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Farming our Fuel

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It has been a busy week this week. I wanted to give a brief update from some things I attended. First, is the Farming our Fuel conference hosted by Minnesota Environmental Initiative (MEI) on the Gustavus Adolphus College campus in St. Peter, MN.

The day long conference (full title is Farming Our Fuel: Growing a Sustainable Ethanol Industry) sought to address the questions: How green is ethanol? What can be changed to maximize environmental benefits AND local economic benefits? What about cellulosic feedstocks? What is the long term role of biofuelsin the State's energy future?

The speakers represented a diverse collection of acedemics, govenment agency reps, environmentalists, and those from the ethanol industry. Conspicuously missing were those representing farming interests. The closest would be a representative from the MN Department of Agriculture and a speaker from the Renewable Fuels Association.

I'll try to give a general gist of what was covered in each session. The only pen I brought died early so perhaps others who were there can leave comments to fill in details. Overall, I think there was a good level of reality and straight talk about the current situation with ethanol and what can/needs to happen in the future.

 The welcoming address and MC duties were handled by Peder Larson. He is an MEI board member and principle in the environmental law practice Peder Larson & Associates, PLC. He was previously Commissioner of the Minnesota Pollution Control Agency (MPCA).

The first session was on the current state of the industry. Bill Lee from the Renewable Fuels Association (RFA) lead off a good recap of the long history of the ethanol industry, the risks experienced by the industry, the role of Minnesota nationally, and the future role of ethanol. The histoy for ethanol as a transportation fuel dates back to the Model T...the first flex fuel vehicle mass produced in the US. The next phase brought failed attemptys to build an economically sustainable ethanol industry after the oil shocks of the 70's. Then there was the era of the "Minnesota Model" based upon small scale, farmer owned ethanol production from the mid-90's to the present. Minnesota's important national role in renewable energy was acknowledged. This ranges from the relatively high availability of E85 and the goal for biofuels to account for at least 20% of transportation fuels in the state (not an E20 mandate as was incorrectly stated several times during the conference) to C-BED and the growth of wind generation to the required used of biodiesel in all diesel sold in the state. The future for the industry involves consolidation, new technology, many more policy efforts and 60 billion gallons of production by 2013. In the first acknowledgement of the limitations of the current production model Lee clearly stated that ethanol production is not now sustainable and it must move toward that. It must move to a low carbon input model involving the use of biomass energy sources in place of fossil fuels (natural gas or coal) and changes in corn agronomy. Myrna Halbach closed out the first session with an over view of the role of the MPCA in regulation of the ethanol industry.

The next session focused on the environmental impacts of ethanol production. Todd Portas from NRG, Janette Brimmer from Minnesota Center for Environmental Advocacy (MCEA), Laurel Reeves from Minnesota Department of Natural Resources (DNR), and Mark Lindquist from The Minnesota Project. This session continued the talk by Habach digging into the regulatory environment around ethanol production and the variations being explored. Most discussed were those using coal to produce process energy and co-location of ethanol plants with electricity generation plants. The latter offers the option for a CHP configuration to provide process energy to the ethanol plant. It also faces a severe regulatory hurdle due to the cumulative impacts assesment complicated by the current emissions of coal plants; particularly those grandfathered under the Clean Air Act. Another favorite topic was water use for ethanol production. This has been of interest due to water availability problems for some of Minnesota's current and planned ethanol plants. Halbach presented a graph in her presentation of the water used per gallon of ethanol at all of the current plants in MN. There is considerable variability in the water used ranging from 3.6 gal/gal to 6.1 gal/gal for plants using corn feedstock. This was explained to be due to technical differences but also due to the quality of groundwater available. Poor quality water heavily laden with minerals requires a higher usage rate and results in additional difficulties in handling. The primary release of water from an ethanol plant is through evaporative losses of non-contact water in the cooling towers. Technology is readily available to stem or eliminate those losses but comes at much higher cost.

Following lunch, the keynote speaker was Maurice Hladik from Iogen Corporation. He talked about a possible future of ethanol production by fermentation of cellulosic feedstocks. Iogen, from Ottawa, Canada, is one of the world leaders in the rush to build the first commercial scale cellulosic ethanol plant. They currently have a site selected in Idaho using ag wastes from wheat and barley production.

The first session after lunch was on the paths toward sustainability of biofuels production. Vernon Eidman, U of M Department of Applied Economics, Cecil Massie, senior process engineer at Sebesta Blomberg, and Jim Kleinschmidt from Institute for Agriculture and Trade Policy were panelists. Dr. Eidman talked about the economics driving ethanol production now and the future. He talked about the strong tie between ethanol price and the price of gasoline. Linking this to the per bushel cost of corn, at a $60/barrel price for crude oil, expansion of ethanol production should increase until corn costs about $4/bushel. He also talked about the cost savings experienced by scaling up from 50 to 100 million gallons per year. It's about 3.5 cents per gallon (David Morris later argues that this gain experienced by the producer is small compared to the loss experienced by farmers and local communities).  Another area of economics covered is the cost savings of using coal for process energy instead of natural gas or biomass. It's understandable why firms are looking at it. I didn't catch all of Cecil Massie's talk but it was one of the few that talked much about the gasification approach to biofuel production instead of the fermentation (sugar platform) approach. I think this will be a very interesting battle down the road between the two technologies. Each have advantages, disadvantages, and their strong supporters and advocates. I hope that our policies do not pick one over the other and let them have a level playing field. Finally, Jim Kleinschmidt talked about the next generation of biofuel feedstocks...i.e. cellulosics. They are a much wider diversity and geographic area of supply. The major types of supplies are crop residues, perennial crops, and forest wastes.

The last session was on the future. The panelists were Gene Hugoson, Commissioner fo the Minnesota Department of Agriculture, Michael Noble from Fresh Energy, and David Morris from Institute for Local Self Reliance (ILSR). I missed much of this section catching up with some folks in the hallway but did catch some disagreement over the scale of production plants and the need to maintain a local based, small scale model previously referred to as the Minnesota Model.