Ethanol still holds promise, but critical challenges remain

MARION, Ohio — It’s easy to spot a grain truck heading down a country road in this rural, central Ohio county. The fields are large and flat and the ground is fertile, but there’s an even bigger reason for the trucks: an active ethanol plant.

On any given day, semis loaded with Ohio corn trickle into POET Biorefining in Marion, while other trucks loaded with ethanol pass on their way out — transporting a fuel to blender companies and retail markets across the state.

About 68 million gallons of ethanol leave the plant each year, along with 175,000 tons of distillers grains — the leftover corn nutrients used in livestock feed.

It’s an American fuel produced here in Ohio, and it has promise.

“Every gallon of ethanol we produce reduces our oil imports and our dependence on foreign oil, and it keeps us from flowing money out to countries that may not be all that friendly to the U.S,” said Cliff Brannon, the plant’s general manager.

Economic return

And if that’s not enough, “it keeps jobs in the U.S.,” Brannon said. Like the 40 people who work for him, as well as POET’s two other identical plants in Fostoria and Leipsic, Ohio.

All told, Ohio has a half-dozen operating ethanol plants, with some owned by other entities. Three are owned by POET; the others are owned by Guardian Lima, in Lima; Valero Renewable Fuels Co. in Bloomingburg; and Andersons Marathon Ethanol, in Greenville.

They’re multi-million dollar projects, which also create jobs for the workers who build the plants. The Ohio Ethanol Association says 240 jobs are directly tied to Ohio’s ethanol industry, which has $900 million in annual sales and spends $600 million at local businesses.

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But this industry also has its challenges. One of those is its youth.

The Marion plant has only been operational a couple years, and other plants in Ohio also are in their infancy, with a few that have been put on hold.

Harrison Ethanol in Ohio’s Harrison County is one of several plants termed “non-operational.” The plant was never finished because of the weak economy and lack of funding, said managing member Wendel Dreve.

The Harrison plant is a much smaller-scale facility than POET and also has the goal of combining several thousand head of livestock in a “closed loop” system. Its funding comes from independent investors.

“Their (POET) plan works,” Dreve said, but he said the Harrison plant has more local interest, to serve the local livestock and crop producers.

The plant could potentially be operational in 12-14 months, he figured, but it all depends on the economy and the price of corn.

Dreve still believes in the project, but it needs a boost. He’d like to see some federal loan guarantees and new investors.

Many achievements

Even with some setbacks, ethanol still constitutes up to 10 percent of all gasoline sold at the pump. A new standard was approved by the U.S. Environmental Protection Agency in the fall of 2010 to allow up to 15 percent blend of ethanol in vehicles made in 2001 and newer. Flex-fuel vehicles can use the most ethanol, at 85 percent.

But the challenge, Brannon said, is making the different blends available to consumers. He’s one of many ethanol advocates who want to see funds made available to help privately owned fuel stations invest in blender pumps, so more motorists can use higher-percentage ethanol.

He estimates about 800,000 flex-fuel vehicles in the United States can run on 85 percent ethanol.
“But the availability of that fuel is limited,” he said. “We have one blender pump in the state of Ohio right now.”

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Mike Irmen, director of ethanol services for The Andersons, said the company’s Greenville, Ohio, plant has run continuously since opening in 2008. But this year “has been very tough on many producers due to tight corn supply and the resulting high prices,” he said.

The Andersons, like POET, would like to see more blender pumps installed. But Irmen said retailers also need liability waivers so they can protect themselves from damage claims, if a consumer incorrectly puts the wrong fuel into his vehicle.

He thinks more scrutiny should be given to oil subsidies, than those given to ethanol.

“If our country’s leaders are really serious about making significant budget cuts in an effort to balance the budget, the oil subsidies are where the real money is,” he said.

Traditionally, blenders of ethanol have received a federal tax credit of 45 cents per gallon. But pressure from other industries who feel disadvantaged, and national budget tightening are causing legislators to raise questions.

Recent efforts in the U.S. Senate moved forward to repeal the tax credit, as well as a 54 cent per gallon tariff on imported ethanol.

The tax credit has also pitted farmer against farmer, specifically the livestock producer versus the crop grower.

“The (tax credit) and the tariff on imported ethanol have put cattlemen and other end-users of corn at a competitive disadvantage to the corn-based ethanol industry when it comes time to buy a bushel of corn,” the National Cattlemen’s Beef Association President, Bill Donald, said in a statement mid-June. “Repealing the (tax credit) and the import tariff are important steps to fully leveling the playing field.”

Market access

Brannon and other ethanol-backers say they want to “level the playing field,” as well, albeit in a different way.

Brannon said the industry understands why there is concern over government funding, and he’d rather see those funds used to install infrastructure the industry needs to be accessible to consumers, and compete on its own.

“We want to convert that into infrastructure and then, going forward, there will be no need for having the (tax credit) and we will have market access so that we can compete directly with gasoline,” he said.

If the infrastructure can be built, along with a better system of piping ethanol to the eastern markets, Brannon is confident the fuel will hold its own.

“We really want to be able to compete in the market directly with gasoline,” he said. “We believe if consumers have the choice at the pump, they’re going to pick ethanol every time because they’re going to choose between paying higher prices for gasoline — where their money is going to be going over seas — or they can buy domestically produced ethanol.”

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Good resource

As a fuel, ethanol is 59 percent cleaner burning than gasoline, and it’s renewable. It can actually increase fuel efficiency up to about a 30 percent blend, and it costs less per gallon than pure gasoline.

Brannon and other ethanol backers say there’s plenty of reasons why ethanol and other uses for corn can co-exist, as they have for the past few years.

Dwayne Siekman, CEO of the Ohio Corn and Wheat Growers Association, said the state’s 460 million gallons of ethanol translates to about 1.2 million metric tons of distillers grains — a feed that still contains the original fats and proteins found in corn, minus the starch.

“That’s one of the things that everyone forgets,” he said.

And, another well-known fact among corn growers is yields are on the rise. Maybe not this year, after a record wet spring, but overall yields per acre are trending upward.
“On average, the per-bushel yield is consistently going up,” Siekman said. “There’s more grain out there; it’s not being diverted.”

According to an analysis released in May by the Renewable Fuels Association, America’s ethanol producers supplied nearly 35 million metric tons of livestock feed in the 2009/2010 marketing year. By volume, it’s greater than the total amount of grain consumed by all of the beef cattle in the nation’s feedlots.

Nearly 25 percent, or 9 million metric tons of distillers grains produced in 2010 was exported.

Whatever side of the debate, the benefits of ethanol are very pronounced.

A new study conducted by researchers at Iowa State University and the University of Wisconsin found that ethanol reduced wholesale gas prices in 2010 by nearly 90 cents per gallon.

Department of Energy data shows U.S. gasoline use averaged 138 billion gallons per year from 2000 to 2010, which would produce a cost savings due to ethanol of $34.5 billion over the past decade.

“This study confirms that ethanol is playing a tremendously important role in holding down volatile gasoline prices, which are currently inching closer to all-time record highs,” said Renewable Fuels Association (RFA) President Bob Dinneen.

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More efficient

Like the 26 other POET ethanol plants across the nation, the one in Marion continues to get better at what it does. Brannon said they’re becoming more efficient and can produce more ethanol from less corn.

And, they’re exploring other ways to make ethanol, including from corn cobs. The company, which has headquarters in Sioux Falls, S.D., is working with equipment manufacturers to provide an efficient way to gather and bale the cobs.

Other plants are exploring ethanol from entirely different crops, like switchgrass and miscanthus. It’s called cellulosic ethanol, but it’s all the same fuel, Brannon said.

POET is only one player in a much bigger industry, but they continue the same values that helped ethanol get its start.

“They really believe in energy independence for the U.S,” Brannon said. “They believe in farming as a huge asset for the country that’s going to help us become independent.”