Field to fuel

Farmers have a new option for turning crops into cash:
processing corn
into ethanol
Sunday, January 23, 2005 | 12:00 a.m. CST; updated 11:00 a.m. CDT, Sunday, July 20, 2008

Stainless steel silos rise from some of the most fertile farmland in central Missouri. At the end of January, the silos of the Malta Bend plant in Saline County will begin filling with ethanol from Missouri’s first completely farmer-owned ethanol plant. The sparkling new facility, the third ethanol plant in Missouri, is designed to transform 40,000 bushels of corn per day into 190-proof grain alcohol that will be blended with a small amount of gasoline to make it unfit to drink and pass muster with the Bureau of Alcohol, Tobacco and Firearms.

By year’s end, up to 48 million gallons of the corn-derived fuel is expected to have left the Malta Bend plant for blending facilities as close as Columbia and as far away as California — and into the tanks of millions of automobiles.

The Malta Bend plant took shape in 2000 with the vision of a small group — 15 farmers from Marshall, Carrolton, Malta Bend and surrounding communities — that comprise the board of Mid-Missouri Energy, the farmer cooperative that owns the plant. The $62 million project took more than 100 meetings to crystallize. Ownership expanded to 729 farmers who invested a total of $24 million — a minimum of $20,000 each — and borrowed the rest.

The farmers expected the fund raising to take a couple of years, but they exceeded their goal of $13 million and raised $24 million in six months. Ryland Utlaut, one of the founders and chairman of Mid-Missouri Energy, said the group isn’t accepting any more investors; even so, farmers are still calling to see if they can buy shares.

Mid-Missouri Energy considers its enterprise more autonomous than Missouri’s two other ethanol plants — Northeast Missouri Grain in Macon and Golden Triangle Energy in Craig — that have many farmer members but were partially financed by outside investors.

Don Arth, who invested six years ago in the plant at Craig, said he is seeing good returns and believes the Macon plant, the larger of the two, is experiencing even greater success. “It’s a good economic boost for farmers and townspeople,” said Arth, who has been farming for nearly 40 years in Saline and Lafayette counties and is one of the original Malta Bend investors.

The investors range from experienced farmers such as Utlaut, who has grown corn for 38 years, to younger farmers such as Brian Miles of Marshall, a 1996 MU grad who plans to dedicate 150 acres, or 20 percent of his yield, to ethanol. “Ethanol is a win-win,” Miles said, because it’s renewable, uses homegrown corn and is environmentally friendly.

With fuel prices high and corn prices low, market conditions are favorable. “You’re not overly concerned about what you’re going to get per bushel, because you’re going to get it on the back end with ethanol,” said Miles, a fourth-generation farmer who expects an eventual 30 to 50 percent return on his initial investment.

That’s the primary incentive — to increase the value of corn. Donald VanDyne of Columbia, a former MU researcher who has studied the economics of ethanol, said it “gives another option for farmers and our businesses, and we produce more corn than we need each year, so ethanol reduces the surplus.”

The plant is a dry-mill operation, which means the leftover corn product, minus the starch, will be dried and sold as poultry and swine feed to local farmers. Utlaut said investors are working to establish a buyer for the other byproduct of ethanol production — carbon dioxide. In other parts of the country, beverage companies have established partnerships with ethanol companies to use the carbon dioxide for soda.

The new plant will pull up groundwater for the process and then treat it and scrub it before directing it into a local stream. Miles said this plant is one of the cleanest facilities possible and that the outgoing water is as clean, if not cleaner, than the incoming water.

The plant created 35 jobs, and board members received more than 400 applications, Utlaut said. Many of the employees are already working, and farmers are eager to start seeing the ethanol flow — and begin reaping the dividends.

The farmers probably won’t be the last group to fire up an ethanol plant in Missouri, the nation’s ninth largest corn producing state at more than 300 million bushels a year. In 2004, Missouri farmers turned 8 percent of their corn crop into ethanol, 4 percent less than the national average. Thirty percent of the gasoline sold in the United States is already blended with ethanol, and the Missouri Corn Growers Association says the industry is poised to double in the next four to five years.

Two more plants are expected to break ground this year, adding to Missouri’s 55-million-gallon ethanol industry. Farmers near Malden in southeast Missouri are in the final stages of signing up members for an ethanol plant there, and East Central Ag Products near Laddonia in Audrain County is trying to secure funds to break ground on a 14 million-gallon-per-year plant.

“We’re 90 to 95 percent confident the Laddonia plant is going to go through,” said Roger Young, an Audrain county commissioner leading the push to produce ethanol in Audrain County. “One lender told us an ethanol plant today is a legal way to print money,” he said.

Fred Stemme of the Missouri Corn Growers Association said that in the next 12 to 18 months, about 20 percent of Missouri corn will be used to produce 150 gallons of ethanol annually.

With five ethanol plants up and running in the next few years, Missouri could produce 250 to 300 million gallons of ethanol a year from one-quarter and one-third of the state’s corn crop, Stemme said.

The ripple effect of ethanol will spread well beyond the pockets of Missouri farmers, Stemme said, adding that five plants could create 10,000 new jobs, more than a $1 billion in economic output a year and close to $100 million in tax revenue. “These dollars roll seven to 10 times through the local economy,” he said.

The move toward ethanol

Ethanol has been produced since the days of the Model T, which was originally designed to run on the corn-derived fuel. But oil supplies blossomed right after the Model T’s invention, and costs drove the fuel market in that direction. Drivers were content with gasoline through much of the 20th century, but the oil crisis of the 1970s forced Americans to reconsider alternative fuels and refiners began blending ethanol.

Record-high corn yields in 2004, improved technology, government subsidies and a growing public interest to reduce U.S. dependence on foreign oil are some of the factors propelling interest in ethanol.

The Clean Air Act requires high smog and ozone areas such as St. Louis to add oxygen to gasoline to lower greenhouse gas emissions, and ethanol is one way to add oxygen and help gasoline burn more completely. St. Louis used 65 million gallons of ethanol in 2004, about 10 million gallons more than Missouri’s first two ethanol plants can produce in a year.

Eighty-three U.S. ethanol plants, most of them in the Midwest, are pumping out ethanol 24 hours a day and 14 more will be operational in the next year. And scientists are researching ways to harness ethanol from substances other than corn, including organic materials and fast-growing perennial crops like switch grass.

Ethanol also enjoys considerable political support.

Gov. Matt Blunt wants to require all gasoline sold in Missouri to be blended with at least 10 percent ethanol.

U.S. Sen. Jim Talent of Missouri formed the Senate Biofuels Caucus to promote development and use of ethanol and other renewable fuels. Talent favors incrementally increasing the nation’s use of renewable fuels to 5 billion gallons or more by 2015. Ethanol would make up the majority of that amount, but biodiesel, a soybean-derived fuel, and other renewable sources would also factor in.

U.S. Rep. Kenny Hulshof of Columbia has a pending bill that would provide incentives for the production of ethanol and other renewable fuels.

President Bush extended ethanol subsidies to 2010 when he signed the Jobs Bill in October.

Ethanol is subsidized by the federal government at 51 cents per gallon, so when it is blended with gasoline it lowers the cost. The math works out to federal taxes of 13.3 cents per gallon of blended fuel compared to regular unleaded gasoline at 18.4 cents per gallon. It all adds up to a $3 billion annual government subsidy for the ethanol industry and slightly lower prices of ethanol-blended gasoline for the consumer.

“That lower tax is a reflection of things like the oil industry doesn’t pay for a fleet of battleships to protect their shipping lanes — we pay for that as taxpayers,” said Ron Lamberty, marketing director for the American Coalition for Ethanol.

In Missouri, ethanol producers receive a subsidy for the first 12.5 million gallons and a 5-cent-per-gallon subsidy for the second 12.5 million gallons from the Missouri Ethanol Producers Incentive Fund, administered by the state Department of Agriculture.

The fuel’s critics

Not everyone is jumping on the ethanol bandwagon. Some environmental analysts suggest ethanol is being promoted by politicians as a clean fuel when it actually causes more pollution. Critics also maintain the lower prices for ethanol blends reflect a fuel that can’t survive without a subsidy.

“The reason ethanol is so important is because we got too damn much corn,” said Ken Cook president of the non-profit Environmental Working Group. “It’s another strategy for dealing with the failure of our agriculture policy. We’ve grown far beyond domestic needs, and we can’t rely on the export markets to hold the price up, so what do we do? We convert it to ethanol and put it in our 12-mile-per-gallon SUVs.”

But Ron Lamberty of the American Coalition for Ethanol said that without ethanol, corn would be rotting on the ground. “Using the corn to make a fuel product and returning the nutritional portion of it back to the food supply is responsible thing to do,” he said. “If you put it in perspective, compared to an oil refinery or an electric power plant, the emissions are minuscule.”

Miles, one of the original investors in the Malta Bend plant, said few pollutants would leave the plant’s smoke stacks, due to the use of special equipment designed to reduce harmful pollutants.

But entomology professor David Pimentel of Cornell University, who has studied ethanol since 1979, disagrees with the use of a food source for fuel when millions of people around the world are starving. He also questions ethanol’s ability to lower emissions of greenhouse gases.

Ethanol doesn’t reduce carbon dioxide if you take into account all the fossil fuels burned to produce it, Pimentel said.

“It’s adding to the carbon dioxide in the atmosphere because they’re burning more fuel than you actually get out of ethanol,” he said. “You’re taking it away from livestock production, and the meat producers have reported that it’s costing the consumer $1 billion more for higher prices of beef.”

Pimentel includes 15 inputs in his study, including the fossil fuels burned to make the steel for farm equipment and produce fertilizers and pesticides.

Another part of the debate centers on ethanol emissions when it interacts with gasoline. Unlike gasoline, ethanol loves water, so putting small amounts of it in gasoline, such as the commonly used 10 percent blend, forces Volatile Organic Compounds into the air, said John Sheehan, senior research engineer at the National Renewable Energy Laboratory in Colorado.

“I don’t think that it’s fair at this point in the development of vehicle technology to say ethanol, especially low ethanol blends, offer a lot of environmental benefits,” Sheehan said.

On the other hand, about 60 percent of ethanol blends used today are mixed with reformulated gasoline designed to counter ethanol’s higher vapor pressure, and Sheehan said the problem disappears once ethanol makes up 50 percent or more of the blend.

Among major U.S. field crops, corn requires the most nutrients and is hardest on the soil. Tad Patzek, a petroleum engineering professor at Berkley University, said runoff from partially decomposed fertilizers, nitrogen and phosphorus in the Midwest flows to the Gulf of Mexico, causing oxygen depletion and creating a “dead zone.”

“It’s an environmental problem that needs to be addressed and is being addressed,” said Keith Collins, chief economist and energy task force leader for the U.S. Department of Agriculture. “We have the knowledge and the tools to solve the problem, and we’re working to do that.”

The Missouri Environmental Quality Incentive Program is one of those tools. The U.S. government dedicates $1 billion a year to the program that pays farmers to employ practices that benefit the environment. “Nutrient management is one of the keys to reducing impacts on the environment,” Collins said.

Cal Hodge, an energy consultant in Texas who studies transportation fuels, is skeptical of ethanol’s energy potential. “If you look at the whole life cycle of ethanol it has a negligible contribution to the energy solution,” Hodge said. “It hasn’t delivered on energy or air quality promises.”

But Michael Wang, a life-cycle energy researcher at Argonne National Laboratory near Chicago found otherwise. “Our study shows the energy balance is positive for ethanol and it does provide some greenhouse gas reductions,” Wang said.

He concluded that for every 1 Btu of energy used in the production of ethanol, 1.67 Btu is produced. In other words, producing ethanol yields 67 percent more energy than is required to make it. With recent technological improvements, Wang said, the numbers will soon be closer to 1 Btu in and 2 Btus out.

What the future holds

With ethanol securely planted in the political agenda, innovations in making and using it are well under way. Ethanol derived from the cellulose, such as corn stalks and wood residue, has energy researchers excited about future possibilities.

John Sheehan, senior research engineer at the National Renewable Energy Laboratory, is researching the use of switch grass to make ethanol. With switch grass, for every one unit of energy put in, four units of energy are produced. But the technology to convert switch grass to ethanol is not yet cost effective for large-scale production.

“Ethanol suffers from the fact, especially the grain ethanol story, that the subsidies that are on ethanol are not justified,” Sheehan said. The government, he added, has “encouraged us to stay with grain ethanol technology instead of really pushing and developing cellulosic ethanol technology.”

But the renewable fuels standard could change that. Nathanael Greene, senior energy analyst at the Natural Resources Defense Council, said the standard would no longer require that ethanol be used as an oxygenating additive, but it would require increased use of biofuels, including ethanol and biodiesel, in areas like the Midwest where it is more cost-effective.

There is also the possibility that ethanol plants may use ethanol to supply their own power. Stemme said an ethanol plant in Pekin, has successfully demonstrated ethanol fuel cell technology. Lamberty of the American Coalition for Ethanol said ethanol-powered fuel cells open up possibilities “to power not only your car but your home and business, too.”

But for motorists in Missouri, E85 – a blend of 85 percent ethanol and 15 percent gasoline – is available now. Stewart Burton, 28, has been using the fuel for about a year. He backed his black 1993 Ford F150 up to the gas pump at the Break Time at Providence Road and Ash Street earlier this month and selected the bright yellow nozzle that signifies E85.

“It’s cheaper and it’s good for farmers,” said Burton, a mechanic at Service One in Columbia. “Everybody I live around is farmers, and I figured I might as well return the buck.”

Although his vehicle is not a Flexible Fuel Vehicle engineered to run on E85 or regular unleaded gasoline, Burton said he gets better mileage. His wife powers her 1997 Chevy Lumina with E85, Burton said, and he also uses it in his tractor.

“Hundreds of thousands of miles of evidence shows using E85 in a non-Flexible Fuel Vehicle works just fine, but we can’t recommend it,” said Phil Lampert, executive director for the National Ethanol Vehicle Coalition, based in Jefferson City.

In FFVs, using E85 causes a reduction in gas mileage of 5 to 15 percent depending on driving conditions, according to the National Ethanol Vehicle Coalition. However, the average price difference nationally is about 20 cents cheaper than regular unleaded gas, and in markets such as Minnesota, where there are sixty-eight E85 stations, the fuel is 40 cents cheaper.

At the Break Time at Providence Road and Ash Street, the only pump in Columbia that offers E85, it was 5 cents cheaper than unleaded on Jan. 17 at $1.67. MFA Oil vice president Melvin Schebaum said his company is aggressively marketing E85 and hopes to offer it at more stations soon.

There are now more than 600 stations around the country selling E85, Lampert said. “We’ve been fairly successful so far, but we have a long way to go.” He expects 500 to 600 more stations to open nationwide this year.

Corn producers in Missouri are poised to fill that demand.

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