to encourage them to invest in renewable energy and energy efficiency projects. Another $500 million would be directed to research on bioenergy and biomass-based products; $210 million would be the government's share of a $2.1 billion loan guarantee program to build commercial-scale ethanol plants.

Looking specifically at cellulosic ethanol, the Bush Administration seeks $150 million for biomass research, $150 million for wood-to-energy R&D, and $100 million for direct support to cellulosic ethanol producers to help them bring their facilities to full-scale operations.

USDA funding for cellulosic ethanol would be $400 million over 10 years. This compares with a single $385 million investment made last February by the Department of Energy to help fund six start-up demonstration projects for cellulosic ethanol biorefineries. Six months earlier, DOE kicked in $250 million for cellulosic research centers to discover new technologies to break down cellulose.

"The Department of Energy has been worried about finding the right bug to turn corn stover or switch grass into ethanol, and there is a lot of good research going into this now," says Ken Cook, president of the activist organization Environmental Working Group. "But I have this rudimentary question," he says. "How are you going to get enough stover off the fields, move it, store it, and process it in order to supply a 100 million-gal ethanol plant? It is pretty basic stuff. Like, will Larry's baler work? And what do you do with a 2-ton bale of corn stover?"

Biotech firms and DOE are spending a lot of money to develop enzymes to break down cellulose, but there has been little interest in developing a basic infrastructure that could handle the huge amount of biomass needed for cellulosic ethanol. Congress is slowly addressing the issue of cellulosic biomass processing, but it is unclear whether new proposals will be included in the farm bill. Rep. Peterson and others in Congress have discussed incentives to encourage biomass pilot plants, as well as plans to set aside millions of acres for cellulosic crops, but language to this effect has yet to be put into the farm bill.

"It will be a huge issue just getting cellulosic material to the biorefinery," says Jeff Fox, vice president for legal and government affairs for Poet, formerly Broin Companies. Poet is one of the biorefineries DOE funded to begin making cellulosic ethanol. The company is proposing to expand its plant in Emmetsburg, Iowa, to increase annual production from 50 million gal to 125 million gal. Thirty million gal will come from corn stover. To get that amount of biomass, Fox says, Poet plans to strip stover from all acreage in a 30-mile radius around the biorefinery. Poet plans to remove 25% of the stover, leaving the rest on the land to enrich the soil. To pass through the field harvesting corn and a quarter of the stover and then haul all this to the biorefinery, Fox says, farmers will have to modify their harvesting and transportation machinery as well as their thinking.

"If we come to a farmer and say, 'We want you to spend a few thousand dollars on your equipment and take time out from your busiest time of year, and we want you to do something you have never done before,' a lot of farmers are going to just say, 'I think I'll watch and see how this works out,' " Fox explains. "But we can't afford a delay of a year or two to coax them into trying this."

Poet proposes to pay farmers to harvest cellulosic feedstock and to split the cost between the company and the federal government. Fox would like to see this in the farm bill. His view is seconded by Brent Erickson, executive vice president of the Biotechnology Industry Organization, who also urges a greater focus on building an infrastructure for biomass feedstocks. "Farmers will grow whatever makes them money," he adds.

Erickson warns, however, that farm bill funding for a transition to cellulosic feedstock may be opposed by the corn lobby and agricultural interests that have made corn America's largest crop and want that growth in production to continue. Among them is Monsanto, which recently announced its goal of developing technologies that would more than double corn productivity and thus greatly increase the crop's contribution to ethanol.

Cook urges U.S. agriculture to "take a breather" before expanding further with corn ethanol. "When you get to 40% or 50% of corn acreage committed to ethanol and you try to change to, say, prairie grass, corn will just be too big with too powerful vested interests to move it, and we might never make the transition to cellulose," he says. "We need to describe a real national transitional path for cellulosic ethanol."


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