Biofuel challengesWritten by Jennifer Womack
“All this is driven by policy,” said Gustafson to a group of ranchers gathered for a recent educational seminar in Wheatland. University of Wyoming Cooperative Extension Service Educator Dallas Mount organized the mid-March event with about 40 local ranchers attending. “Ethanol was not economical, but we made it economical through the tax credits, the tariffs and the mandate,” said Gustafson. The mandate is metropolitan areas requiring a percentage of biofuels in place of MTBE.
“Cellulose is not economical, but it will be,” said Gustafon. “We’re going to make it that way.” Listing recent U.S. Department of Agriculture and U.S. Department of Energy grant disbursements, he estimates $200 million in federal dollars have recently been invested in cellulosic fuel research. An additional $400 million in matching funds takes total research dollars to $600 million.
Gustafson said the scenario began with the passage of the renewable fuels standard by Congress in August 2005. “It set a national goal to produce 7.5 billion gallons of ethanol by 2025,” he recounted. At the time ethanol was not economical to produce, but Gustafson said a 51-cent tax credit coupled with a 54-cent tariff on imported ethanol made the industry pencil out. Ethanol plants going on line were reporting an ability to pay back their initial investment within three years, a scenario that caught Wall Street’s eye.
With an interjection of what Gustafson called “New York money,” the Wall Street Journal reported $3 billion has been invested in agriculture as part of the ethanol movement. With that kind of support the 2025 goal was quickly passed with the U.S. on course to produce between eight and nine billion gallons of ethanol this year.
“National leaders need something to strive for,” said Gustafson, noting new policy passed December 2007. The legislation puts forth a goal of 36 billion gallons of ethanol production by 2022. Of that, 15 billion gallons is to come from traditional sources and the remainder through sources like cellulos sources, which includes sugar.
“We’re now looking at a new national goal that’s four times higher than we had before,” he said. “Think of all the adjustments that already have taken place.”
Gustafson said two companies, one in Mexico and the other in South America, have announced plans to invest $22 billion in new plants. Gustafson said 60 plants that will use sugarcane as stock are being built on the Texas and Mexico border. “We’ve passed this mandate and foreign countries are responding,” he noted.
A decline in the ability of distiller’s grain as a feed source can also be expected. “Gasification is probably going to be happening with distillers grains,” said Gustafson, noting that plant operators find distribution of the grains to be a headache. “They’d rather find other things to do with it. New ethanol plants plan to gasify it and use it as a heat source instead of selling it as a byproduct.”
Additional pressure for acres may also impact the cattle sector. Gustafson said the people pushing for cellulosic fuel production hope to avoid competition with prime agricultural areas. “They’re talking about crops that can be grown in marginal areas so they don’t compete with things like corn,” he noted. “What they forget is that it will be grown on ground that could be used for livestock. Let’s say switchgrass ends up being the crop of choice. I think we’re going to find that if you sprinkle a little fertilizer on it you get more switchgrass. A few years down the road there will be Roundup Ready switchgrass. Then it will be raised on our most productive lands. This goal of developing liquid energy and not competing with corn or soybeans is flawed.”